Babbage Bulletin: Lookahead to 2026 Session
What to Look for in the 2026 Legislative Session
The Kentucky General Assembly's 2026 session, lasting from January through mid-April, is dominated by a Republican supermajority focused on passing a two-year state budget while advancing a series of high-stakes policy changes.
Crafting the biennial budget is the session's top priority and a draft could come as early as this week but unlike previous years of record surpluses, lawmakers face a tighter fiscal environment. Governor Andy Beshear has projected a $156 million revenue shortfall for the current fiscal year ending June 2026 and has proposed a 3% budget reduction for most executive branch agencies to mitigate the total. The federal "One Big Beautiful Bill" has shifted costs significantly, including for SNAP, for which Kentucky must now pay 75% of administrative costs (up from 50%), expected to cost the state an additional $115 million over the next two years.
Ultimately, Kentucky holds a healthy Budget Reserve Trust Fund (one of the nation's best on a per capita basis), though legislative leadership remains hesitant to tap into it for recurring expenditures, preferring a conservative approach to spending and one-time investments.
The central point of contention is likely to be education; while Beshear and Democrats continue to push for universal pre-K as a bilateral approach to improve workforce participation, GOP leaders are instead pressing further on "school choice" by leveraging new federal scholarship tax credits. These credits would allow Kentuckians to receive dollar-for-dollar offsets for contributions to private education organizations, potentially bypassing state constitutional prohibitions. Additionally, lawmakers may look to intervene in the Jefferson and Fayette County school districts to address significant financial deficits and spending concerns.
Beyond education, the legislature could prioritize the state’s energy infrastructure to accommodate the rapid expansion of AI-driven data centers. Following significant tax incentives to attract the sites being passed in 2025, Republicans are advocating for a $75 million pilot project to establish nuclear reactors to meet their ever-growing energy demands. In an effort to mitigate local backlash regarding noise and rising utility costs, new legislative proposals would require these companies to sign contracts covering their own power generation costs, protecting residential ratepayers while allowing local communities more control over where these facilities are located.
On the social policy front, legislators are expected to file legislation mandating that local law enforcement cooperate with federal immigration authorities via formalized agreements. Following the 2025 ban on Diversity, Equity, and Inclusion (DEI) in higher education, expect to see legislation filed to do the same in K-12 public schools.
The session will also aim to tackle a severe housing shortage through a multi-pronged deregulation and incentive strategy. Based on recommendations from a legislative task force, several bills are to be introduced to reduce lot sizes, streamline zoning for urban "infill," and strengthen affordable housing trust funds.
Elsewhere, the state's Medicaid oversight board is proposing stricter eligibility audits and co-pays to manage healthcare costs as the state will have to cover a larger share due to federal cuts and new work requirements. Projections suggest up to 210,000 Kentuckians could lose coverage, and 35 rural hospitals are considered at risk of closure.
Key Dates
January 6: Regular Session Convenes
January 9: 2026 Election Candidate Filing Deadline
April 15: Regular Session Adjourns
May 19: Primary Election Day
