ELLY GRIMM
• Leader & Times
Improved economic development has been a priority for the Kelly Administration, and a recent announcement helped recognize that.
Moody’s Investors Service, which provides international financial research and well-known credit ratings, announced it has upgraded the credit outlook for the State of Kansas, underscoring Gov. Laura Kelly’s steady fiscal leadership, according to a release from the State of Kansas.
“Moody’s upgraded positive outlook is a reflection of the hard work done over the last eight years to undo the damage created by the previous administration,” Gov. Kelly noted in the State of Kansas release. “Closing the Bank of KDOT, building a $2 billion Rainy Day Fund, using our surpluses for one-time projects, and paying our bills on time has restored their faith in our ability to responsibly manage our finances. We must remain fiscally disciplined if we are to continue on this strong economic path. Moody’s upgraded Kansas’ credit outlook from stable to positive. In its announcement, Moody’s attributed this upgrade to an improved governance structure, strong rainy day reserves, a reduction in the state’s debt obligations, and implementing tax cuts that are responsible in nature.”
“Under Governor Kelly’s leadership, we have been laser focused on re-establishing common sense and principled budgeting practices in Kansas, and those efforts are being recognized nationally,” Adam Proffitt, Director of the Budget for the State of Kansas, noted in the State of Kansas release. “By taking a measured, forward-looking approach to budgeting, the State’s fiscal house is back in order, and it will remain on solid footing into the future.”
Prior to Governor Kelly’s administration, the State of Kansas’ Moody credit outlook was dropped from stable to negative in 2016, citing inabilities to restore structural balance to the budget due to the Brownback-Colyer Tax Experiment.
Moody’s statement went into more detail about the decision for the upgrade.
“Kansas' Aa2 issuer rating is supported by a Budget Stabilization Fund (BSF) equal to about 20% of General Fund expenditures, as well as substantial ending fund balances. Accumulation of these resources and a series of annual pension contributions at or near full actuarial amounts are consistent with an improving governance profile,” the decision noted. “Tax reduction initiatives have remained a key legislative objective, but fiscal impacts of recent policy changes should be manageable, provided the state adheres to statutory guardrails and uses its careful revenue monitoring and management to address adverse conditions when they materialize. With concentrations in both agriculture and manufacturing, the state's economy has elevated exposure to two industries vulnerable to the global trade effects of US tariff hikes and military conflict. The industry mix, with a strong transportation equipment manufacturing sector, also provides an opportunity to bolster performance, which has lagged the nation, by capitalizing on emerging advanced manufacturing sectors such as electric vehicle batteries. Total leverage as a share of revenue has improved, reflecting pension contribution discipline, proactive debt defeasance efforts and favorable financial market factors (rising interest rates and strong stock market returns). Debt issued by the Kansas Development Finance Authority for state projects is rated Aa3, a notch below the state's issuer rating, to account for the contingent nature of the debt, which is payable subject to annual legislative appropriation. Highway revenue bonds (Aa2) issued by the Kansas Department of Transportation, or KDOT, are paid from a somewhat broad pledge of transportation-related taxes and fees levied statewide and deposited to the State Highway Fund. The state covenants in the bond resolution to maintain highway fund revenue and transfers that provide at least three times annual debt service coverage. Including bonds issued last year, actual 2025 revenue covered maximum annual debt service by more than 10 times. Excluding federal and other intergovernmental sources, coverage also was strong, at 6.6 times debt service. By law, debt service on the bonds must remain below 18% of projected future highway fund revenue.”
