July 11, 2017

#8 | Ranking the States by Fiscal Condition: Tennessee

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On the basis of its fiscal solvency in five separate categories, Tennessee is ranked 8th among the US states for its fiscal health. On a short-run basis, Tennessee has between 3.72 and 5.29 times the cash needed to cover short-term obligations. Revenues exceed expenses by 5 percent, and net position improved by $213 per capita in FY 2015. Tennessee’s long-run rankings are among the highest in the country. Net assets are 12 percent of total assets after debts have been paid. Long-term liabilities are 10 percent of total assets, or $585 per capita. Total primary government debt is $2.18 billion, or 0.8 percent of state personal income, which is among the lowest in the states. Unfunded pension liabilities, on a guaranteed-to-be-paid basis, are $44.62 billion, or 16 percent of state personal income. OPEB is 1 percent of state personal income.

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Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (Tennessee ranks 11th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Tennessee ranks 23rd.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (Tennessee ranks 3rd.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (Tennessee ranks 9th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (Tennessee ranks 2nd.)

For a complete explanation of the methodology used to calculate Tennessee's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings

To read all our work on Tennessee, go to mercatus.org/states/tennessee.