General Fund revenues have risen annually since fiscal year 2011
(July 11, 2014) — Moody’s Investors Service revised the outlook for Kentucky from negative to stable in an analysis released on June 11 and said the commonwealth’s financial profile has improved following the economic downturn. However, large pension liabilities remain a source of credit pressure and despite the stabilized ratings, Kentucky’s credit profile remains below average compared with most other states.
Key factors in the outlook change include:
- The budget adopted for the fiscal 2015-16 biennium shows near structural balance following state actions to reverse weak trends. General Fund revenues have risen annually since fiscal year 2011, and structural imbalance has decreased to about 4 percent of projected revenues, compared to over 23 percent in fiscal 2010.
- Kentucky has undertaken modest pension reforms. Recent legislation reduces benefits for new hires and requires full funding of the annual required contribution for the general employee retirement system. But the legislature failed to pass reform for the teachers’ system and the state’s ratio of adjusted net pension liability to revenues remains third highest in the nation.
- Debt levels will remain high. Commonwealth debt as a percentage of personal income (5.7 percent) is more than double the 2013 state-sector median.
- With Ford and Toyota two of the state’s largest employers, pent-up demand for automotive purchases bolstered the economy from 2009-12.