As with any General Assembly session, it’s wise to expect the unexpected. This year, the surprise arrived in the form of devastating floods across the commonwealth that killed more than a dozen people and caused more than $1 billion in damage, according to Gov. Andy Beshear.
That leaves lawmakers to decide if the legislature will help with recovery and rebuilding efforts in a year when they normally wouldn’t tackle spending issues.
“The General Assembly has been cautious… about opening up the budget,” says Andi Johnson, chief policy officer for Commerce Lexington. “But we want to make sure that we’re providing those supports to get our businesses back, to get people back to work, and to make sure that people have places to live.”
The state is in a better position now to provide emergency assistance than it was a decade ago, says Andrew McNeill, president of the Kentucky Forum for Rights, Economics and Education. That’s thanks to a recent budget surplus and a healthy Budget Reserve Trust Fund. He says the question is whether lawmakers will pursue a relief package during the current regular session, which ends March 28, or wait for special legislation when they might have better information about how much assistance is needed.
“Having the resources in place makes it more of a question of how do we structure a package appropriately and responsibly,” says McNeill.
Options for Addressing the Housing Shortage
The flooding likely will exacerbate Kentucky’s housing shortage. Current estimates say the commonwealth is short more than 200,000 homes and rental units. Last year, the Kentucky Chamber of Commerce predicted the state will need some 500,000 new homes over the next 25 years.
Because housing impacts so many other sectors, from workforce development to child wellbeing, lawmakers could look at a range of options to increase housing stocks and to help Kentuckians stay in places they already own or rent. Kentucky Youth Advocates Executive Director Terry Brooks points to Senate Bill 59, which would allow religious organizations to develop affordable housing projects on land they own. Brooks also says Senate Bill 138 would prohibit evictions during extreme weather events, while a third measure would prevent minors from being named in eviction proceedings.
“What animates me about those three bills,” says Brooks, “none of those have anything to do with the budget. They have to do with commonsense solutions and kids are going to benefit.”
Lexington alone is 22,000 housing units short, according to Johnson. She says that number balloons to 40,000 units for the nine-county region surrounding the city. She says the legislature could create a residential infrastructure fund to help municipalities pay for road, sewer, and water improvements needed to develop properties. She says they could also create low-income tax credits to provide more access to capital for housing developers who want to build affordable housing.
Kentucky already has an Affordable Housing Trust Fund to help those who need financing assistance to buy a home. But Jason Bailey, executive director of the Kentucky Center for Economic Policy, says it needs to be bigger. He suggests lawmakers appropriate state dollars into the fund and update the existing funding mechanism that’s based on a small fee assessed on deed transfers.
“The only other big solution to the problem involves changes to zoning,” Bailey says, “trying to make the availability of housing and infill development more accessible than it is now.”
Since the housing shortage is largely a matter of greater demand than available supply, McNeill contends state government has little capacity to address the crisis. He says small, smart steps like zoning changes and helping people stay in the homes they already have can make a big difference for Kentucky families without burdening taxpayers. He says he would advise lawmakers to proceed cautiously on any grandiose housing plans because he argues such proposals, though well intentioned, can continue forever without improving the actual problem.
Support for Public Education
School funding continues to be a hot topic in Frankfort, especially after Kentucky Education Commissioner Robbie Fletcher warned lawmakers that public schools could face a $40 million shortfall this year.
Questions about the SEEK formula, the complex calculation that determines the amount of per-pupil funding schools receive, have arisen in recent years amid concerns about inequities between the state’s wealthier and poorer districts.
Bailey says per-pupil spending is down about 26 percent since the 2008 recession when adjusted for inflation. He adds that teacher pay is down 20 percent compared to 2008, and that the gap between rich and poor districts has indeed increased.
“We were a leader after 1990 when we passed the Kentucky Education Reform Act in terms of investing in education... but then gradually over time, that commitment lessened,” says Bailey. “There were some small reinvestments in the last budget (in 2024), but they haven’t risen to the occasion, and they haven’t made up the ground that we’ve lost.”
Brooks says he thinks SEEK should be reviewed and updated, but he contends a more important issue for lawmakers is to settle on a philosophy of public education: Will they provide the funding and let local districts determine how to best spend those funds without micromanagement from the legislature? Or do lawmakers prefer to mandate how schools should operate and what they should teach? He contends Kentucky public schools are now trapped between those two strategies, which he says creates a “budgetary schizophrenia” that is a “recipe for failure.”
“The General Assembly has to decide are they advocates for local control or are they advocates for categorical funding coming from Frankfort,” says Brooks. “That’s an important debate that needs to be had.”
Even before lawmakers consider giving public schools more money, McNeill says they need to evaluate how current funds are being spent. He argues that more money doesn’t correlate to improved academic outcomes. He also says administrative bureaucracies resistant to change have led to schools using outdated or ineffective teaching strategies.
“If you have a failed curriculum... it doesn’t matter how much money you shovel at it,” says McNeill. “So why don’t we look at how the money has been spent, where it is going, how much is actually getting into the classroom.”
From the perspective of the business community, Johnson says schools should align with local community and business needs and then put kids on career pathways that can meet those needs. She says having students, parents, educators, local leaders, and businesses working together can position Kentucky for a strong, productive future.
“Having high quality schools – public education, private education – is also a critical quality-of-life factor when you’re looking to attract and retain workforce to your state,” says Johnson.
Workforce Participation
Although Kentucky’s labor participation rate continues to rank below most other states, Johnson says it has improved recently. She says the problem now is that Kentucky isn’t adding enough workers in the 25-54 age range with the skills that businesses need.
Bailey says the state’s prime age labor force rate is higher now than it’s been in 50 years. But he says Kentucky faces four unique problems: A growing number of Baby Boomers are retiring, which he says shrinks the overall working population; there continue to be few jobs eastern Kentucky following the downturn in the coal industry; many Kentuckians would like to be working but can’t afford or don’t have access to quality child care and therefore have to stay home to look after their children; and the state’s high rates of illness and disability keep people out of the workforce and on government support.
McNeill says able-bodied individuals on Medicaid should be incentivized to work or get an education or job training to improve themselves. He contends the state should also do more to help entrepreneurs start and grow their own businesses, which he says will provide more employment opportunities for Kentuckians.
