For the Same Cost as a Half-Point Income Tax Cut, Kentucky Could Meaningfully Reinvest in Public Education

In the 2025 General Assembly, Kentucky lawmakers reduced the individual income tax rate from 4% to 3.5%, a cut that will take effect on Jan.1, 2026. That cut will cost the state budget $718 million per year.¹ And it will be the third half-point cut in just four years, following a reduction from 5% to 4.5% that took effect in Jan. 2023 and a cut to 4% effective Jan. 2024. The cost of all three cuts adds up to a total of $2.15 billion annually.

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Spending large amounts of money in this way is a choice that takes resources away from other opportunities. Choosing instead to put $718 million into public education, for example, would allow Kentucky to make up significant ground lost from state disinvestment in core formula funding over the last 15 years, begin to address the teacher and bus driver shortage and improve the quality of education at Kentucky schools through proven, evidence-based investments.

In this report, we provide an illustration of what $718 million more could mean for Kentucky public schools. For that cost, the state could increase the base funding component for schools, known as Support Education Excellence in Kentucky (SEEK), by an estimated 14%, to $5,212 per pupil; provide 100% funding of statutorily required school transportation costs for the first time since 2004; and restore $38 million that had been previously cut from textbooks, teacher professional development and technology.

Though districts would decide exactly how to spend the extra SEEK funds, this amount of money would make all three of the following possible:

• An average 8% raise for certified and classified employees across school districts;
• Hiring 2,658 or 5% more teachers and certified staff for smaller class sizes, restored course offerings, expansion of preschool or more counselors to address mental health needs;
• $59 million across the state for school meals, additional bus drivers and other classified staff, Family Resource and Youth Service Centers (FRYSCs) and other student support services, school safety improvements, equipment or other needs.

$718 million annually would allow schools to gain significant lost ground

While $718 million a year is less than the $1.3 billion more the state would need to put into schools to get back to inflation-adjusted 2008 funding levels — and much less the amount needed to adequately fund public education according to evidence-based studies of best practices — it is substantially more than the modest $206 million average annual increase the legislature included in the 2024-2026 state budget.²

State funding for K-12 education has failed to keep up with inflation since 2008 despite growing evidence that more funding for public schools significantly improves the lives of children, especially those from disadvantaged backgrounds.³ For example, one study found that between 1972 and 2010 an increase in school spending by 10% over a 12-year period resulted in 7% higher wages and 10% higher family incomes in adulthood.⁴

There are many urgent uses for an additional reinvestment in Kentucky public schools. In the scenario outlined in this report, we use $89 million of the proposed additional $718 million to fully fund the state’s obligation under law to fund school transportation. The state has not met that obligation since 2004. This additional contribution helps ensure that a basic and necessary obligation of districts — to get kids to and from school on the bus — is met.

Additionally, $38 million is allocated to restore cuts that were made in textbooks, teacher professional development and technology. These expenditures are not part of the SEEK formula but are core needs that the state had until recently met its obligation to provide. The legislature entirely cut funding earmarked for textbooks and teacher professional development in 2018 and still has not funded those items in the 2024-2026 budget despite billions available in the Budget Reserve Trust Fund.

The remainder of the $718 million in this report’s scenario is put into SEEK and associated state costs. SEEK is designed to take into account disparities across the state by contributing more to districts with less property wealth and greater student needs to help reduce the gaps that would otherwise exist. State SEEK funding has declined by an inflation-adjusted 24% since 2008, making it the primary reason the gap between wealthy and poor districts now exceeds levels declared unconstitutional by the Kentucky Supreme Court under the Rose decision in 1989.⁵ SEEK also allows flexible funding for school districts, permitting each district to best identify how to allocate dollars based on local needs with input from educators, parents and the community.

While each district would be able to decide how to best allocate its funds, we make assumptions about how the monies will be spent to provide an illustration of the potential impacts and include additional state costs for health insurance and retirement associated with increased salaries and expanded hiring.

We assume several areas of broad need:

Provide substantial raises for all educators

Kentucky ranks 42^nd among states in average teacher pay, a decline from 41^st last year. And the state ranks 48^th in average teacher starting salary and 49^th in average pay for education support professionals.⁶

These numbers have also declined in real dollars over time: the average Kentucky district is paying its teachers 20% less in inflation-adjusted salary than it was in 2008.⁷ That decline is as high as 31% in rural counties that lack the local property wealth to generate enough in local taxes to make up for the loss of state funds. And as pay has eroded, so have benefit payments to retired school employees, which are calculated based on final average salary.⁸

Teacher pay has been identified as a major factor in recruitment and retention of teachers and other school employees including bus drivers and food service staff, contributing to a growing educator shortage.⁹ Adequate compensation is essential to high quality education and properly staffed schools.

If 60% of the $718 million funding increase outlined in this report went toward raises for certified and classified employees, it would allow an estimated average 8% raise across the state. An 8% increase in average teacher salary would increase Kentucky’s average teacher salary to $62,991, allowing the state to jump from 42^nd to approximately 29^th in average teacher pay. An 8% increase in pay for education support professionals would allow Kentucky to jump from 49^th to 43^rd.

Reduce class sizes, expand preschool and increase school counselors through hiring additional teachers and other certified staff

Lowering class sizes is a clear, evidence-backed method for improving education outcomes.¹⁰ As economist Diane Schanzenbach explains, “research supports the common-sense notion that children learn more and teachers are more effective in smaller classes.”¹¹Class size, she says, “is an important determinant of a variety of student outcomes, ranging from test scores to broader life outcomes. Smaller classes are particularly effective at raising achievement levels of low-income and minority children.” More teachers and smaller classes allow for more individualized attention that can improve success and behavior and unlock kids’ imaginations and potential.

Another challenge more funds could help to address is a decline in course offerings due to state budget cuts. A 2018 KyPolicy survey of school superintendents found that because of post-Great Recession state budget cuts, a majority of districts reduced days in the school calendar, 35% reduced or eliminated art and music programs, 30% cut course offerings, 35% increased fees, 42% reduced student supports including afterschool programs, and 25% spent less on health services.¹² A lack of state reinvestment since 2018 makes it likely those trends have continued or even worsened.

Despite the proven benefits of high-quality, universal preschool, the state only funds preschool for 4-year olds up to 160% of poverty and for 3- and 4-year olds with disabilities. And even with growing understanding of the serious mental health challenges facing many kids, 9% of Kentucky schools do not have a certified school counselor, and 46% do not meet the state target of 1 counselor for every 250 students.¹³

If 30% of the proposed funding increase in this report went to hire new certified employees to reduce class sizes, expand preschool, provide more mental health counselors, increase course offerings or meet other needs, it would allow the hiring of an estimated 2,658 or 5% more positions across the state.

Fill other needs including by hiring bus drivers and expanding support services like FRYSCs, free school meals and afterschool programs

In recent years, there is growing recognition that adequate nutrition is critical to student welfare and academic success.¹⁴ But in Kentucky, more than one in five kids is food insecure.¹⁵ The state has made strides in recent years to expand access to federally-funded free school breakfast and lunch programs through the Community Eligibility Provision that makes these meals free to all kids at qualifying schools.¹⁶ But access to food will be threatened by the cuts to SNAP food assistance in the One Big Beautiful Bill Act (OBBA), which directly affects eligibility for federal funding for school meals.¹⁷ These cuts will make state funding for meals critical.

School districts have many other pressing needs. FRYSCs, for example, play a vital role of connecting families with community services and resources like clothing, but FRYSC funding per student has fallen an inflation-adjusted 53% since 1991.¹⁸ And shortages of bus drivers, cafeteria workers, and other classified staff make basic services hard to deliver.¹⁹

If 10% of the additional SEEK funds in this proposal were allocated for these needs, it would mean $59 million more for districts.

Reinvestment in education will especially help high-poverty districts

Many of the proven strategies described above are especially important for low-income students and students of color that face extra challenges. In addition, because of the way the SEEK formula is designed, new dollars go disproportionately to the poorest districts that have less capacity to raise resources locally and often have higher rates of student need. The table below illustrates the potential gain to districts that would see the largest per pupil increase in spending as a result of this plan.

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Lowest-Wealth Districts Would Benefit Disproportionately
	Total SEEK Increase		What that makes possible
	Additional dollars to district	Additional per pupil	Educator raise	Additional teachers and other certified staff	Funds for other needs
Wolfe County	$1,302,697	$1,317	10%	6	$130,270
Breathitt County	$1,725,670	$1,278	9%	9	$172,567
Jenkins Independent	$493,104	$1,261	8%	3	$49,310
Jackson County	$2,080,737	$1,261	10%	10	$208,074
Owsley County	$677,629	$1,248	9%	3	$67,763
Leslie County	$1,626,768	$1,247	9%	8	$162,677
Whitley County	$4,429,764	$1,243	11%	20	$442,976
Clay County	$2,891,167	$1,242	9%	14	$289,117
Magoffin County	$1,936,622	$1,225	10%	10	$193,662
Harlan County	$3,410,719	$1,218	9%	17	$341,072

See below for a map that provides the potential benefits for all districts. At the end of the report is a table with the same information, and district fact sheets are available at this link.

In contrast, income tax cuts go overwhelmingly to the wealthy

Kentucky has already cut the income tax rate by 1.5 percentage points, costing the state $2.15 billion annually and primarily benefiting the wealthy. Approximately two-thirds of reductions in the state income tax Kentucky flow to the wealthiest 20% of people, as shown in the chart below. The richest 1% of Kentuckians, who make at least $610,200 a year, receive 29% of all income tax cuts. The lowest-income 60% of Kentuckians, in contrast, receive just 19% of the cuts.

That means the richest 1% of Kentuckians receive an average of $5,001 year from each half point reduction in the income tax, while working class Kentuckians may receive enough for one oil change or a cable bill each year, as shown in the graph below. People below the poverty line will receive no benefit at all because of an existing low-income credit meant to partially offset the cost of regressive sales taxes, and all but high-income seniors won’t benefit because of laws that already exempt Social Security and the first $31,110 of retirement income from the income tax.

While the rich will get wealthier from income tax cuts, most Kentuckians will be disproportionately harmed by future budget shortfalls that will mean poorer schools, reduced access to health care, outdated infrastructure, higher fees of various kinds and more.

For just 1/3 of the legislature’s commitment to recent tax cuts, Kentucky could step forward in public education

Kentucky was a leader in public education following the passage of the Kentucky Education Reform Act (KERA) of 1990 and the associated increase in taxes that allowed greater investment in public schools. But since that time, and especially following the Great Recession in 2008, the state has lost significant ground as funding has not kept up. In recent years, strong pandemic stimulus resulted in a substantial bump in state tax revenue that made reinvestment possible. But the legislature’s top priority instead has been cuts to the individual income tax that disproportionately benefit the wealthy few. Appropriating just 1/3 of the amount given away in tax cuts in recent years to education would begin to put Kentucky back on the right track for its public schools and the quality education that all kids need and deserve.

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Revenues and Investments in 2027 Made Possible from Additional Seek Investment
	Total SEEK Increase		What that makes possible
	Additional dollars to district	Additional per pupil	Educator raise	Additional teachers and other certified staff	Funds for other needs
Adair County	$2,430,644	$1,082	10%	3	$243,064
Allen County	$3,099,270	$1,099	11%	14	$309,927
Anchorage Independent	$281,225	$713	3%	1	$28,123
Anderson County	$3,100,218	$951	9%	15	$310,022
Ashland Independent	$2,784,513	$1,052	9%	14	$278,451
Augusta Independent	$296,030	$1,028	8%	2	$29,603
Ballard County	$831,399	$1,044	7%	4	$83,140
Barbourville Independent	$623,547	$945	9%	3	$62,355
Bardstown Independent	$2,361,056	$1,025	8%	10	$236,106
Barren County	$4,511,868	$1,043	8%	20	$451,187
Bath County	$1,824,426	$1,106	10%	9	$182,443
Beechwood Independent	$1,096,448	$750	6%	5	$109,645
Bell County	$2,429,709	$1,178	9%	11	$242,971
Bellevue Independent	$385,922	$849	5%	2	$38,592
Berea Independent	$966,235	$1,142	8%	4	$96,624
Boone County	$18,288,490	$963	7%	76	$1,828,849
Bourbon County	$2,099,094	$965	9%	10	$209,909
Bowling Green Independent	$4,374,976	$1,023	8%	20	$437,498
Boyd County	$2,585,867	$1,069	8%	12	$258,587
Boyle County	$2,736,710	$988	9%	12	$273,671
Bracken County	$1,153,978	$1,138	10%	6	$115,398
Breathitt County	$1,725,670	$1,278	9%	9	$172,567
Breckinridge County	$2,623,616	$1,124	10%	12	$262,362
Bullitt County	$11,104,054	$949	8%	47	$1,110,405
Burgin Independent	$405,705	$886	8%	2	$40,571
Butler County	$2,224,407	$1,141	11%	11	$222,441
Caldwell County	$1,728,064	$1,058	10%	8	$172,806
Calloway County	$2,719,732	$981	9%	12	$271,973
Campbell County	$4,745,219	$1,023	8%	21	$474,522
Campbellsville Independent	$1,227,694	$1,029	9%	6	$122,769
Carlisle County	$679,381	$1,138	9%	4	$67,938
Carroll County	$1,780,705	$1,082	8%	8	$178,071
Carter County	$3,832,262	$1,107	10%	18	$383,226
Casey County	$2,208,770	$1,150	11%	11	$220,877
Caverna Independent	$576,889	$1,089	8%	3	$57,689
Christian County	$7,851,892	$1,066	10%	41	$785,189
Clark County	$4,823,003	$1,031	9%	23	$482,300
Clay County	$2,891,167	$1,242	9%	14	$289,117
Clinton County	$1,421,251	$1,114	9%	7	$142,125
Corbin Independent	$2,677,863	$995	9%	12	$267,786
Covington Independent	$3,099,340	$1,051	7%	15	$309,934
Crittenden County	$1,352,833	$1,114	11%	7	$135,283
Cumberland County	$1,006,023	$1,141	10%	5	$100,602
Danville Independent	$1,567,072	$1,050	7%	7	$156,707
Daviess County	$9,890,780	$1,009	8%	44	$989,078
Dawson Springs Independent	$565,338	$1,098	9%	3	$56,534
Dayton Independent	$716,371	$999	7%	3	$71,637
East Bernstadt Independent	$423,169	$962	9%	2	$42,317
Edmonson County	$1,703,602	$1,098	10%	9	$170,360
Elizabethtown Independent	$2,258,250	$986	8%	10	$225,825
Elliott County	$939,323	$1,178	10%	5	$93,932
Eminence Independent	$855,832	$953	8%	5	$85,583
Erlanger-Elsmere Independent	$1,889,076	$906	7%	9	$188,908
Estill County	$2,012,089	$1,114	11%	10	$201,209
Fairview Independent	$516,298	$1,166	7%	3	$51,630
Fayette County	$35,905,279	$940	6%	137	$3,590,528
Fleming County	$2,044,287	$1,052	10%	11	$204,429
Floyd County	$5,119,310	$1,102	10%	26	$511,931
Fort Thomas Independent	$2,299,052	$758	6%	9	$229,905
Frankfort Independent	$817,107	$984	8%	4	$81,711
Franklin County	$5,587,541	$1,057	8%	26	$558,754
Fulton County	$584,866	$1,088	7%	3	$58,487
Fulton Independent	$275,219	$1,087	7%	2	$27,522
Gallatin County	$1,258,642	$997	7%	6	$125,864
Garrard County	$2,282,975	$1,030	9%	11	$228,298
Glasgow Independent	$2,227,747	$1,020	9%	10	$222,775
Grant County	$3,030,471	$1,125	9%	16	$303,047
Graves County	$3,668,774	$1,012	10%	18	$366,877
Grayson County	$3,784,010	$1,070	10%	18	$378,401
Green County	$1,697,548	$1,160	9%	8	$169,755
Greenup County	$2,367,903	$1,124	8%	12	$236,790
Hancock County	$1,329,411	$1,008	7%	6	$132,941
Hardin County	$13,590,878	$1,062	9%	60	$1,359,088
Harlan County	$3,410,719	$1,218	9%	17	$341,072
Harlan Independent	$806,114	$1,061	10%	4	$80,611
Harrison County	$2,857,743	$1,065	10%	13	$285,774
Hart County	$2,262,769	$1,129	9%	11	$226,277
Hazard Independent	$896,815	$1,049	8%	4	$89,682
Henderson County	$5,982,946	$1,061	8%	28	$598,295
Henry County	$1,852,777	$1,068	9%	9	$185,278
Hickman County	$735,540	$1,195	10%	4	$73,554
Hopkins County	$5,905,447	$1,051	9%	29	$590,545
Jackson County	$2,080,737	$1,261	10%	10	$208,074
Jackson Independent	$316,648	$1,015	9%	2	$31,665
Jefferson County	$82,699,718	$1,009	6%	304	$8,269,972
Jenkins Independent	$493,104	$1,261	8%	3	$49,310
Jessamine County	$7,706,618	$1,030	8%	34	$770,662
Johnson County	$3,315,550	$1,169	9%	16	$331,555
Kenton County	$12,492,939	$983	8%	52	$1,249,294
Knott County	$2,014,518	$1,164	9%	10	$201,452
Knox County	$3,823,356	$1,176	9%	19	$382,336
LaRue County	$2,383,400	$1,112	11%	10	$238,340
Laurel County	$8,310,186	$1,073	10%	38	$831,019
Lawrence County	$2,194,019	$1,119	10%	11	$219,402
Lee County	$874,563	$1,117	11%	5	$87,456
Leslie County	$1,626,768	$1,247	9%	8	$162,677
Letcher County	$2,505,370	$1,160	8%	12	$250,537
Lewis County	$1,983,835	$1,146	10%	10	$198,384
Lincoln County	$3,201,773	$1,130	10%	16	$320,177
Livingston County	$956,423	$1,040	8%	4	$95,642
Logan County	$3,275,197	$1,082	10%	16	$327,520
Ludlow Independent	$677,189	$915	7%	3	$67,719
Lyon County	$819,529	$937	8%	4	$81,953
Madison County	$7,546,177	$1,030	6%	34	$754,618
Magoffin County	$1,936,622	$1,225	10%	10	$193,662
Marion County	$2,888,265	$1,039	9%	13	$288,826
Marshall County	$3,820,565	$985	8%	17	$382,056
Martin County	$1,640,843	$1,132	9%	8	$164,084
Mason County	$2,430,444	$1,095	9%	11	$243,044
Mayfield Independent	$1,865,800	$1,093	7%	9	$186,580
McCracken County	$6,072,384	$985	9%	27	$607,238
McCreary County	$2,714,141	$1,205	10%	14	$271,414
McLean County	$1,283,526	$1,046	9%	6	$128,353
Meade County	$4,581,443	$1,041	9%	20	$458,144
Menifee County	$1,025,146	$1,161	10%	5	$102,515
Mercer County	$2,632,842	$1,116	9%	11	$263,284
Metcalfe County	$1,284,857	$1,115	9%	6	$128,486
Middlesboro Independent	$1,066,100	$1,159	10%	5	$106,610
Monroe County	$1,784,111	$1,118	9%	9	$178,411
Montgomery County	$4,099,181	$1,074	10%	20	$409,918
Morgan County	$1,867,924	$1,186	10%	9	$186,792
Muhlenberg County	$4,204,307	$1,065	8%	20	$420,431
Murray Independent	$1,723,305	$945	9%	8	$172,330
Nelson County	$3,602,018	$963	7%	17	$360,202
Newport Independent	$1,092,336	$941	5%	5	$109,234
Nicholas County	$1,018,641	$1,075	10%	5	$101,864
Ohio County	$3,614,306	$1,095	9%	17	$361,431
Oldham County	$10,662,895	$951	7%	51	$1,066,289
Owen County	$1,593,907	$1,074	9%	8	$159,391
Owensboro Independent	$4,561,428	$1,019	8%	20	$456,143
Owsley County	$677,629	$1,248	9%	3	$67,763
Paducah Independent	$2,502,185	$1,001	7%	11	$250,219
Paintsville Independent	$645,909	$936	7%	3	$64,591
Paris Independent	$713,792	$1,060	9%	4	$71,379
Pendleton County	$2,058,289	$1,125	8%	10	$205,829
Perry County	$3,430,079	$1,183	9%	16	$343,008
Pike County	$7,073,722	$1,051	8%	34	$707,372
Pikeville Independent	$926,971	$868	7%	4	$92,697
Pineville Independent	$507,299	$1,115	9%	3	$50,730
Powell County	$1,971,393	$1,093	9%	10	$197,139
Pulaski County	$6,585,507	$1,042	9%	33	$658,551
Raceland Independent	$966,684	$986	9%	5	$96,668
Robertson County	$462,044	$1,179	9%	2	$46,204
Rockcastle County	$2,842,565	$1,161	11%	14	$284,256
Rowan County	$3,009,821	$1,017	9%	15	$300,982
Russell County	$2,875,496	$1,096	10%	14	$287,550
Russell Independent	$1,814,817	$994	9%	8	$181,482
Russellville Independent	$977,759	$1,085	8%	5	$97,776
Science Hill Independent	$514,343	$1,045	11%	3	$51,434
Scott County	$8,878,186	$1,004	8%	40	$887,819
Shelby County	$6,334,663	$998	8%	30	$633,466
Simpson County	$2,797,445	$1,010	8%	12	$279,745
Somerset Independent	$1,505,645	$943	8%	7	$150,565
Southgate Independent	$147,384	$925	5%	1	$14,738
Spencer County	$3,127,041	$1,034	9%	14	$312,704
Taylor County	$2,516,140	$1,068	9%	12	$251,614
Todd County	$1,773,115	$1,129	9%	10	$177,311
Trigg County	$1,829,984	$1,039	8%	9	$182,998
Trimble County	$1,057,462	$1,055	8%	5	$105,746
Union County	$1,964,165	$1,084	9%	10	$196,416
Walton Verona Independent	$1,640,080	$959	7%	8	$164,008
Warren County	$17,339,524	$1,011	9%	78	$1,733,952
Washington County	$1,691,836	$1,077	9%	7	$169,184
Wayne County	$3,097,521	$1,150	10%	16	$309,752
Webster County	$2,074,398	$1,114	10%	11	$207,440
Whitley County	$4,429,764	$1,243	11%	20	$442,976
Williamsburg Independent	$741,185	$1,029	9%	4	$74,119
Williamstown Independent	$699,375	$958	8%	4	$69,937
Wolfe County	$1,302,697	$1,317	10%	6	$130,270
Woodford County	$3,367,502	$936	8%	16	$336,750
Total/State-Wide Average	$594,578,678	$1,028	8%	2,658	$59,457,868
Source: KyPolicy analysis of Kentucky Department of Education data. The actual allocation of the additional SEEK funds in this scenario would be at the discretion of the school district. Table omits Cloverport Independent due to anomalies from its virtual school.

Methodology

Increases are compared against a baseline of 2026 SEEK forecast data and assume the same SEEK variables for 2027. Estimates use a base SEEK per pupil level of $5,212, 100% funding of SEEK transportation, a Tier 1 rate of 17.5%, a SEEK Tier 1 equalization level of $1,211,000 and other SEEK add-on levels that were used in the 2024-2026 Budget of the Commonwealth.

Examples of what the proposed extra funding makes possible assume 60% of extra SEEK funds go to raises for classified and certified employees, 30% goes to hiring additional certified staff, and 10% goes to other district needs.

The estimates for additional number of certified staff are derived using average teacher salary for the district in 2025 adjusted by 3% inflation for 2026 and the salary increase estimated for each district as described below. While using average salaries likely overestimates the starting salaries of hiring additional staff, average salaries are used to take into account potential new facility, supervision, training and other costs.

We estimate salary costs assuming that 82% of state and local spending is for personnel, the state-wide share reported in the 2022-2023 School Report Card.²⁰ State and local spending for 2024 is used and then adjusted by 3% inflation for two additional years to get 2026 baseline estimates against which raises are applied. These numbers were also compared and found to closely resemble Kentucky Department of Education data on total salaries paid for classified and professional staff as obtained through an open records request. Estimates assume that 74% of personnel expenses go to salary plus the portion of benefits paid by school districts based on an analysis of these costs.

The total of $718 million in state costs includes $85 million in additional state retirement and health insurance expenses associated with the hiring of additional staff and employee raises included in the example scenario, an estimate which is also based on the state normal cost for retiree pensions and health benefits and the per employee per year health insurance costs for employers reported by the Kentucky Employees Health Plan.²¹