Updated with correction
Standard & Poor's Ratings Services announced Thursday it had lowered its issuer credit rating for the state of Kentucky to A+ from AA- due primarily to the state retirement systems' underfunded pension liabilities.
As of June 30, 2014, the most recent data available, the $18.6 billion Kentucky Teachers' Retirement System and the $14 billion Kentucky Retirement Systems, both of Frankfort, were 45.6% and 43.2% funded, respectively.
“The downgrade reflects our view of Kentucky's substantially underfunded pension liabilities that are the result of chronic underfunding and that we view as placing long-term pressures on the state's finances,” said John Sugden, credit analyst at Standard & Poor's, in a news release. “The Kentucky retirement system includes various funds, with the two largest substantially underfunded and the rest having below-average funded levels.”
Last week, current and retired Kentucky school teachers filed a lawsuit against KTRS, charging the retirement system with failing to adequately address its “dire” funded status, including illegally raising teachers' contributions to the pension fund.
Officials at the pension fund could not be reached by press time for comment.