The par amount of the refunding series may change prior to sale. The bonds will be sold via negotiated sale on or about
Fitch has also affirmed the 'AAA' rating on:
The Rating Outlook is Stable.
Full faith and credit, payable as to principal and interest from any funds or monies of the state from whatever source derived.
KEY RATING DRIVERS
CONSERVATIVE DEBT PROFILE: The state's debt profile is very conservative, with low debt ratios, swift amortization, few non-general obligation commitments, and strong security provisions. The state has fully funded its pension contributions for four decades.
CONSISTENTLY BALANCED FINANCIAL OPERATIONS: Financial operations are conservative and consistently balanced, although largely reliant on sales tax revenues. The state retains considerable operating flexibility, including large reserve balances.
DIVERSIFYING ECONOMY: The state has a large manufacturing sector which was a vulnerability in the last downturn, although the economy has returned to steady growth and continues to diversify. Wealth levels are below average.
CHANGES IN LONGSTANDING PRACTICES: The rating is sensitive to continued maintenance of the state's conservative debt and fiscal management practices.
In response to economic and revenue weakness during the last downturn, the state repeatedly lowered base spending while relying on one-time resources, including federal stimulus and state reserve balances, to maintain budgetary equilibrium. Despite reserve draws, including recent draws to cover unanticipated
VERY LOW LIABILITY BURDEN
The state's debt places a very low burden on resources, is well-protected by security provisions, and amortizes rapidly. Taxes allocated to the general, highway and debt service funds are pledged to GO debt service, and their yield is the basis for a debt service limit that is only 34.5% used before the current sale. Net tax-supported debt of almost
The state has met the full actuarially calculated required employer contribution to its pension system each year since 1972. The
CONSERVATIVE FINANCIAL OPERATIONS
Fiscal vulnerabilities include the state's dependence on sales taxes, which make up 62% of total tax revenues, as well as challenges controlling the spending growth in TennCare, the state's
Fiscal 2014 performance continued the conservative course of recent budgets. During the fiscal year the state lowered its revenue expectations and adjusted the budget accordingly. The state estimates total tax revenues rising 1.1% over fiscal 2013 levels, to
The fiscal 2014 budget remains balanced despite revenue underperformance, with total spending rising 2.8%, to
The fiscal 2015 adopted budget assumes tax revenues rising 2.8%, to
The state's economic strengths lie in trade and manufacturing, although cyclicality in the latter has been a concern, particularly given the growing importance of automotive-related manufacturing. In the last downturn the state's job losses exceeded the U.S., with nonfarm employment in the 2007-2010 period falling 6.5%, compared to 5.6% nationally. Job growth resumed in late 2010 and has been steady since then.
Employment in the state grew 1.3% in 2013, compared to 1.7% nationally.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from
--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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