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Fitch Ratings: TN Has Lowest State Debt in the Nation

News release from Lt. Gov. Ron Ramsey:
(July 22, 2013, NASHVILLE) – Lt. Governor Ron Ramsey (R-Blountville) and Senate Finance Chairman Senator Randy McNally (R-Oak Ridge) today announced that Fitch Ratings officially declared Tennessee the lowest indebted state in the union. Fitch Ratings issued the finding in a special report on state pensions last week. The ranking is based on Tennessee’s net tax-supported debt and unfunded pension obligations as a percentage of personal income.
“This news proves once again that Tennessee can outperform any state in the union — even in the Obama economy,” said Lt. Governor Ramsey. ¬†“While the federal government and other states are taxing, spending and leaving their grandchildren the bill, Tennessee continues to balance budgets and pay what we owe. I’m proud of our legislature, our Governor and our constitutional officers for their commitment to a lean and efficient state government that provides necessary services at minimal cost to taxpayers. It is that commitment that continues to attract businesses and families to our great state.”
Senate Finance Chairman Randy McNally concurred in celebrating the news.
“I’m grateful to Fitch Ratings for recognizing Tennessee’s commitment to fiscal discipline,” said Sen. McNally. “We work hard as a state government to live within our means and pay our debts promptly. I look forward every day to participating in Tennessee’s economic success story.”
Fitch Ratings State Pension Update special report published July 16, 2013 revealed that the median level for states’ combined net tax-supported debt plus unfunded pension liabilities measures 7.0 percent of 2012 personal income. Tennessee’s was lowest at 1.8 percent. The nation’s highest percentage was Illinois at 24.8 percent.
Fitch Ratings is a leading global rating agency which provides the world’s credit markets with independent credit opinions. ¬†Fitch, together with Moody’s and Standard and Poor’s, are the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission.

Two Agencies Keep TN Bonds at AAA, One at AA+

(Note: Expands and replaces earlier post)
NASHVILLE, Tenn. (AP) — Rating agencies have decided not to downgrade Tennessee’s debt after the state submitted a detailed game plan for how each agency would respond to deep federal spending cuts.
Republican Gov. Bill Haslam on Tuesday cited a “proven history of fiscal responsibility” in announcing that Moody’s Investors Service and Fitch Ratings have reissued their top ratings to Tennessee and that the state will remain one notch below Standard and Poor’s best grade.
The only change is Moody’s switching Tennessee to a negative outlook, following a decision in August to do the same with the federal government’s debt.
Haslam last month led a delegation of state official to meetings with all three ratings agencies in New York in which he presented plans for coping with federal spending cuts as deep as 30 percent.
The governor told reporters after a speech to a Republican group at a Nashville law firm on Tuesday that Tennessee showed the ratings agencies a willingness to make difficult spending decisions if they are required.
“Their concern is not about delivery of services,” he said. “What it’s about (is): Will people who loan money to the state get paid back? And to do that, they want to be hear if you’re willing to make cuts if you have to.”
“That’s reassuring to them,” he said.
The ratings decisions were reported earlier by The Tennessean and The Memphis Daily News based on an email to lawmakers from an aide to the state comptroller and a Twitter post by state Senate Speaker Ron Ramsey, R-Blountville, on Monday afternoon.
“These ratings are proof that a united Republican government determined to cut government and promote economic growth works,” Ramsey said in a statement Tuesday. “It’s that simple.”
Finance Commissioner Mark Emkes earlier led a delegation of state officials to meetings with Moody’s and Fitch after initial rumblings in August that Tennessee could face a downgrade because of it relies on the federal government for about 40 percent of its budget.
Upon his return, the former CEO of tire maker Bridgestone Americas ordered each state agency to lay out plans for how it would cut 15 percent of federal aid, and another for reducing those funds by an additional 15 percent.
The state in September submitted its 153-page plan detailing how the each agency would deal with an across-the-board reduction in federal money.
“They were used to seeing contingency planning and risk assessment from corporations, so I think they were favorably impressed that the state government had looked at this and gone through the process,” Emkes said after a second round of meetings with the ratings agencies.
Under the worst-case scenario, Tennessee would have to cut $4.5 billion out of the $30.8 billion spending plan and lay off more than 5,100 state employees.
About half of those cuts would be made at TennCare, the state’s expanded Medicaid program serving 1.2 million people.
Former Democratic Gov. Phil Bredesen cut 170,000 adults from TennCare and reduced benefits to thousands more to bring spending under control during his two terms as governor that ended in January. TennCare costs dropped by about $1 billion between 2005 and 2009, but still make up about a quarter of the state budget.
Tennessee’s approach doesn’t appear to have been replicated by other states making their cases to keep or improve their debt ratings.
Note: News release below

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