FRANKFORT, Ky. - One of two major credit rating agencies removed Kentucky from its “watch list” for a potential downgrade Tuesday, citing the relatively smooth operation of government without a budget.

        Moody's Investor Service said, however, that Kentucky's overall credit is still in jeopardy.

        “Given the budgetary stress the commonwealth faces due to continued weak revenue collections, and the uncertainty relative to the strength and timing of its economic rebound, the credit outlook for the commonwealth remains negative,” Moody's said in its report.

        Standard & Poor's rating agency continues to have Kentucky on its watch list for possible downgrade and an overall negative outlook.

        Credit ratings can increase the amount of interest the state has to pay on its debt, even though there have been no bonds sold since the fiscal year began July 1.

        The General Assembly failed to pass a budget during its 60-day session or an eight-day special session, leaving the state to open a fiscal year for the first time without a legislatively enacted spending plan.

        Gov. Paul Patton imposed a “spending plan” that follows budgets approved by the House and Senate. A lawsuit to settle the constitutionality of the arrangement is slowly making its way to court, with no decision expected until October.

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