Tennessee Gov. Bill Haslam is planning a September trip to meet with major credit rating agencies in New York. He’s thankful it isn’t sooner.
“I’m glad we’re not going now because it would be chaos,” Haslam said Tuesday, referring to the congressional battle over the debt ceiling and the nation’s own credit rating. “We’ll wait to see what happens there.”
But the state’s credit rating is certainly a big deal in the current economic climate, with Tennessee holding a AAA rating from two of the three major rating agencies and AA from the other. Moody’s Investors Service recently announced that five states, including Tennessee, could see their own bond ratings decrease simply because of their dependence on federal funds. The ratings amount to a state’s credit score. The higher the rating, the lower the interest rates on borrowing.
It will not be Haslam’s first rodeo on visiting rating agencies. He went to the agencies twice as mayor of Knoxville, the first time during his first year in office, then again in his fifth year. State officials make the rounds with rating agencies annually. City officials go less often.
Tennessee officials feel confident about the way they have managed taxpayer money, especially during difficult economic times and when many other states are struggling. Among Tennessee’s major selling points is its constitutionally required balanced budget.
Haslam said going to the rating agencies is sort of like going to the doctor.
“They ask, ‘How long has this been hurting and when did it start?’” he said.
In those settings, both the government officials and the ratings officials do the talking. Haslam will be accompanied by state Comptroller Justin Wilson, Treasurer David Lillard, Secretary of State Tre Hargett and Commissioner of Finance and Administration Mark Emkes. Haslam said he probably will also take his legal counsel, Herbert Slatery, and communications chief Alexia Poe.
The ratings have taken on an added measure of attention as debt, credit worthiness and overall financial health creep into almost every conversation about government on any level. When the time comes, Haslam intends to make a good case for the state.
“Part of your job is you are selling your state,” he said. “I won’t be selling in the sense of begging or demanding, but I’ll be telling them why I think we deserve to be AAA.
“I think you sell the state’s financial position, but you also sell your intentions. I’ll call attention to the track record in Knoxville. I think it does show here’s what my intentions are in terms of leading the state.”
Haslam campaigned for governor on lowering Knoxville’s debt and tripling its rainy day fund. The state Legislature worked this year to bolster its rainy day fund by adding $70 million, the first time that’s happened in three years. The state’s $30.8 billion budget is based on an estimated revenue growth of 3.7 percent, and recent monthly revenue figures have shown a steady pace of topping the numbers from the previous year.
But Haslam is not taking the recent revenue trend for granted.
“We have budgeted responsibly and maybe even conservatively, but I don’t see the economy revving up anytime soon,” he said. “In the last three or four weeks the economy has slowed. I don’t know if it’s because of something in Washington or if there’s something else going on.”
Haslam said once the dust settles on the current Washington flare-up on the debt ceiling it may be easier to assess the overall picture. He said one of the biggest factors playing out is the level of confidence business owners have in the overall economic environment, which he says affects hiring. Business owners may be more apt to pay overtime or contract out for help instead of hiring because of getting caught three or four years ago in a situation that led to layoffs, Haslam said.
He noted Fred Smith, founder and chairman of FedEx in Memphis, has a chart that tracks capital investment and employment.
“And it’s an exact match,” Haslam said. “That part of it says more about the reality of the environment than anything. It’s a direct one-to-one correlation.”