As the 2027-2028 state budget continues through the legislative process, legislative leaders have repeatedly assured the public that key investments for programs like senior meals, childcare, salary increases, and increased health care costs, are “in the base.”
These assurances have been made even when the specific programs are not listed in the budget bill (HB 500), and even when the agencies where the programs are housed are slated for base budget cuts.
This tendency has left many agency leaders, key stakeholders, and the public with two questions: What is “the base?” And, with agencies experiencing increasing costs and many facing cuts, is the money left in the base really sufficient? This analysis will attempt to answer these questions.
What are base budgets and what is in them?
Kentucky’s executive branch operating budget is divided by cabinet, and within each cabinet, by major department. Kentucky uses a “base plus new programs” budgeting approach. The base budget includes funding for all of a department’s responsibilities and, for the most part, the budget bill does not separately identify programs or purposes established and funded in prior years. New programs or purposes being funded for the first time in a budget typically are individually listed in the budget bill, with a brief description and a specific amount that the agency can spend in each year for that purpose. In this manner, the agency responsible and the public know how much is available to spend for that specific purpose or program, and the agency is required by the language in the budget to use the specified amount for that purpose.
In the years following the initial establishment and funding of a program, continued funding for that program remains a part of the base, even though the specific purpose for which the money was appropriated — and the dollar amount to be spent for that purpose — is usually no longer explicitly expressed.
It is important to note that language in a budget bill that requires the expenditure of a certain amount for a specific purpose is only in effect for the two years of the budget in which the language was included, and then it goes away. The only requirements that remain regarding the expenditure of those funds in subsequent years, if there are any at all, are in the statutes that create the program or the services, and those provisions generally do not require the expenditure of a certain amount by the agency for those purposes.
Unfunded mandates put stress on base budgets
The legislature sometimes passes legislation that creates programs or requires agencies to perform additional functions without providing new funding to cover the cost. These are called “unfunded mandates.”
While historically, the executive branch has tried to accommodate these unfunded legislative mandates, the budgetary pressures they create have come to a head in recent years. At the close of the 2024 legislative session, the Governor sent a letter to the General Assembly identifying 20 bills and two resolutions that imposed additional costs on state agencies without providing increased funding, and informed the General Assembly that as a result, a majority of those legislative initiatives would not be implemented. In 2025, the Governor sent another letter to the General Assembly, identifying 11 bills, many of them controversial, that would not be implemented due to lack of funding. In 2026, the Governor again has created a website that tracks the cost of implementing specific bills.
Other factors impact base funding
Other factors that impact base budgets include inflation that increases costs over time, and in recent years, the loss of COVID funds that temporarily propped up state agency budgets, allowing the legislature to cut back on state funding for certain services. When those federal funds went away, the General Assembly did not compensate with additional state appropriations in many cases, leaving significant operating shortfalls in the base budgets of many agencies. In addition, most agencies have taken base cuts over the years when revenues were short, and they have never been restored since. Since the Great Recession in 2008, most agencies and programs have been cut, many to severe degrees.
Why tracking what is and isn’t in the base is difficult, and how that affects agency operations
Over time, as more programs and services are included in base budgets without separate designations about how much is devoted to each program or purpose, it is difficult to keep track of everything that agencies must do with the money they have. This challenge increases as members of the General Assembly come and go, and funding levels for particular programs and services are forgotten by those who must approve agency budgets. This lack of institutional memory and the lack of detail in each biennial budget bill results in claims that agencies can use what’s in “the base” to perform their various functions without a sense of what funding level is required to accomplish those purposes.
However, while it is true that an executive branch agency can spend money included in its base to support any purpose or program it is authorized to provide or perform, if base funding is not sufficient to fully support the range of programs and services that agency is authorized to provide, then it will be left with few options:
- Make cuts to all the programs and services it provides to adjust to the lower amount of funding it is receiving; or
- Prioritize the programs and services it is required to provide that are the most fundamental and forego other priorities.
It is simply impossible to reduce the size of a pie and continue to serve the same number of people the same sized piece as before. Either some people don’t get any pie, everyone gets less, or some combination of the two.
Additional cuts and increased expenditures in HB 500 will further erode base funding
These impossible choices are playing out in real time as HB 500 (as passed by the House) requires most state agencies to take base budget cuts of 4% in FY 2027 and another 3% cut in FY 2028, for a total cut in FY 2028 of 7% off the current base funding level.1
Agencies absorbing these cuts will also have to pay additional costs related to salary increases and growing health insurance costs in HB 500 that will come out of their base funding, including:
- A badly-needed 2% salary increase for employees in FY 2027, and an additional 2% salary increase for employees in FY 2028, bringing the cumulative total cost of these increases to 4% in FY 2028; and
- A required increase in employee health insurance costs of 14.1% in FY 2027 with an additional increase of 10% in FY 2028, for a total compound increase in FY 2028 compared to the current cost of 25.5%.
How the House budget proposal hides deep and critical funding cuts within “the base”
One example of a budget unit that will be subject to the cuts and added expenses described above is the Department of Aging and Independent Living (DAIL), which among other programs and services provides millions of meals to seniors each year. Senior meals have been in the news over the past year because the program ran out of money late in 2025 due to increased participation and loss of federal American Rescue Plan Act dollars that were used to support the program during and after COVID. To address the issue, the Beshear administration moved $9.1 million from another area of the budget to fill in the gap.
The House, however, did not explicitly provide additional funding to address the shortfall for senior meals. Combining the base reduction of 7% in the second year of the biennium with the lack of increased funding to support the growth in senior meals participation, the House budget provides $11.2 million less in funding for DAIL than the Governor’s budget in the second year of the biennium. This deficit is before an estimated $460,000 in expenses DAIL will have to absorb due to the salary increases and increased health insurance costs.
Thus, if the current levels in the House budget for DAIL pass, the department will lack sufficient funding to continue to support senior meals at the current levels without making significant cuts to other programs and services the agency provides. Despite this reality, the Chair of the Appropriations and Revenue Committee said that the funding for this important program is “included in the base.”
Another example of base funding being insufficient is the Department for Community Based Services (DCBS), which is responsible for protecting children and vulnerable adults including through the provision of foster care, conducting child and adult abuse investigations, determining eligibility for Medicaid and SNAP, and providing childcare support, among other functions.
The Governor’s budget includes language directing DCBS to implement several programs and provides additional appropriations to cover the cost of the programs, resulting in an overall increase in funding for DCBS.
HB 500, on the other hand, requires DCBS to absorb the base cuts and increased personnel costs outlined above, resulting in a base reduction of roughly $100 million over the biennium. In addition, HB 500 appropriates specific amounts for separately identified programs and purposes, some of which include significant increases from past funding that must also be absorbed by the reduced base. When these types of earmarks are made with no additional funding to support them, as is the case in HB 500, the agency’s ability to appropriately prioritize expenditures is compromised because the spending that is delineated leapfrogs above all spending areas. So, in a budget that is underfunded, earmarks exacerbate the issues the agency faces in determining where and how to cut. The table below compares the base appropriations and specifically identified allocations included in the Governor’s budget and HB 500 illustrating that the base funding available in HB 500 is almost $100 million less than in the Governor’s proposed budget.
In addition to the base reductions and carveouts identified above, HB 500 also claims that the funding is there to implement legislation previously enacted but not funded. The bill includes language specifically identifying five bills the Governor included in his 2024 letter mentioned above as not being implemented due to lack of appropriations. It then says that the base funding is sufficient to implement and carry out all of those provisions – the estimated cost of which, excluding SB 151 implementation, which is included above, is $55 million.
There is no doubt that if the budget that is finally passed includes provisions similar to the House version of HB 500, DCBS will have to make significant cuts to be able to fulfill its existing statutory obligations in addition to those identified in the budget bill. Taking care of children in out-of-home placement will necessarily and appropriately be a very high priority, but DCBS will struggle to do what is needed with fewer resources. That was already the case this year, when DCBS cut basic cash assistance to very low-income families and diverted those funds to foster support care. In a recent news story covering a report released by the State Auditor examining children sleeping in state office buildings and nontraditional placement settings, the Auditor stated that, “We probably do need to be paying more money for foster care parents, especially for therapeutic foster care. We need to be doing more to get treatment locations. We absolutely need to be doing more on this.”
In addition, other parts of DCBS that are not explicitly prioritized through a line item in the budget, like childcare, are more likely to be cut. The roughly $93 million in investments that were included in the previous budget for child care are not separately delineated in HB 500. The DCBS base budget, once all of the unfunded carve outs and base reductions have been accounted for, will be over $96 million less than the current base budget. Nor are the recent basic cash assistance cuts likely to be reversed as the governor proposed in his budget with a $44 million appropriation over the biennium.
At base, it is about priorities
The examples provided above are but a few that will play out across state government as agencies struggle with added responsibilities, reduced funding, and unrealistic expectations about their ability to continue doing more with less.
Over the past two budget cycles, with a laser focus on continuing to reduce Kentucky’s income tax rate, the General Assembly has left over a billion dollars unspent that was available in each fiscal year to support state government, instead electing to cut the base budgets of many agencies while at the same time adding new statutory responsibilities without funding them. That choice has made it increasingly difficult for these agencies to continue to operate at the capacity needed to fulfill all of their responsibilities. In many cases the funding is not “in the base” — it is “on hold” to support future tax cuts. Meanwhile agencies like DAIL and DCBS — both of which are charged with helping the most vulnerable among us — are left with agonizing choices about what to cut from what is not, in fact, in “the base.”
- Budget units exempted from the base cuts include Veteran’s Affairs, Appropriations Not Otherwise Classified and Judgements, SEEK, Learning and Results Services within the Department of Education, County Costs, Medicaid Benefits, Behavioral Health, FRYSC/Volunteer Services, the Department of Juvenile Justice, specific budget units within the Department of Corrections, and the Postsecondary Performance Fund.
