Tennessee State Finances Receive a Grade of “B”

Unlike in most states, Tennessee's elected officials have only promised the amount of benefits they can afford to pay. Because of this, Tennessee’s finances are in good health. The state has enough money to pay all of its bills and a surplus of $4.1 billion, according to Truth in Accounting's (TIA) analysis of Tennessee's most recent financial filings. When broken down, this equates to a taxpayer surplus of $2,100 for each Tennessee taxpayer, which makes it a Sunshine State according to TIA. Compare that to Kentucky, which TIA calls a Sinkhole State because it has a taxpayer debt burden of $39,000!

These statistics are good for Tennessee, but what's troubling is that state government officials continue to obscure large amounts of retirement debt on their balance sheets, despite new rules to increase financial transparency. This skewed financial data gives state residents a false impression of their state's overall financial health.

Truth in Accounting is a Chicago-based nonprofit think tank that analyzes state financial reports when they are published. According to their report for 2016, Tennessee has $17.2 billion of assets available to pay the state's bills totaling $13 billion. This means that Tennessee has $4.1 billion available after bills have been paid, which breaks down to $2,100 per taxpayer. TIA's Taxpayer Surplus™ measurement incorporates both assets and liabilities, not just pension debt.

Because of an accounting rule implemented last year, Tennessee had to report its pension debt on its balance sheet. This year, the state's reported pension debt grew from $677.2 million in 2015 to $1.3 billion in 2016. Despite reporting most of its pension debt, however, Tennessee is still hiding 7% of its debt. When it comes to retiree health care benefits, Tennessee is hiding $852.8 million from taxpayers. A new accounting standard will be implemented in two years that will require states to report this debt on the balance sheet.

The bottom line is that Tennessee has enough money to pay its bills, so it has received a "B" for its finances from Truth in Accounting. A "B" grade is given to states with a taxpayer surplus™ between $100 and $5,000. Kentucky, in contrast, received a grade of “F.”

See how Tennessee compares to Indiana, Kentucky, and Ohio: http://www.statedatalab.org/c/f6W4bYpqe6f15ee
Click on the link to go to an interactive chart at Truth in Accounting’s State Data Lab.