S&P says Tennessee's recovery, rainy day fund and low debt makes state fiscally healthy

May 27, 2016 at 1:00 a.m. | Updated May 27, 2016 at 10:40 a.m.

by Dave Flessner , Andy Sher

FILE - This Tuesday, March 10, 2009, file photo, shows a digital display board on the floor of the New York Stock Exchange. It’s been seven years since one of the stock market’s best-ever runs began, and investors still don’t feel much of an itch to get involved. Worries are high that the market has already topped out, and a looming recession may knock the S&P 500 down again. It’s an indication of what a strange bull market this has been, and another reminder how important it is to stay diversified. (AP Photo/Henny Ray Abrams, File)
FILE - This Tuesday, March 10, 2009, file photo, shows a digital display board on the floor of the New York Stock Exchange. It’s been seven years since one of the stock market’s best-ever runs began, and investors still don’t feel much of an itch to get involved. Worries are high that the market has already topped out, and a looming recession may knock the S&P 500 down again. It’s an indication of what a strange bull market this has been, and another reminder how important it is to stay diversified. (AP Photo/Henny Ray Abrams, File)

For the first time in 16 years, Tennessee has achieved a top rating for its fiscal health from all three major bond rating agencies.

Standard & Poor's announced Thursday it has upgraded the bond rating for the state of Tennessee to its highest AAA level. Tennessee now holds the highest bond ratings issued by all three major credit rating agencies for only the second time in the state's history.

S&P cited Tennessee's growing economy, improving fund balance and declining debt for raising the state's rating from AA-plus to AAA - the highest rating that is even better than S&P's rating on U.S. Treasury bills.

"This is truly the gold standard to say you have three AAA ratings," Gov. Bill Haslam said Thursday. "It obviously means that our taxpayers will be paying less in interest rates on the state's debts. But I think even more important is what it says about who we are as a state."

S&P rated debt issued by the state of Tennessee even better than that of the U.S. government. Tennessee is one of only 11 states that enjoy top AAA ratings from Standard & Poor's, Moody's and Fitch ratings services.

"Tennessee's general obligation bonds are eligible to be rated above the sovereign debt of the United States because we believe the state could maintain better credit characteristics than the U.S. government in a stressed scenario," S&P said in its analysis.

Tennessee boosted its rainy day fund by $100 million in the past year to $668 million while reducing its overall state debt and not adding any new debt for the first time, Haslam said.

The economy also is improving in Tennessee with the state's unemployment rate declining in April to 4.3 percent - the 19th lowest rate of all U.S. states and the lowest level since 2007. Tennessee's employment is now at a record high of more than 3 million jobs.

"When you look at the economic development that is going on across Tennessee, it points to the economic success of the state and that translates into a better bond rating," Tennessee Secretary of State Tre Hargett said. "We have managed well in good times and bad. When we had surpluses we didn't rush out to spend that and when times were tough, we limited our spending."

The only other period when Tennessee had a top rating from all bond agencies was from May 1998 to June of 2000.

Contact Dave Flessner at dflessner@timesfree press.com, 423-757-6340 or Andy Sher at asher@timesfreepress.com.

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