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By Aaron Mudd, Bowling Green Daily News

When it comes to the states' fiscal footing, Kentucky ranks near the bottom.

Kentucky is 46th on a list put together by the Mercatus Center at George Mason University that assesses each state's solvency, meaning how able it is to cover costs.

Illinois, New Jersey, Massachusetts, and Connecticut trailed Kentucky, respectively. Puerto Rico, a U.S. territory with a debt of more than $70 billion, finished dead last.

Using state audit data from 2014, the study further breaks down state solvency into five categories. It refers to a state's ability to cover short-term bills, whether it has a budget shortfall, ability to cover long-term costs, how much room it has to increase spending and the state's amount of debt. Kentucky is below average in all five areas.

So what do the bottom five states have in common? They all have high unfunded pension obligations.

Eileen Norcross, a senior research fellow who co-authored the report, told the Daily News that many states have unfunded pension liabilities that current accounting practices don't reveal. That means the problem could be worse than it seems.

Large unfunded pensions are only part of the reason Kentucky ranked where it did, Norcross said. It also doesn't have enough cash on hand to weather an average recession, she said. As of 2014, Norcross said the state can commit $77 million to that purpose. To make it through an average recession, Norcross said, the state would need $670 million and $1.79 billion for a bad one.

For Norcross, the state needs to do more to reform pensions along with bolstering its rainy day fund to endure potential economic downturns.

Despite the financial challenges facing Kentucky, State Sen. Mike Wilson, R-Bowling Green, sees progress with the actions of Gov. Matt Bevin.

"It takes a while to get the ship turned around, and I think that we're making some good steps in that direction," Wilson said.

Going forward, Wilson also said benefit reforms and more transparency about how pension dollars are invested may be needed.

State Rep. Jody Richards, D-Bowling Green, pointed to the Great Recession of 2008 for tanking investment yields needed to meet pay outs. Declining revenues made it a "double whammy," he said.

"It's going to be an over time fix," he said.