Kentucky

State Budget Practice Report Cards and Budget Resource Guide

Kentucky's average grade in legacy costs rose to B for fiscal 2017 through 2019 from C for the previous three years. The aver-age mark improved largely because the state made its full actuarially determined contributions for public worker pensions each year in the latest period. Though Kentucky’s 2018 pension funding level of 44.9 percent was still about 25 percentage points below the all-state total, it was up from 31 percent in 2016. The state made its full annual contributions for other postemployment benefits, such as health care, in fiscal 2017 through 2019.

The state earned C averages in budget maneuvers and reserve funds. Its mark in the latter category reflects a lack of policies to guide the legislature on using rainy day fund assets. Kentucky is also one of twenty-nine states that fail to consider historical revenue volatility in establishing rainy day fund goals. Those two best practices are among those cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action.

Kentucky averaged a B in forecasting. Its single significant shortcoming was a lack of long-term expenditure estimates. The state provides such estimates for only two years and does not present a justification for the forecast. It forecasts revenues for three years, with that information contained in budget-planning documents rather than in the budget itself.
 

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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 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, 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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