Fitch Ratings upgraded Kentucky's long-term issuer default rating to AA from AA-minus and assigned a stable outlook to the credit.
Fitch said Thursday its upgrade of Kentucky's IDR "reflects material improvements to Kentucky's fiscal reserves since 2020 as a result of improved budgetary discipline and a post-pandemic surge in tax collections now in its third year."
These improved practices have let Kentucky use surplus revenues to boost its fiscal reserves, increasing the state's overall financial resilience, Fitch said.
"The upgrade of Kentucky's IDR also factors in improved funding practices related to long-term liabilities, particularly public pension plans," the rating agency said. "Fitch believes improved pension funding has enhanced Kentucky's budgetary flexibility and that these improvements are sustainable."
Fitch also upgraded Kentucky's annual appropriation-backed and other IDR-linked debt to AA-minus from A-plus.
"The AA-minus rating on the commonwealth's appropriation-backed debt reflects a slightly elevated risk of non-payment given the appropriation pledge," Fitch said.
Kentucky is rated Aa3 by Moody's Investors Service, A by S&P Global Ratings, and AA-minus by Kroll Bond Rating Agency.
The Office of State Budget Director reported Thursday that general fund receipts were the second highest ever.
Gov. Andy Beshear said receipts were slightly lower than last April due to a reduction in the individual income tax rate. Collections for April were more than $1.7 billion, indicating 4.5% growth in the first 10 months of fiscal 2023.
"It is absolutely true that Kentucky is an economic powerhouse and that we are creating good-paying jobs for our families," Beshear said. "We are in the midst of the best economic roll that Kentucky has ever been on."
