Kentucky earns ‘F’ grade for its fiscal health: report

Repeated decisions by elected officials have left the Commonwealth of Kentucky with a staggering debt burden of $50.3 billion, according to Truth in Accounting's (TIA) analysis of Kentucky's most recent financial filings. That burden equates to $39,200 for every taxpayer.

Kentucky’s financial condition is concerning, but what’s also troubling is that government officials have continued to mislead the public by failing to disclose significant amounts of retirement debt on the commonwealth’s balance sheet, despite new rules to increase financial transparency. This skewed financial data gives Kentucky’s residents and taxpayers a false impression of the commonwealth’s overall financial health.

But there is a silver lining that offers some hope for future government financial reporting in Kentucky, said Sheila Weinberg, founder and CEO of Truth in Accounting.

"We are pleased to see Gov. Matt Bevin and legislators are finally understanding Kentucky is in a financial crisis," said Sheila Weinberg, founder and CEO of Truth in Accounting. "It is encouraging to hear the governor highlight the accounting gimmicks that have been used to balance the budget while also putting Kentucky more than $50 billion in the hole.”

Truth in Accounting is a Chicago-based nonprofit think tank that analyzes state and municipal financial reports when they are published. According to its report for 2017, Kentucky has $62.3 billion worth of bills and just $12 billion in available assets after capital and restricted assets are excluded. This results in a $50.2 billion shortfall and a $39,200 Taxpayer Burden™, which is each taxpayer's share of state bills after its available assets have been tapped. TIA's Taxpayer Burden indicator incorporates both assets and liabilities, not just pension debt.

And because of an accounting rule implemented two years ago, Kentucky must report all of its pension debt on the balance sheet. At the end of the 2017 fiscal year, the commonwealth’s reported pension debt was $40.6 billion. And while it reported most of its pension debt, Kentucky continues to hide most of its retiree health care debt, also known as other post-employment benefits. Its total hidden debt comes to $3.1 billion. A new accounting standard will be implemented next year that will require state and local governments to report this debt on the balance sheet.

The bottom line is that Kentucky would need $39,200 from each of its taxpayers to pay all of its bills, which is why it received an “F” grade for its fiscal health.

You can read the full report here.