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March 1, 2005

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Schwarzenegger gets top score on governors report card
Governor Bill Richardson of New Mexico is highest rated Democrat

WASHINGTON -- Gov. Arnold Schwarzenegger earned the highest score on the Cato Institute's seventh biennial fiscal policy report card released today. The popular California governor was awarded an A for cutting taxes by more than $2 billion, slashing spending, and balancing a $15 billion budget deficit inherited from his predecessor, Gray Davis.

New Mexico Governor Bill Richardson, who earned a B, is the highest scoring Democrat in the nation and one of the best governors overall. The report card praises Richardson for cutting taxes and strictly limiting increases in state spending.

Republicans Craig Benson of New Hampshire, Bill Owens of Colorado, and Judy Martz of Montana were also awarded A's for their fiscally responsible leadership. Four governors earned failing grades on the report card: Bob Holden of Missouri, Bob Taft of Ohio, Edward Rendell of Pennsylvania, and James McGreevey of New Jersey. Taft received the lowest score for raising numerous taxes and increasing spending despite the fact that his state faced billions of dollars in budget deficits.

"A Fiscal Policy Report Card on America's Governors: 2004," by Cato senior fellow Stephen Moore and Cato director of budget studies Stephen Slivinski, shows that "states that keep tax rates low and restrain spending growth have the best economic performance and thus the best long term fiscal health."

Their report card grades 42 governors on 15 objective fiscal measures, awarding the highest grades to those who have reined in spending and cut taxes. Eight governors were excluded from the study because they assumed office too recently or for other technical reasons.

Other key findings of the study include:

• States that overspent in the 1990s faced the biggest deficits when the national recession hit.
• Constitutional spending restraints and tax cuts are the best way for states to avoid bloated budgets in boom years and large deficits during recession.
• Flat taxes spur economic growth and make state revenue less volatile.
• Medicaid must be reformed to prevent rising health care expenditures from consuming state budgets.

"The lesson of the last 20 years is that governors can't tax and spend their way to prosperity; they should stop trying," write Moore and Slivinski.

A Fiscal Policy Report Card on America's Governors: 2004:
http://www.cato.org/pub_display.php?pub_id=3691