Fitch Ratings revised Kentucky’s outlook to stable from negative due to the state’s solid economic recovery from the COVID-19 pandemic.
Fitch cited the state’s ability to “navigate the ongoing budgetary implications without materially weakening its fiscal resilience.”
“This improvement further indicates Kentucky is poised to sprint out of this pandemic and be a leader in the post-COVID economy,” Gov. Andy Beshear said Wednesday. “Thanks to responsible fiscal management by my administration, even in the midst of a pandemic, our financial outlook is improving.”
Fitch also affirmed the state’s issuer default rating at AA-minus and appropriation-backed debt at A-plus.
Kentucky's rating reflects its “solid ability to control revenues and expenditures to maintain fiscal balance, a declining reliance on one-time measures, and an elevated, but still moderate, long-term liability position,” Fitch said.
Kentucky ended fiscal 2020 with a $177.5 million general fund surplus. The state made a $162.5 million deposit into its Budget Reserve Trust Fund, or rainy day fund, bringing the balance to an all-time high of $465.7 million or 4% of fiscal year 2020 general fund revenue.
On April 30, the governor said the third quarter economic and revenue report indicated the state will end the current fiscal year with large surpluses.
“Recent estimates suggest we are going to end our fiscal year with a more than $586 million surplus in the general fund, and even a $12 million surplus in the road fund,” Beshear said. “What that will mean is that we will end up with over a billion dollars in our rainy day fund. It is the most money ever in a rainy day fund in Kentucky by both dollars and percentage of the total budget.”
The governor added that about $1.3 billion of American Rescue Plan Act funds will be used to boost the state’s economy by building schools, expanding broadband access, and delivering clean drinking water.
Moody’s Investors Service assigns an Aa3 rating to Kentucky with a stable outlook while S&P Global Ratings rates the state A and Kroll Bond Rating Agency rates it AA-minus with a stable outlook.
