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larger dollar reduction in the local property tax.  Since

1994 numerous states have followed Michigan's lead.  In most

cases, the changes involve a reduction in local property

taxes, with the state government compensating local govern-

ments for that reduction by increasing the state share of

school funding.  In some cases, the increased state funding

comes from new state-level taxes or increases in existing

state taxes.  Local property tax/school finance reforms of

this type have been implemented in recent years in numerous

states, including Idaho, Iowa, Kansas, South Carolina, South

Dakota, Vermont, and Wisconsin.  Such centralization of an

inherently local function of gove2rnment is both seriously

2

misguided and counterproductive.

For the purposes of our

report card, such reforms create a significant challenge.

Our data on state finances reflect the impact of the in-

creased spending and revenue at the state level, but they do

not reflect the impact of the reductions at the local level.

Thus, it appears that taxpayers in  Michigan have seen a

huge increase in spending and revenue under Engler--which is

fairly accurate at the state level.  However, because local

property taxes were substantially reduced, the combined bur-

den of state and local taxes and spending has not exploded

at all.  For Michigan, and for each of the other states that

have implemented similar property tax/school finance re-

forms, we have attempted to make reasonable adjustments to

our state spending and tax variables to account for the net

impact of those changes.

Finally, we have substantially more data for assessing

the fiscal performance of governors first elected before

1995 than for the seven governors in our survey who have

taken office since then.  Therefore, we caution that the

grades of the seven governors who have taken office since

1995 should be viewed as midterm reports.

Report Card Methodology

In this study, for each governor we compute an overall

fiscal policy grade that reflects the governor's success at

restraining the growth of taxes and spending.  All of the

tax and expenditure data used come from the Bureau of the

Census, the National Association of State Budget Officers,

the National Conference of State Legislatu3res, and individ-

2

ual state budget and revenue departments.

Unlike the case for past report cards, there are only a

few governors who have been in office for fewer than three

years.  Therefore, we do not have two groups of governors,

old governors and newer governors.  All 46 of the governors

included in this study are examined together.  However, we