HCR 81 would establish the ‘Debt Affordability Task Force’ in Kentucky

The Bluegrass Institute’s “Lost Decades” report highlighted the following facts about Kentucky’s debt:

  • Kentucky is burdened with $11.2 billion in appropriation and non-appropriation supported bonds.

  • Debt service to support Kentucky’s borrowing mushroomed from $474 million in 2010 to $1.18 billion in 2018. 

  • Kentucky has the seventh-highest debt as a percentage of personal income among the 50 states.

  • Among Kentucky’s seven neighboring states, only Illinois has a lower bond rating. Indiana, Missouri, Tennessee and Virginia have the highest possible ratings from the three bond-rating agencies.

To begin addressing the non-pension debt issues facing Kentucky, the Bluegrass Institute worked with Rep. DJ Johnson to introduce HCR 81, which would establish the Debt Affordability Task Force.

The purpose of the task force is “to study Kentucky's non-pension debt obligations and report ‘best practices’ and recommendations for managing the state's debt going forward.”

The resolution includes seats on the task force for the Kentucky School Boards Association and the Council for Postsecondary Education. Both organizations support the effort.

The full text of HCR 81 is below:

A CONCURRENT RESOLUTION establishing the Debt Affordability Task Force. 

WHEREAS, the fiscal health of a state is characterized by its capacity to meet both immediate and long-term financial responsibilities required to provide essential public services; and 

WHEREAS, Kentucky’s overall fiscal health has historically ranked alongside highly leveraged states like Illinois, Connecticut, and New Jersey; and 

WHEREAS, the Commonwealth of Kentucky’s current financial condition has seen substantial improvement in the short term, but still faces significant structural challenges; and 

WHEREAS, in May 2021, Fitch Ratings recognized improvements in Kentucky’s fiscal condition, upgrading the state’s outlook from "negative" to "stable"; and 

WHEREAS, even with the recent improvements in Kentucky’s fiscal condition, Kentucky still carries one of the lowest credit ratings in the nation; and 

WHEREAS, since 2016 the General Assembly has enacted important reforms to the state’s pension systems and consistently provided historic levels of pension funding; and 

WHEREAS, Kentucky’s long-term fiscal challenges are also defined by debt authorized in the general fund, road fund, and agency fund; and 

WHEREAS, Kentucky’s appropriation for debt service increased from $537 million in FY 2010 to $1.15 billion in FY 2022; and 

WHEREAS, the Federal Reserve Bank has stated policymakers must carefully balance a state’s capital needs with efforts to keep debt levels affordable; and 

WHEREAS, the three major credit rating agencies consider a state’s debt burden and debt management policies among various factors when assigning ratings; and 

WHEREAS, Kentucky currently lacks a clear approach to collect, evaluate, and monitor debt-related data; and 

WHEREAS, there are best practices available for Kentucky to evaluate and monitor debt-related data and consider strategies for publicly reporting and managing the state’s non-pension related debt; and

WHEREAS, prudent debt management would be a signal Kentucky is on track to join the ranks of the most fiscally responsible states in the nation; NOW, THEREFORE, 

Be it resolved by the House of Representatives of the General Assembly of the Commonwealth of Kentucky, the Senate concurring therein: 

Section 1. The Legislative Research Commission is hereby directed to establish the Debt Affordability Task Force. The duties of the task force shall include but are not limited to: 

(1) Analyzing and reporting on the current outstanding debt issued by state agencies, universities, and state-affiliated independent authorities and commissions; 

(2) Defining and describing Kentucky’s current, non-pension debt obligations, utilizing generally accepted measurements that allow for comparisons against peer states; 

(3) Identifying and recommending best practices for measuring and publicly reporting on Kentucky’s non-pension debt obligations, the Commonwealth's capacity to repay existing debt, and decisions on issuing new debt; and 

(4) Identifying and recommending action to improve Kentucky’s credit rating, including any immediate opportunities to reduce Kentucky’s non-pension debt obligations. 

Section 2. The Debt Affordability Task Force shall be composed of the following members, with final membership of the task force subject to consideration and approval of the Legislative Research Commission: 

(1) One member of the House of Representatives appointed by the Speaker of the House of Representatives who shall be designated to serve as co-chair; 

(2) One member of the House of Representatives appointed by the Minority Floor Leader of the House of Representatives; 

(3) One member of the Senate appointed by the President of the Senate who shall be designated to serve as co-chair;

(4) One member of the Senate appointed by the Minority Floor Leader of the Senate;

(5) The President of the Council on Postsecondary Education, or designee;

(6) A representative from the Kentucky School Boards Association recommended by the Executive Director of the Kentucky School Boards Association and appointed jointly by the President of the Senator and Speaker of the House; 

(7) A citizen representative from a public policy non-profit organization appointed by the Speaker of the House of Representatives; and 

(8) A citizen representative from a public policy non-profit organization appointed by the President of the Senate. 

Section 3. The executive branch of government shall promptly provide necessary data, research, and other requested information to assist the Debt Affordability Task Force in the performance of its duties. 

Section 4. The Debt Affordability Task Force shall meet monthly during the 2022 Interim of the General Assembly. The task force shall report its findings and recommendations to the Legislative Research Commission for referral to the appropriate committee by December 1, 2022. 

Section 5. Provisions of this Resolution to the contrary notwithstanding, the Legislative Research Commission shall have the authority to alternatively assign the issues identified herein to an interim joint committee or subcommittee thereof, and to designate a study completion date. 

 

Budget, State BudgetGuest User