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Hawaii

Benjamin Cayetano, Democrat

Legislature: Democratic

Took Office: 12/94

Grade: B

Benjamin Cayetano took office in the midst of the

state's worst economic downturn, a recession that has con-

tinued through 1998.  In his first year, Cayetano reduced

the state bureaucracy by more than 2,700 employees and cut

spending by more than 10 percent in all departments except

education, bringing FY96 spending below the FY93 level.

What he has not done is reform the state's absurdly generous

welfare system.  Hawaii offers the most generous welfare

package of any state--the equivalent of a job that pays more

than $17 per hour.  Not surprisingly, Hawaii is one of only

three states that has not lowered welfare caseloads since

1995.  Until this year, Cayetano had also failed to provide

any net tax relief.  His modest tax cuts were offset by

revenue increases elsewhere.  In a state with one of the

highest personal income tax rates and one of the highest

state and local tax burdens, tax relief is a must if

Cayetano hopes to revitalize Hawaii's stagnant economy.

Cayetano appointed an Economic Revitalization Task Force,

which in 1997 put forth a tax reform plan with a substantial

income tax cut offset by an almost equally large increase in

the state's general excise tax.  Although the plan had pow-

erful support from business and unions, it did not win leg-

islative approval.  At least Cayetano and the legislature

did approve an income tax cut that will reduce the top rate

from 10 percent to 8.25 percent over four years.  Hawaii's

lagging economy has slowed revenue growth, forcing Cayetano

and the legislature to cut expenditures.  Under Cayetano

spending growth has slowed from more than 8 percent per year

to about 1.6 percent a year, less than the rate of infla-

tion.  In this heavily liberal Democratic state, Cayetano is

clearly the most fiscally conservative governor in many

years.  His popularity is low and his reelection prospects

are in doubt mainly because he has had to battle the estab-

lishment within his own party.

Score Grade Rank

Overall Fiscal Policy Score

55

B

16

Spending Score

62

B

13

Revenue and Tax Rate Score

51

B

18

Amount

-0.4%

Average Annual Change in Real Per Capita Direct General Spending through 1996

-1.0%

Average Annual Change in Direct General Spending Per $1,000 Personal Income through 1996

-2.3%

Average Annual Recommended Change in Real Per Capita General Fund Spending through 1999

-0.4%

Average Annual Change in General Fund Spending Per $1,000 Personal Income 1996-98

0.6%

Average Annual Change in Real Per Capita Tax Revenue through 1997

0.8%

Average Annual Change in Tax Revenue Per $1,000 Personal Income through 1997

-0.3%

Average Annual Recommended Change in General Fund Revenue Per $1,000 Personal Income through 1999

-2.6%

Average Annual Change in Real Per Capita General Fund Revenue 1996-98

0.1%

Average Annual Recommended Tax Changes as % of Prior Year's Spending through 1999

-1.5

Change in Top Personal Income Tax Rate, proposed and/or enacted (% points)

0.0

Change in Top Corporate Income Tax Rate, proposed and/or enacted (% points)

16.4

1998 Combined Top Income Tax Rates (Personal plus Corporate) (*0.5)

0.75

Change in Sales Tax Rate, proposed and/or enacted (% points)

0.0

Change in Gas Tax Rate, proposed and/or enacted (cents per gallon) (*0.5)