Haslam: Tennessee OK for weeks even if U.S. defaults

Haslam: Tennessee OK for weeks even if U.S. defaults

July 29th, 2011 by Andy Sher in News

An exterior view of the Tennessee State Capitol building.

Photo by The Tennessean /Times Free Press.

Gov. Haslam

Gov. Haslam

NASHVILLE -- As the country nears a possible historic debt default, Tennessee Gov. Bill Haslam and top officials said Thursday that the state can meet its obligations for weeks should Washington's partisan disputes over raising the debt ceiling send the nation's credit ratings careening off a cliff.

"We've looked at what happens if the funding totally gets cut off if they shut down, and we're actually in pretty good shape with how our payment flow works," Haslam told reporters. "But it obviously impacts the credit ratings and funding that comes from Washington.

"It's not a drastic like 'Oh boy, we're not going to be able to do state government the next day if they don't meet the [deadline]'" he said.

Pressed on how long the state can go, Finance Commissioner Mark Emkes later said that preliminary figures show "we can go beyond six weeks." He will meet with Haslam today to go over the figures, he said.

If the Republican-controlled U.S. House, Democratic-run Senate and Democratic President Barack Obama can't agree on increasing the nation's $14.3 trillion debt limit, some federal programs are expected to get less or no money.

Tennessee and other states receive huge amounts of money from the federal government. Partially because of that, Moody's Investors Service, a credit rating agency, has put Tennessee and four other states with triple-A ratings on a credit watch if there is a federal default.

State interest rates could go higher, making it more expensive for Tennessee to borrow money on a short-term basis and on longer-term bonds for its capital projects. Sandi Thompson, state Comptroller Justin Wilson's assistant director of state and local finance, said Tennessee is financially prepared for that.

While things look good for the short term, Haslam said we shouldn't "kid ourselves" about long-term problems.

"If that [congressional standoff] lasts a very long time, we have major problems because so many of our programs are funded by the federal government," he said

In Emkes' view, it is inconceivable that federal politicians would not reach some type of solution.

"If there's not an agreement during that period of time, I think the world explodes," Emkes said.