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Some governors

· Mike

grade of B for his proposed cuts in the

Huckabee of Arkansas also went

income tax rate and property taxes. But

from being one of the best governors in

have ended their

looking closer at how the plans are actu-

America to one of the worst. He receives

tenure with the

ally structured shows that they aren't

an F for his current term and a D for his

grade they started

really net tax cuts at all. Instead, they are

entire tenure. The main reason for the

tax shifts. The increases in fees and other

drop was his insistence on raising taxes at

with. But most

taxes that Baldacci has either proposed

almost every turn throughout his final

have ended up

or signed into law have been enough to

term.

overwhelm the tax cuts. As a result,

with a lower

Maine still labors under the highest

More detailed descriptions of why each of

overall grade.

state and local tax burdens in the nation.

these governors' grades fell appear in Appen-

Four governors

And a broader view of his budget record

dix D.

shows that Baldacci is quite the big

have dropped the

spender. As a result, his overall first-term

furthest.

General Observations about

grade is a D.

State Fiscal Policy

The Graduating Class

There are several conclusions about state

fiscal policy during the past decade that can

be useful policy guides in the years to come:

In this year's report card, governors were

graded on a term-by-term basis. The grades in

· First,

Table 1 reflect the end-of-term or midterm

and most important, the states

grade for each governor. However, eight of the

that spent the most in the boom years

governors are in their last term. Therefore, they

generally had the deepest fiscal holes to

climb out of when the recession hit.4

have received overall, end-of-tenure grades that

average the grades of all their previous terms

That fiscal calamity was driven almost

(Table 2). Some governors have ended their

entirely by reckless overspending in the

tenure with the grade they started with. But

1990s when many state budgets dou-

most have ended up with a lower overall grade.

bled during boom times. Governors

Four governors have dropped the furthest:

should be cautious not to repeat that

mistake.

· George Pataki of New York, who started

· Second, constitutional spending restraints

his governorship with an A, ends his

coupled with tax cuts are arguably the best

tenure with an overall grade of C. His

antidote to bloated budgets during boom

grade declined each subsequent term as

years and out-of-control deficits during

lean years.5 Governors and legislators of

a result of abandoning his first-term

commitment to lower taxes and smaller

states without such limits would be well

government.

advised to experiment with them.

· Bill Owens of Colorado earns an overall

· Third, flat-rate tax systems are highly

grade of C after a string of A's because of

preferable to graduated income tax

his crusade to raise taxes by raising the

structures (personal and corporate), not

constitutional budget cap known as the

only because flat-rate taxes create fewer

Taxpayer's Bill of Rights.

economic distortions and disincentive

· Kenny Guinn of Nevada, who ends his

effects, but also because flat-rate taxes

avoid the peaks and valleys in revenues

governorship with a grade of D, went

that cause boom-and-bust cycles for

from being one of the best governors in

states. States such as California with

the nation to being one of the worst as a

highly graduated income tax structures

result of his massive tax hikes and his

had the biggest windfalls in revenues

creation of a gross receipts tax.

6