Tennessee pleads to keep high debt rating

Tennessee pleads to keep high debt rating

September 15th, 2011 by Andy Sher in Business Around the Region

NASHVILLE - Gov. Bill Haslam said Wednesday he feels "very positive" about Tennessee's top debt rating, but as he wrapped up two days of meetings with New York bond-rating agencies, he said the state isn't out of the woods yet.

"They recognize we do have a strong history of fiscal responsibility," Haslam told reporters in a conference call.

But he said the state won't know until October whether it will maintain its high ratings. He said ratings company executives expressed concerns about the impact of federal budget cuts on Tennessee.

The governor, Finance Commissioner Mark Emkes, legal counsel Herbert Slattery, Lt. Gov. Ron Ramsey, Treasurer David Lillard, Comptroller Justin Wilson and Secretary of State Tré Hargett met this week with executives from Moody's Investors Service, Standard & Poor's and Fitch Ratings.

Ramsey posted a statement on his Facebook page.

"We believe that Tennessee is clearly a AAA state and we told the folks at Fitch's, Standard & Poor's and Moody's just that," Ramsey said.

"The evidence we presented is truly overwhelming and regardless of what designation the New York rating agencies give Tennessee, I just wanted you to know how proud I am of the presentation that we made and how proud I am of the state in which we live."

A major topic was how the state would deal with major federal cuts. Standard & Poor's recently downgraded U.S. government debt and Tennessee officials want to keep all three agencies from downgrading the state's AAA ratings.

"We walked through why we think that Tennessee is not more susceptible than any other state," Haslam said.

"If there was a concern from the agencies, it'd be ... basically the external factor of what happens in Washington," Haslam said. He noted that about 40 percent of the state budget is funded with federal dollars.

The agency officials also worried about cuts to federal institutions such as the Oak Ridge National Laboratory and Fort Campbell, a U.S. Army base.

Last month, Moody's reaffirmed - at least for now - its credit rating for Tennessee. It had put the state on a credit watch in case of a federal default, which didn't happen.

But the ratings agency also slapped Tennessee with "negative" outlooks because of the volatile situation in Washington.

Emkes described plans to trim state spending by 15 percent to 30 percent if federal cuts prove to be that deep.

Haslam said the state is "very much in control" of costs in the mammoth TennCare program, about 65 percent of which is federally funded, and is prepared to cut there if necessary.

Officials also emphasized that Tennessee bond debt is low as a percentage of overall spending.

"There was also appreciation for the structure of Tennessee's government as it relates to financial decisions," Haslam said.

Tennessee Democratic Party Chairman Chip Forrester later scolded the Republican officials, saying they need to consider a jobs plan to keep the "state's fiscal house in order."

"The surest way to strengthen our state's fiscal house is to put 300,000 Tennesseans back to work," Forrester said in a news release. "If Ron Ramsey and Governor Bill Haslam put half the effort they expend wooing corporate campaign donations into a common sense jobs plan, Tennessee would get there a lot faster."