Cato Institute
Policy Analysis
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No. 624
October 20, 2008
Fiscal Policy Report Card
on America's Governors: 2008
by Chris Edwards
Executive Summary
bama, Jodi Rell of Connecticut, and C. L. "Butch"
Revenue poured into state governments as the
Otter of Idaho.
U.S. economy expanded between 2003 and 2007,
Republican governors, on average, received
prompting the nation's governors to expand state
slightly higher grades than Democratic gover-
budgets and offer the occasional tax cut. But now
nors. More importantly, there has been a disap-
that the economy has slowed and revenue growth
pointing lack of major spending reforms among
is down, governors are taking various actions to
governors of both parties in recent years. State
close rising budget deficits.
tax policies have also been uninspiring. Most tax
This ninth biennial fiscal report card exam-
cuts pursued by the governors have been small
ines the tax and spending decisions made by the
and targeted breaks, not broad-based rate cuts
governors since 2003. It uses statistical data to
that can foster economic growth.
grade the governors on their taxing and spend-
Fiscal policies need to be improved if the states
ing records--governors who have cut taxes and
are to meet the huge challenges ahead. Medicaid
spending the most receive the highest grades,
costs continue to rise, state debt is soaring, and the
while those who have increased taxes and spend-
pension and health care plans of state workers
ing the most receive the lowest grades.
have huge funding gaps. At the same time, rising
Three governors were awarded an "A" in this
international tax competition makes it imperative
report card--Charlie Crist of Florida, Mark Sanford
that states cut tax rates to attract jobs and invest-
of South Carolina, and Joe Manchin of West
ment. Governors don't have an easy job, but they
Virginia. Eight governors were awarded an "F"--
Martin O'Malley of Maryland, Ted Kulongoski of
do need to pursue more aggressive fiscal reforms
Oregon, Rod Blagojevich of Illinois, Chet Culver of
to meet the challenges of an increasingly compet-
Iowa, Jon Corzine of New Jersey, Bob Riley of Ala-
itive economy.
Chris Edwards is director of tax policy studies at the Cato Institute and coauthor of Global Tax Revolution