On June 29, 2023, S&P Global Ratings raised its issuer credit rating on the Commonwealth of Kentucky to ‘A+’ (from ‘A’). At the same time, S&P Global Ratings raised its long-term rating on Kentucky’s appropriation-backed obligations linked to the state rating, issued by the State Property and Buildings Commission and other state agencies, to ‘A’ (from ‘A-‘). The Rating Outlook for Kentucky is ‘Stable.’

S&P Global Ratings also raised its rating on Kentucky’s lease debt backed by appropriations from the Administration Office of the Courts, issued for county court projects, to ‘A-‘ (from ‘BBB+’). And S&P Global Ratings raised its long-term rating on certain issues linked to Kentucky’s public university intercept program to ‘A’ (from ‘A-‘).

According to S&P Global Ratings, the issuer credit rating upgrade reflects several key factors:

  • Kentucky’s recent sustained trend of structural balance, and no reliance on one-time measures to balance the budget over the past two fiscal biennia
  • Improved governance over the past few years, including recent pension reform for the Teachers’ Retirement System, and a demonstrated willingness to reduce expenditures to balance the budget
  • Healthy budgetary trust stabilization fund that is at its highest level ever and offers some cushion for unforeseen events
  • Solid economic trends with continued investments in the auto industry expected to generate many jobs

S&P Global Ratings further stated that these strengths are somewhat mitigated by the following considerations:

  • Kentucky’s comparatively high fixed costs, with significant pension liabilities, that are expected to weigh on future budgets
  • A large percentage of Medicaid that could pressure future budgets
  • Weaker demographics, including lower per capita income relative to that of the nation
  • Relatively low labor force participation rates

This is the second credit rating upgrade for Kentucky in less than two months, following a similar announcement by Fitch Ratings (to ‘AA’ from ‘AA-‘) on May 11, 2023. As Governor Andy Beshear stated, “This rating increase reflects the State’s commitment and execution of efforts to strengthen budgetary flexibility and long-term financial stability.” In general, credit rating is a measure of a state’s ability to pay debts and the overall health of its economy.


This information is general in nature and is not intended to provide investment, accounting, tax or legal advice. It is not intended to represent a recommendation or solicitation related to any particular investment, security or industry sector.

Independent rating services (such as Standard & Poor’s, Moody’s and Fitch) assign ratings, which generally range from AAA (highest) to D (lowest), to indicate the credit worthiness of the underlying bonds in the portfolio. Where the independent rating services differ in the rating they assign to an issue, or do not provide a rating for an issue, the highest available rating is used in calculating allocations by rating.

Mutual fund investing involves risk; loss of principal is possible. Investments in bonds may decline in value due to rising interest rates, a real or perceived decline in credit quality of the issuer, borrower, counterparty, or collateral, adverse tax or legislative changes, court decisions, market or economic conditions. State-specific fund performance could be more volatile than that of funds with greater geographic diversification. Past performance does not guarantee future results.

Before investing in any mutual fund offered by Aquila Group of Funds, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund’s prospectus. The prospectus is available from your financial professional, by clicking here, or by calling 800-437-1020.