The federal shutdown and debt ceiling compromise should not affect Tennessee’s bond rating and credit worthiness, Gov. Bill Haslam said Friday.
Haslam traveled to New York Wednesday to meet with representatives from the three major bond rating agencies – Standard and Poor’s, Moody’s Investors Service and Fitch Inc.
The governor had expressed concern earlier this week that the ratings agencies would ask about the impact of the partial federal shutdown in Tennessee and the effects of federal funding cuts on state government. Almost half of Tennessee’s annual $32.8 billion budget comes from the federal government.
But Haslam said in a teleconference with reporters Friday morning that the rating agency managers didn’t in fact seem too concerned about that after he, along with Secretary of State Tre Hargett, Secretary of the Treasury David Lillard and State Comptroller Justin Wilson, made the case for the state’s financial stability.
“I was very proud of what we had to present and every Tennessean should be proud of what we’ve built,” Haslam said on the phone call. The state has the financial controls in place and built a climate that encourages economic growth, he said.
The agencies did express concern over vulnerable consumer confidence in the economy and the “certainty of the uncertainty” from Congress’s debt ceiling compromise, which the governor noted really only delayed political fighting over federal finances in Washington until next year.
Overall, Haslam said a good case was made for Tennessee keeping its high credit rating.
Similar to a personal credit rating, banks use bond ratings to determine how much risk is involved with loaning money to a government. The higher the score, the lower the interest rate on money loaned. An “A” rating indicates above-average creditworthiness with the highest score being “AAA.”
Currently, Tennessee enjoys a the highest rating possible from Moody’s – a “AAA” rating. The state’s high bond rating means lower interest rates when borrowing money in the taxpayers’ name.
Bond ratings are opinions of the investment quality of a state and are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances and administration/management strategies.
According to Fitch, Tennessee has the lowest debt ratio of any state in the nation.