Tennessee Officials Warn of Federal Default Ripples

Tennessee’s top finance official says he is encouraged that most lawmakers in Washington are now saying the country must avoid default. But Finance Commissioner Mark Emkes says a hiccup in the flow of federal funding would require immediate state budget reductions.

“It’s far-reaching, whether it’s things like TennCare, for example. I mean if you reach a point where you’re not receiving money, then cuts are gonna have to be made.”

Governor Bill Haslam calls the debt negotiations “an incredibly serious game of chicken.”

“I think if you talked to any governor they would say, we really need you to solve this for the economic health of the country, Number one. Number two, for us as states, you’ve seen where some of the credit rating agencies have said, the fact that they don’t have a deal puts Tennessee’s credit rating in peril. That speaks volumes.”

Last week Moody’s told five states, including Tennessee, that a default would mean downgrades in their AAA ratings, primarily because of their heavy dependence on federal revenue.

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