Cato Policy Analysis No. 167 January 30, 1992

Policy Analysis

A Fiscal Policy Report Card
on America Governors

by Stephen Moore

Stephen Moore is director of fiscal policy studies at the Cato Institute. He gratefully acknowledges the help of Dean Stansel, research assistant.


Executive Summary

This study is a detailed fiscal policy report card on the nation's governors. An objective fiscal policy index was devised and used to determine which governors have raised spending and taxes the most and which the least. The results give a clear indication of the fiscal responsibility of each governor.

The rankings of 45 current governors are based on a review of their budget and tax policies. For the 26 governors who were elected before 1989, we examine data on state government finances from the U.S. Census Bureau and other sources and construct a 15-variable index of fiscal performance. The fiscal measures investigated include the annual change in state expenditures per family and as a percentage of personal income; the change in state employees per 100,000 residents; the overall level of 1990 spending; total revenues as a share of personal income and per family; the annual growth rate of taxes; and the change in income, sales, and gasoline tax rates. For the 19 governors elected in 1989 or 1990, we explore similar but fewer fiscal policy variables that reflect budget and tax changes enacted through fiscal year 1992.

Alaska, Kentucky, Louisiana, Mississippi, and Vermont are excluded from the study. Alaska is excluded because of peculiarities in its budget and tax policies; the other states are excluded because they elected new governors in November 1991.

On the basis of his or her ranking on each of the fiscal policy measures, we assign each pre-1990 governor four grades: one for spending, one for taxes, one for tax rate changes, and one for overall fiscal policy record. We assign the new governors three grades--the grades for tax revenues and tax rates are combined. Two governors earned A's for their overall fiscal performance: Michael Sullivan of Wyoming, and William F. Weld of Massachusetts. Six governors received F's: John Waihee of Hawaii, Gaston Caperton of West Virginia, Bob Miller of Nevada, Lowell P. Weicker, Jr., of Connecticut, Jim Florio of New Jersey, and Pete Wilson of California. Other prominent governors earned the following grades: Bill Clinton of Arkansas, D; Mario M. Cuomo of New York, C; Jim Edgar of Illinois, C; Ann W. Richards of Texas, C; and L. Douglas Wilder of Virginia, B.

The results indicate that the states are pursuing widely disparate budget policies to cope with the current economic and fiscal crisis. The different budget directions pursued by their governors are having a dramatic impact on the economic conditions of individual states. Those directions also translate into significant shifts in the relative tax burden on families in many states. For example, through 1990 in Wyoming under Sullivan annual spending fell by 5.5 percent of personal income and by $356 per family, whereas in Hawaii under Waihee the corresponding spending trends were increases of 3.5 percent relative to income growth and of $864 per family.

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