Kentucky

State Budget Practice Report Cards and Budget Resource Guide

Despite having the worst-funded state public employee pension system, with only 33.9 percent of assets needed to fulfill promised benefits as of 2017, Kentucky managed to earn a C average in legacy costs for fiscal 2016 through 2018.

The grade reflects a 2013 law requiring Kentucky to pay—after years of shortfalls—the amount recommended by actuaries into the five plans that make up the Kentucky Retirement Systems. The Teachers’ Retirement System of the State of Kentucky, a separate fund, was not covered by the law, however, and Kentucky continued to miss its full annual contribution for that plan in 2016. The state made a turnaround in 2017 and 2018, coming close to the full annual contribution for teachers while exceeding the recommended amount for its other major plans.

Still, future annual contributions will need to be even greater if Kentucky is to achieve full funding within the thirty-year amortization period of its pension gap. There is no guarantee that this goal will be reached. Just making the full contribution in the last biennium required special fund transfers and multiple cuts to state services and higher education.

Kentucky also received a C average in the reserve fund category because it lacks policies for the disbursement of cash it has set aside. The rainy day fund can be tapped via the legislative appropriations process, but the state lacks rules governing how or when lawmakers can access reserves.

Download Printable State Report Card

To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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