The Collaborative International Dictionary of English v.0.48:

Blue-grass State \Blue-grass State\
   The Sate of Kentucky; -- a nickname alluding to the
   blue-grass region, where fine horses are bred.
   [Webster 1913 Suppl.]

WordNet (r) 3.0 (2006):

Bluegrass State
    n 1: a state in east central United States; a border state
         during the American Civil War; famous for breeding race
         horses [syn: Kentucky, Bluegrass State, KY]