Kentucky Finances Receive a Grade of “F”

Kentucky continues to be a major sinkhole state without enough assets to cover its debt. Repeated decisions by state officials have left the commonwealth of Kentucky with a staggering debt burden of $48.9 billion, according to Truth in Accounting's (TIA) analysis of Kentucky’s most recent financial filings. That burden equates to $39,000 for every Kentucky taxpayer, up from $33,700 in 2015.

These statistics are troubling, but what's more troubling is that state government officials continue to obscure large amounts of retirement debt on their balance sheets, despite new rules to increase financial transparency. This skewed financial data gives state residents a false impression of their state's overall financial health.

Truth in Accounting is a Chicago-based nonprofit think tank that analyzes state financial reports when they are published. According to their report for 2016, Kentucky only has $12.7 billion of assets available to pay $61.5 billion worth of bills. This means that the commonwealth has $48.9 billion shortfall and a $39,000 taxpayer burden™ which is each taxpayer's share of state bills after its available assets have been tapped. TIA's Taxpayer Burden™ measurement incorporates both assets and liabilities, not just pension debt.

Because of an accounting rule implemented last year, Kentucky had to report its pension debt on its balance sheet. This year, the commonwealth's reported pension debt grew from $29.6 billion in 2015 to $33.6 billion in 2016. Despite reporting most of its pension debt, the commonwealth continues to hide much of its retiree health care debt. The commonwealth's total hidden debt comes to $9.1 billion. A new accounting standard will be implemented in two years, and will require states to report this debt on the balance sheet.

The bottom line is that Kentucky would need nearly $40,000 from each of its taxpayers to pay all of its bills, so it has received an “F” for its finances. Compare this to Tennessee which got a “B” because it has a taxpayer surplus of $2,100 per taxpayer.

See how Kentucky compares to Indiana, Ohio, and Tennessee: http://www.statedatalab.org/c/...
Click on the link to go to an interactive chart at Truth in Accounting’s State Data Lab.