Thu October 10, 2002
Standard & Poor's Changes Kentucky's Ratings
Frankfort – Kentucky State Budget Director Jim Ramsey issued the following statement today in response to the expected announcement by Standard and Poor's of a downgrade of Kentucky's credit rating from "AA" to "AA-",
"The downgrade by S&P was not unexpected as the credit rating agencies have been looking closely at the impact of the recession on all states. Forty-six states have experienced budget shortfalls in the last two years resulting from the economic downturn. The downgrade is a reflection of our weakened economic condition and the actions the Commonwealth has taken to address short falls. The Commonwealth, like many other states, has used budget reserves and one-time resources to offset revenue shortfalls in order to keep from making drastic program cuts. As a result, our capacity and flexibility to deal with future fluctuations in revenue is limited.
The immediate impact of the rating action will be to slightly increase our borrowing costs on future bond issues. The action brings us back to the "AA-" rating the Commonwealth had throughout the mid-90's. While we are disappointed with the action, we continue to have a very strong capital management program and good relationship with the capital markets. The Finance and Administration Cabinet will continue to examine our debt structure to maximize refunding and other cost-saving measures in an effort to offset any negative cost of the rating reduction.
This action confirms that Kentucky has long-term structural problems in its revenue structure that should be addressed to bring into balance recurring revenues and recurring expenditures."
For more details regarding Standard and Poor's announcement, you may visit their web site at http://www.standardandpoors.com/RatingsActions/RatingsNews/PublicFinance/index.html.