Press Release|Public Finance
KBRA Affirms A+ Rating and Stable Outlook for Commonwealth of Kentucky State Property and Buildings Commission Revenue Bonds
21 Sep 2023 | New York
KBRA affirms the long-term rating of A+ with a Stable Outlook to the Commonwealth of Kentucky State Property and Buildings Commission Revenue Bonds. Because debt service is subject to appropriation, the rating on the Revenue Bonds is one notch below the Commonwealth’s General Obligation credit rating, which is concurrently affirmed at AA- with a Stable Outlook.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Ongoing progress in addressing the chronic underfunding of pension obligations.
- Strong revenue performance has led to balanced financial operations and improved reserves over the past two biennia.
Credit Challenges
- Despite recent pension funding progress, the unfunded liabilities of the Commonwealth’s retirement system dwarf outstanding bonded debt and the annual General Fund Budget and require continued, disciplined budgeting and constructive reform.
- Economic performance lags the region and U.S. in terms of wealth levels and growth.
Rating Sensitivities
For Upgrade
- Continued trend of meaningfully improved pension funding.
- Expansion of economic base that contributes to improved wealth and income metrics.
For Downgrade
- Failure to maintain momentum towards pension sustainability.
- Material decline in performance of General Fund revenues.
To access rating and relevant documents, click here.