NASHVILLE — Moody's Investors Service has revised the outlook of Tennessee and Hamilton County's top Aaa credit ratings from negative to stable.
In a news release, the bond rating company said the outlook for Tennessee and South Carolina, which both had been slapped with a negative outlook in August, "were revised to stable to reflect their relatively lower levels of financial and economic exposure to the U.S. government."
This summer, Tennessee, South Carolina and several other top-rated states, as well as 161 local governments, were assigned a negative outlook based largely on their dependence on the largesse of the federal government, which was and continues to battle over its deficit.
The outlook for Maryland, New Mexico and Virginia remains negative because of "high concentrations of federal government employment and federal procurement," Moody's statement said.
Gov. Bill Haslam later tweeted "more positive news on TN's credit ratings: Our outlook has been revised from negative to stable by MoodysRatings."
Senate Speaker Pro Tempore Bo Watson, R-Hixson, welcomed the good news for Tennessee's general obligation bonds, saying, "We have taken a very fiscally prudent path in our state finances. This action demonstrates Tennessee's finances are managed well. Now the bond agencies are recognizing this fact."
Any downgrade in credit ratings leads to higher interest rates when state or local governments borrow money through issuing bonds.
Regarding Hamilton County government, Watson said it "speaks well of the management of the county's finances, as well as the forward movement being made in economic development locally."
Moody's spokesman David Jacobson noted that the Aaa ratings themselves never changed; the issue was the outlook.
"What we basically did was put all the folks [given negative outlooks] through ... another series of tests and studies" and reexamined their "individual connections to the U.S. government."
That produced the turnaround from negative to stable.
Moody's analysis included healthcare employment as an indicator of "economic sensitivity" as were Medicaid expenditures for states.
At issue is the federal deficit, stalled congressional efforts at the time to grapple with problems and the prospect of huge federal cuts affecting states and municipalities.
State government and Tennessee citizens get the benefit of receiving much more federal support than residents and businesses pay in federal taxes.
Tennessee officials went to New York this fall where they took issue with the negative outlook and argued the state has relatively little debt and had plans in place to make dramatic cuts in TennCare and other areas if and when proposed federal cuts come.
State Senate Majority Leader Mark Norris, R-Collierville, took note of Moody's revision of Tennessee's outlook during a meeting of the Tennessee Advisory Commission on Intergovernmental Relations.
"We're apparently the healthiest horse in the glue factory," he joked.
Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...