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First, as mentioned above, the report card does not en-

tirely isolate the impact of the governor from the fiscal

decisions of the state legislature.  In most states the leg-

islature's influence on budget outcomes is at least equal to

the governor's.  In addition, if the state legislature is

controlled by a different party than the governor's, then

the governor's command over fiscal policy outcomes is nor-

mally diminished.  (Appendix B to this report summarizes the

fiscal policy record of each governor and makes note of

whether the legislature is of the same party as the gover-

nor.)  There are 14 governors in our survey who work with

state legislatures entirely controlled by the other party.

To mitigate that problem, we grade the governors not

just on the policy outcomes but also on the expenditure and

tax proposals contained in their official annual budget rec-

ommendations.  This allows us to isolate the governor's

policies from those of the legislature.

Another limitation of this study is that some states

grant their governors substantially more constitutional

authority over the budget process than do others.  For exam-

ple, in Wisconsin, Tommy Thompson is empowered with an item-

reduction veto, which allows him to unilaterally reduce

agency funding.  By contrast, Jim Hunt of North Carolina is

the only governor in the country who does not have veto

authority.  Moreover, the supermajority vote requirement for

overriding a veto varies among states.  Those factors give

the governors different amounts of control over budgetary

outcomes, which are not accounted for in this study.

Another complication is that every state has peculiari-

ties in its expenditure and tax policies that can impede in-

terstate tax and spending comparisons.  For instance, in Ha-

waii most school funding comes from the state not the local

governments, which inflates Hawaii's spending figures.

Alaska and several other states receive tax revenues from

severance taxes on oil produced or minerals mined in the

state.  Those are taxes that can be exported to out-of-state

residents.  Furthermore, the fiscal condition of those

states can improve or deteriorate dramatically in response

to changes in the market price of commodities.  We believe

that severance taxes are a significant distortion only for

Alaska and exclude that state from the study for that rea-

son.

A number of states have moved in recent years toward

reducing reliance on local property taxes as part of school

finance reform initiatives.  Most notably, in 1994 Michigan

implemented an education finance reform package that in-

cluded an increase in the state sales tax in exchange for a