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.