The state comptroller reported today that bond rating agencies have analyzed debt ratios in all 50 states and found that Tennessee’s ratio is the lowest.
“There’s a simple reason why our state’s debt rate is so low-we borrow a small amount of money relative to the size of our government, and we repay it quickly,” Comptroller Justin P. Wilson said in a prepared statement. “That’s a credit to our state legislators, who have managed our finances very wisely. They have helped keep the burden that future generations of Tennesseans will have to repay low.”
The study, conducted by New York-based Fitch Ratings, used a metric that is calculated by combining the state’s net tax-supported debt and unfunded pension liabilities, then measuring them against the state’s personal income level, according to the comptroller’s news release.
Tennessee’s ratio of debt and pension liabilities to personal income was 1.8 percent.
No other state had a ratio below 2.2 percent, and four states had ratios above 20 percent.
Fitch plans to use the debt ratios as a factor in evaluating states’ credit ratings.
Favorable ratings from Fitch and the other major rating agencies can translate to lower interest rates when the state borrows money, resulting in savings for taxpayers, according to the news release.
Fitch released a similar report last year, in which Tennessee also had the lowest debt ratio.
According to a news release from Lt. Gov. Ron Ramsey, Fitch Ratings State Pension Update Special Report was published July 16. Ramsey’s release was embargoed until July 21.
“I’m grateful to Fitch Ratings for recognizing Tennessee’s commitment to fiscal discipline,” Senate Finance Chairman Randy McNally said in a prepared statement. “We work hard as a state government to live within our means and pay our debts promptly. I look forward every day to participating in Tennessee’s economic success story.”