Tennessee's and Hamilton County's commitment to living within their means has yielded some real benefits -- one of the most recent being an improved outlook for the state's and county's credit ratings from ratings agency Moody's Investors Service.
Because a significant part of Tennessee's budget is linked to the federal government, it was alarming several months ago when another credit-rating agency, Standard & Poor's, downgraded the United States' rating from the top level, AAA, to AA-plus for the first time in U.S. history. And in August, Moody's downgraded the outlook on Tennessee's and Hamilton County's Aaa ratings from stable to negative.
That is troubling, because a downgraded credit rating leads to higher interest rates when state or local governments borrow money by issuing bonds.
But Tennessee and Hamilton County did not take that lowered outlook lying down. In recent months, both have demonstrated fiscal discipline despite difficult economic times. Tennessee made it clear that it would act responsibly if federal dollars sent to the state were sharply reduced, and Tennessee officials pointed out our state's low debt load.
As a result, Tennessee's negative outlook was "revised to stable to reflect [the state's] relatively lower levels of financial and economic exposure to the U.S. government," Moody's noted in a news release.
"We have taken a very fiscally prudent path in our state finances," said Senate Speaker Pro Tempore Bo Watson, R-Hixson. "This action demonstrates Tennessee's finances are managed well. Now the bond agencies are recognizing this fact."
As for Hamilton County, Watson said, the improved outlook "speaks well of the management of the county's finances, as well as the forward movement being made in economic development locally."
While Tennessee and Hamilton County cannot require the federal government to behave with fiscal responsibility, our state and county can control their own actions -- and should continue their generally sound financial practices.