FRANKFORT — Two financial rating houses — Moody's and Fitch — have recently downgraded Kentucky's bond rating, citing increasing costs in the state's pension systems and too much reliance on one-time money to balance the state's books.
On March 30, Moody's downgraded Kentucky's ability to repay its debt to AA2, which is below AAA, or prime.
In February, Fitch downgraded Kentucky from stable to negative, meaning the organization has concerns that the state's finances are not heading in the right direction.
The ratings are used to determine how much Kentucky will pay in interest when it sells bonds.
Overall, both Moody's and Fitch still rank the state's ability to repay its bond debt as high.
Senate Republicans — who have criticized Democratic Gov. Steve Beshear's financial management — said the dip in the bond ratings shows that Beshear is doing a poor job managing the state's finances.
Beshear countered Thursday that Kentucky's bond rating remains high and better than that of most other states.
Sen. David Givens, R-Greensburg, mentioned the Moody's and Fitch reports in debate on the Senate floor Wednesday.
"We are moving on a path that is not only costing us but is costing our children," Givens said. "Where is the outrage?"
On Thursday, Senate President David Williams, R-Burkesville, who is running for governor, addressed the topic on the Kruser and Krew show on WVLK 590-AM. Williams said the downgrades showed that a proposal by the state Senate that failed in the recent legislative session was the best fiscal policy.
"The governor has not made the cuts necessary to make us financially sound," Williams said.
Senate Republicans proposed $100 million in cuts across state government and additional limitations on Beshear's ability to restructure the state's debt as a way to shore up a hole in the state's Medicaid budget. House Democrats and Beshear rejected the Republicans' idea, instead implementing a plan that moves money within the Medicaid budget and uses savings in the health-care program next year to avoid cuts.
House Democrats said that the state's finances are in better shape than most other states.
"Any time you get a downgrade it is a concern," said Rep. Bob Damron, D-Nicholasville, a financial advisor who specializes in government bonds.
Damron said that most government bond ratings have been downgraded over the past 18 months.
But he added that "for the most part, we have a relatively solid bond rating."
Beshear said the state has made substantial cuts — more than $1 billion over the past three years — and is reducing its borrowing.
Beshear said he restructured debt — pushing debt payments into the future — rather than cutting key areas of the budget such as education and health care and other social services.
"By our estimation, 17 other states have used debt restructuring as a tool to balance the budget, so we aren't alone," Beshear said.
