Commonwealth of Kentucky – G.O. / Appropriation Surveillance Report

Rating Summary

The Commonwealth of Kentucky’s (the “Commonwealth”) implied General Obligation (G.O.) rating continues to reflect resilient financial performance, evidenced by favorable General Fund operating results and healthy budgetary reserves. Although the Commonwealth’s combined net pension liability has gradually declined following previously implemented pension reforms, significant funding challenges remain and temper this credit strength. Additional considerations include the Commonwealth’s weak socioeconomic and demographic profile and potential revenue variability associated with its initiative to eliminate personal income taxes.

The rating on the Revenue Bonds (the Bonds) is ultimately based on KBRA’s expectation that the General Assembly will appropriate funds, as needed, to pay debt service, given that Lease financing is critical to the Commonwealth’s ability to fund essential real estate and other building projects. KBRA notes that the General Assembly has never failed to…