State tries to convince rating agencies it can handle reduced federal funding

Tuesday, October 23, 2012 at 1:08pm

Tennessee officials expect to see reductions in federal education funding, a factor they are trying to convince the nation’s leading bond rating agencies the state is poised to deal with.

On a trip to New York to defend the state’s high credit ratings this week, the state tried to prove above-expected tax collections and increases in per capita income make the state worthy of the highest credit ratings despite fears the federal government will hand the state fewer dollars in coming years, Gov. Bill Haslam told reporters Tuesday.

“At the end of the day, what the credit ratings are concerned about is when you borrow money, can you pay it back? And we think with that standard and given the fiscal condition of the state, we very much deserve to be a AAA state.”

Tennessee now sports a AAA rating — the highest possible — from Moody’s Investor Service and Fitch Inc. The third agency, Standard and Poor’s, last issued the state an AA+ rating. Higher ratings reflect lower interest rates the state can score when it borrows money and a greater value on bonds.

About $20 million worth of Title I funding for schools that serve low-income students and another $20 million in special education dollars — all from the federal government — will most likely be in jeopardy in coming years, said Mark Emkes, commissioner of the state’s Department of Finance and Administration.

“At this stage of the game, what we know, it’s very manageable,” Emkes said.

Standard and Poor’s red-flagged Tennessee last year for depending too much on federal dollars and contemplated downgrading the state’s bond rating.

The state responded by drawing up a contingency plan for continuing government operations in the event the federal government slashed spending, a study Emkes said the state pointed to at this week’s hearings.

The agencies are expected to announce new ratings in the next few weeks, Haslam said.

3 Comments on this post:

By: Badbob on 10/25/12 at 10:01

Yeah, what are they going to do? Kick people out of nursing homes onto the street?

OH, I know, the legislature will take a pay and expense allowance cut, right?

By: Moonglow1 on 10/26/12 at 9:37

Moonglow1: Interesting how these TP repubs hate the feds, but obviously take their money. Tennessee depends too heavily on federal dollars: well, well.

Where are all of these so called job creators in this state. Haslam the business man-ha! He is begging the feds and the rating agencies to help him out. Even Volkswagen can't see value here because we do not have an educated workforce. We believe in "creationism. " We should believe in job creation. Oh but no: the govt does not create jobs. Oh really? Police, teachers, firefighters, regulators who help keep us safe, whom do they work for?

Come on people. Use your brain. Do not spend every waking hour brainwashed by Fox News. Think on your own.

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