Melt butter in a large skillet or saucepan over medium heat. Add sausage and bacon. Cook, breaking sausage into small pieces, until sausage is browned and bacon is almost crisp, about 10 minutes. Add light green onion to sausage mixture and saute until soft, about 3 minutes more.

Stir flour into meat mixture, 1 to 2 tablespoons at a time, until thoroughly combined and mixture is pasty. Cook, stirring often, to remove raw flour taste, 2 to 3 minutes.

Whisk milk into meat mixture, about 1 cup at a time, until combined. Continue to whisk until gravy begins to thicken, about 5 minutes. Turn heat to medium-high, bring gravy to a simmer. Season with cayenne pepper, salt, and black pepper. Reduce heat to medium-low.

Continue to simmer gravy, stirring occasionally, until flavors have blended and gravy is thick, 10 to 15 minutes. Garnish with green onion and cayenne pepper.