Public project costs are rising rapidly.
Bond rating agencies have lowered Kentucky’s credit rating several times in recent years, citing the state’s huge unfunded pension liabilities as a key factor. The most recent downgrade was by Standard and Poor’s Rating Service in September 2015. Failure to pay down Kentucky’s unfunded pension liabilities will further affect the state’s credit rating, increasing the state’s cost to borrow money and limiting public construction projects that create private sector jobs and spur economic growth. A real-world example: A downgrade of Illinois’ credit rating due to pension liabilities even higher than Kentucky’s increased the cost of a $1.3 billion bond issue for construction projects in that state by $95 million over the term of the bonds. This increased cost was enough to fund the construction of at least four high schools or 12 elementary schools.