Kentucky Credit Outlook Takes A Hit
Credit rating agency Standard and Poor’s has downgraded its outlook for Kentucky, signaling another possible drop in the state’s credit rating.
S&P’s Global Ratings revised the commonwealth’s outlook from stable to negative this week, echoing a similar move in 2015 before the agency lowered Kentucky’s rating from AA- to A+. And S&P is citing familiar concerns – namely, worries that weighty pension obligations could hobble the state’s budgetary performance and flexibility.
While Kentucky’s public pension debt is estimated at $32.6 billion, Gov. Matt Bevin told a Chamber of Commerce event in Lexington this month that that figure assumes unrealistic rates of return on investment. When pegged to 30-year treasuries, the number swells to $82 billion.
"That is eight times what our annual gross intake is at this time," he warned. "If we spent every single cent this state takes in for the next eight years, and assuming it doesn't grow in terms of obligation, interest, etc., we would only just begin to get back to the top of the hole we have dug for ourselves because of irresponsibility on the part of those that have preceded me."
The Lexington Herald-Leader reports the odds of another ratings downgrade are now one-in-three. If S&P hands Kentucky another cut, it would make borrowing more costly for the state.
The revised economic outlook comes despite a two-year $1.28 billion influx into the retirement systems approved by the General Assembly in 2016.