Press Release|Public Finance

KBRA Affirms A+ Rating, Stable Outlook on Commonwealth of Kentucky Revenue Bonds

3 Sep 2026   |   New York

Contacts

KBRA affirms the long-term rating of A+, with a Stable Outlook on Revenue Bonds issued by the Commonwealth of Kentucky State Property and Buildings Commission (the "SBPC") on behalf of the Commonwealth of Kentucky (the "Commonwealth"). As Revenue Bond debt service is subject to appropriation by the Commonwealth, KBRA concurrently affirms the Commonwealth's implied General Obligation (G.O.) rating at AA-, with a Stable Outlook.

Revenue Bonds are secured by and payable from rental payments made by the Finance and Administration Cabinet of the Commonwealth (the “Cabinet”) to the SPBC pursuant to a Lease. The SPBC has further entered into subleases with various state agencies which utilize the leased projects. For each biennial budget period, the Lease requires the Cabinet to seek legislative appropriations sufficient to make rental payments in amounts adequate to pay debt service on Revenue Bonds issued by the SPBC. While the General Assembly is not obligated to appropriate funds in future years, the Cabinet has covenanted to annually include an appropriation request for debt service. The Bonds are not secured by a lien on properties constituting the project.

Key Credit Considerations

Credit Positives

  • Ongoing progress in addressing chronic underfunding of pension obligations.
  • Strong operating performance, resulting in generally balanced financial operations and healthy reserves over the past two biennia.

Credit Challenges

  • Despite recent pension-funding progress, the unfunded liabilities of the Commonwealth’s retirement systems dwarf outstanding bonded debt and require continued, disciplined budgeting.
  • Lagging economic performance, as measured by growth and wealth levels, relative to the region and the U.S.
  • An increasing need to manage revenue uncertainty associated with the initiative to eliminate personal income taxes, together with planned modest reductions in the Budget Reserve Trust Fund.

Rating Sensitivities

For Upgrade

  • A continued trend of meaningful improvement in the long-term liability burden.
  • Demonstrated ability to grow revenues as income tax rate reductions are implemented.
  • Expansion of economic base that contributes to improved wealth and income metrics.

For Downgrade

  • Failure to maintain momentum toward pension sustainability.
  • Material deterioration in General Fund revenue performance leading to significant reserve declines.

To access ratings and relevant documents, click here.

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1016836