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.
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 found here contain grades of the state's budgetary practices during the fiscal years of 2016 through 2018. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.