Pension debt leads to Kentucky credit rating downgrade

Due to Kentucky’s poorly funded pension system and its growing unfunded liability, credit rating Standard and Poor’s downgraded the state’s credit rating on Thursday. In addition to the enormous unfunded liability, they stated part of the reason for the downgrade is because Kentucky’s elected officials have done little to remedy the problem.

Standard and Poor’s downgraded Kentucky from AA- to A+, which is now the 4th lowest in the nation.   The agency stated that until Kentucky addresses long term pension liabilities, the rating is unlikely to raise. The report also stated that despite pension reform in 2008 and 2013, Kentucky lawmakers have yet to make meaningful progress on the issue, especially when it comes to the Kentucky Teachers’ Retirement System. This downgrade can negatively affect the interest rates on bonds.

The Kentucky Chamber has long called for additional reforms to the system, including a comprehensive performance audit of KRS and full disclosure of pension funding. There has been much discussion on additional pension reforms in the upcoming 2016 General Assembly, especially for the KTRS. In July of this year, Governor Steve Beshear appointed a 23 member panel to study the system and make suggested changes to the system.

Categories: Kentucky Competitiveness, Pensions

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  1. The Chamber is dead on calling for a performance audit of KRS. The state auditor did a traditional audit in 2013 and on page 85 found that that KRS paid $50.727 million a year in fees to Wall Street firms. However an outside expert The CEM benchmark report found $126.6 million in fees paid by KRS in FY 2014. Have investment fees gone up $75 million or 150% or were fees hidden on the 2013 Audit and is that audit wrong?

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