Governor Ernie Fletcher’s Communication Office
S&P's Raising of the State's Road Bond Evidence of Stronger Economy, Better Fiscal Management
Governor Fletcher: “This will happen on a much larger scale in the general fund if we live within our means and protect the rainy day fund.”
FRANKFORT, Ky. – Governor Ernie Fletcher today announced that Standard & Poor’s, one of the world’s preeminent providers of credit ratings, has raised the rating for Kentucky’s economic development road revenue bonds two notches, from A+ to AA, an indicator of the state’s strengthening capacity to meet its obligations.
“This will happen on a much larger scale in the state’s general fund if we live within our means and protect the rainy day fund,” Governor Fletcher said. “Better fiscal management means we have more money for school children and families needing quality health care.”
Governor Fletcher noted recent comments by Governor Phil Bredesen (D-Tennessee) and Governor Tim Kaine (D-Virginia) on the importance of their respective states’ Budget Reserve Trust Funds – or “rainy day funds.” Governor Kaine on Wednesday announced his new budget with a first-time ever replenishment of Virginia’s Cash Reserves Fund. Governor Bredesen recently reported increasing Tennessee’s Rainy Day Fund to $325 million.
Governor Fletcher explained that the savings in road revenue bonds will provide additional resources that will stretch our road program dollars further. “The upgrade is expected to produce debt service savings of $715,000 over the life of this bond issue alone,” Governor Fletcher said.
This rating change to the third highest level rated by S&P reflects the strong coverage of debt service obligations from road fund revenue. With an improved bond rating, the commonwealth saves significantly on its cost of borrowing through bond issues.
“This should concern legislators who recently have expressed a desire to raid the state’s rainy day fund,” said Governor Fletcher. “Dipping into that fund would send the wrong message at a critical time when we are working to rebuild the commonwealth’s credit rating.”
Sticking to our commitment to limit the state’s debt, continuing to build our reserve funds and timely passage of a state budget that makes progress toward structural balance will be important factors, he added, calling on the General Assembly to join him in working toward this goal.
The Turnpike Authority of Kentucky is issuing bonds to fund the remaining $225 million of the $450 million Road Fund bond authorization from the 2005 session. Governor Fletcher’s budget proposal to the General Assembly for the next biennium includes $938 million of bond projects of which $75 million are Road Fund supported bonds for continued support of the County and Municipal Road Aid Programs.
Additionally, Governor Fletcher proposed $290 million of federal highway administration support bonds known as GARVEEs to fund the second phase of interstate improvements.
Road fund revenues are constitutionally dedicated to highway-related uses and cannot be diverted to General Fund purposes other than for enforcement of traffic and vehicle laws and administrative costs to highway uses.