Tennessee’s Financial Foundation
By Jeff Fleming
As a retired city manager, I’m conditioned to keep an eye on the finances. I’m all for optimism, celebrating accomplishments, and marketing those Instagram moments that make our communities shine. I’m also a believer in “Love Where You Live.” That sense of belonging gives a community its soul.
But God gave us both a head and a heart. Our hearts inspire us to dream; our heads remind us what those dreams cost and how we’ll sustain them. Sometimes we need to celebrate the mundane—the things that aren’t exciting but make everything else possible.
Like a solid foundation.
In church, we hear about building on solid rock rather than shifting sand. The lesson is practical: You can build something beautiful, but if the foundation is weak, everything above it is at risk. The higher you build, the greater the consequences.
The same holds true for public finance.
Truth in Accounting’s 2026 Financial State of the States report ranks Tennessee fifth nationally, with an A grade and a taxpayer surplus of $11,400. It estimates $49.7 billion available to cover $23 billion in financial obligations.
Among our eight neighboring states, North Carolina ranks tenth, Arkansas 11th, Virginia 12th, Georgia 18th, Missouri 25th, Alabama 34th, Mississippi 40th, and Kentucky 45th.
By this measure, Tennessee leads the region and stands among the nation’s leaders. Not a glamorous Instagram moment, perhaps, but worth celebrating.
That foundation wasn’t built overnight—or by one political party. Tennessee’s retirement system dates to 1972. Democratic and Republican administrations have maintained and refined fiscal policies, while more recent pension reforms have strengthened that foundation. Sound stewardship is a responsibility passed from one administration to the next.
Still, Truth in Accounting measures something specific: assets available to meet financial obligations, including pensions and retiree healthcare. It doesn’t necessarily tell us whether states adequately maintain infrastructure or prepare for growth.
Other organizations, including The Pew Charitable Trusts and Tennessee’s Sycamore Institute, examine revenue sustainability, reserves, and long-term needs.
Consider Kentucky. Despite its low balance-sheet ranking, Pew found it held rainy-day reserves equivalent to nearly 111 days of operating expenditures in fiscal 2025. Arkansas had about 105 days; Tennessee was below the national median of roughly 48.
Different measures. Different perspectives.
And neither measure tells us much about the condition of our roads, bridges, water systems, or schools. Those are assets, too. They may not represent money available to pay the bills, but their condition speaks volumes about how well we’re preparing for the future.
Tennessee faces challenges of its own. Growing communities need transportation improvements, water and sewer capacity, schools, and public facilities. Federal grants accounted for 41% of state revenue in the report. And a strong state balance sheet doesn’t guarantee financially healthy cities, counties, or utility districts.
Nobody builds a foundation simply to admire it. We build upon it.
I’d like to think we still have some good old common sense: Do the best with what you have. Live within your means. Give generously, voluntarily, to help your neighbors. Taxes, unlike charitable gifts, aren’t discretionary. Government owes taxpayers careful choices.
And beware the shiny object: the new retail center, the fancy park, the project promising to put us on the map. There’s nothing wrong with those things—provided the foundation is solid. We must be able to maintain tomorrow what we celebrate opening today.
Ribbon cuttings make headlines. Sound pensions, maintained water lines, and balanced budgets rarely do. Yet those quieter achievements make the visible ones possible.
Loving where we live takes heart. Keeping it strong takes our heads, too. Tennessee’s financial foundation is worth celebrating. Now comes the responsibility of building wisely upon it.
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