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Favorable Liquidity Will Help Kentucky Manage Tornado Recovery

Sunset in rural Kentucky

A potent storm system on December 10-11 that saw a reported 70 tornados tear across Kentucky, Arkansas, Illinois, Mississippi, Missouri, and Tennessee resulted in widespread devastation and tragic loss of life. In Kentucky alone, a significant long-track tornado that started in Woodland Mills, Tennessee, traveled a 165.7 mile path of destruction to Falls of Rough, Kentucky.

At the time, Kentucky Governor Andy Beshear declared an emergency and activated the National Guard. President Biden also issued a declaration of a major disaster, which activated a response from the Federal Emergency Management Agency (FEMA) which has deployed 700 personnel to the affected areas. State of Kentucky first responders included more than 600 employees of the Kentucky Transportation Cabinet, 100 Kentucky State Police troopers and personnel, 20 individuals from the Division of Forestry, and about 640 National Guard members. In KBRA’s view, the Commonwealth of Kentucky’s improved reserve position together with federal assistance provide important support to address the added costs that could result from the recovery efforts.

Path of Tornados

The two longest tornado paths started in Tennessee and continued northwest into Kentucky, largely avoiding urban, more populated areas (see Figure 1). The Kentucky tornados claimed the lives of an estimated 76 people and displaced around 600 people, who at one point were given shelter in the state’s park system.

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Kentucky’s Improved Liquidity

Over the past two fiscal years, the commonwealth has experienced operating surpluses. The general fund balance finished the fiscal year ending June 30, 2020, at $610 million or 3.5% of expenditures, up from 2.7% in 2019 and a significant improvement from the year ending June 30, 2018, when the general fund balance was ($60) million. The budget for fiscal year (FY) 2021 expected a continuation of these positive operating results. Governor Beshear has 30 days of extraordinary powers due to the emergency. The legislature is back in session in January 2022 when it will undoubtedly address ongoing recovery plans and costs.

Conclusion

In KBRA’s view, as a result of federal assistance and state resources, Kentucky is well placed to manage the financial implications of the substantial damage caused by the recent tornados. KBRA will continue to monitor the economic and financial effects on the state of the tornados and their aftermath and extends its sympathies to those affected by the disaster. KBRA extends its sympathies to the victims of this devastating natural disaster.

Contacts

Paul Kwiatkoski, Managing Director

+1 (646) 731-2387

paul.kwiatkoski@kbra.com

Linda Vanderperre, Senior Director

+1 (646) 731-2482

linda.vanderperre@kbra.com

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