Fiscal Policy Report Card on America’s Governors

Fiscal Policy Report Card on America’s Governors 2016

Fiscal Policy Report Card on America's Governors 2016
By Chris Edwards

State governments have been in an expansionary phase in recent years. Even though U.S. economic growth since the last recession has been sluggish, general fund revenues of state governments have grown 33 percent since 2010. Some of the nation’s governors have used the growing revenues to expand spending programs, while others have pursued tax cuts and tax reforms.

That is the backdrop to this year’s 13th biennial fiscal report card on the governors, which examines state budget actions since 2014. It uses statistical data to grade the governors on their taxing and spending records — governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Five governors were awarded an “A” on this report: Paul LePage of Maine, Pat McCrory of North Carolina, Rick Scott of Florida, Doug Ducey of Arizona, and Mike Pence of Indiana. Ten governors were awarded an “F”: Robert Bentley of Alabama, Peter Shumlin of Vermont, Jerry Brown of California, David Ige of Hawaii, Dan Malloy of Connecticut, Dennis Daugaard of South Dakota, Brian Sandoval of Nevada, Kate Brown of Oregon, Jay Inslee of Washington, and Tom Wolf of Pennsylvania.

With the growing revenues of recent years, most states have balanced their short-term budgets without major problems, but many states face large challenges ahead. Medicaid costs are rising, and federal aid for this huge health program will likely be reduced in coming years. At the same time, many states have high levels of unfunded liabilities in their pension and retiree health plans. Those factors will create pressure for states to raise taxes. Yet global economic competition demands that states improve their investment climates by cutting tax rates, particularly on businesses, entrepreneurs, and skilled workers.

This report discusses fiscal policy trends and examines the tax and spending actions of each governor in detail. The hope is that the report encourages more state policymakers to follow the fiscal approaches of the top-scoring governors.

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Fiscal Policy Report Card on America’s Governors 2014

Economic Freedom of the World 2014
By Nicole Kaeding and Chris Edwards

The recession of 2007-2009 knocked the wind out of state government budgets, but revenues and spending have grown steadily in recent years. As revenues have risen, some governors have pursued reforms to reduce tax burdens on families and make their states more competitive. Other governors have used rising revenues to expand programs.

That is the backdrop to this year’s 12th biennial fiscal report card on the governors, which examines state budget actions since 2012. It uses statistical data to grade the governors on their taxing and spending records — governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Four governors were awarded an “A” on this report card: Pat McCrory of North Carolina, Sam Brownback of Kansas, Paul LePage of Maine, and Mike Pence of Indiana. Eight governors were awarded an “F”: Mark Dayton of Minnesota, John Kitzhaber of Oregon, Jack Markell of Delaware, Jay Inslee of Washington, Pat Quinn of Illinois, Deval Patrick of Massachusetts, John Hickenlooper of Colorado, and Jerry Brown of California.

With the economy currently growing, governors and legislatures are having few problems balancing their budgets in the short run, but the states face major budget challenges down the road. Many retirement plans for state workers have high levels of unfunded liabilities, and the Medicaid expansion under the 2010 Affordable Care Act will increase stress on state budgets. At the same time, global economic competition is making it imperative that states improve their investment climates, particularly by cutting tax rates on businesses and entrepreneurs.

This report discusses those trends and examines the fiscal policy actions of each governor. More state policymakers should be encouraged to follow the reform approaches of the top-scoring governors.

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Fiscal Policy Report Card on America’s Governors 2012

Economic Freedom of the World 2014
By Chris Edwards

The recovery from the recent recession has been very sluggish, and the nation’s governors have struggled with the resulting budget deficits, unemployment, and other economic problems in their states. Many reform-minded governors elected in 2010 have championed tax reforms and spending restraint to get their states back on track. Other governors have expanded government with old-fashioned tax-and-spend policies.

That is the backdrop to this year’s 11th biennial fiscal report card on the governors, which examines state budget actions since 2010. It uses statistical data to grade the governors on their taxing and spending records — governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Four governors were awarded an “A” in this report card — Sam Brownback of Kansas, Rick Scott of Florida, Paul LePage of Maine, and Tom Corbett of Pennsylvania. Five governors were awarded an “F” — Pat Quinn of Illinois, Dan Malloy of Connecticut, Mark Dayton of Minnesota, Neil Abercrombie of Hawaii, and Chris Gregoire of Washington.

Many states are facing major fiscal problems in coming years. Rising debt and growing health and pension costs threaten tax increases down the road. At the same time, intense global economic competition makes it imperative that states improve their investment climates. To that end, some governors are pursuing broad-based tax reforms, such as cutting income tax rates and reducing property taxes on businesses. The bad news is that many governors are expanding narrow “tax incentives,” which clutter the tax code in an attempt to micromanage the economy.

This report discusses these trends and examines the fiscal policy actions of each governor. Hopefully, policymakers in more states will be encouraged to follow the fiscal reform approaches of the top-scoring governors.

Download “Fiscal Policy Report Card on America’s Governors 2012”

 


 

Fiscal Policy Report Card on America’s Governors 2010

Economic Freedom of the World 2010
By Chris Edwards

State governments have had to make tough budget choices in recent years. Tax revenues have stagnated as a result of the poor economy, and that has prompted governors to take a variety of fiscal actions to close large budget gaps. Some governors have cut spending to balance their budgets, while others have pursued large tax increases.

That is the backdrop to this 10th biennial fiscal report card of the governors, which examines state budget actions since 2008. It uses statistical data to grade the governors on their taxing and spending records — governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Four governors were awarded an “A” in this report card — Mark Sanford of South Carolina, Bobby Jindal of Louisiana, Tim Pawlenty of Minnesota, and Joe Manchin of West Virginia. Seven governors were awarded an “F” — Ted Kulongoski of Oregon, David Paterson of New York, Jodi Rell of Connecticut, Pat Quinn of Illinois, Jim Doyle of Wisconsin, Bill Ritter of Colorado, and Chris Gregoire of Washington.

Many states have raised taxes the past two years, which has hurt families and businesses at a time when they are already struggling because of the slow economy. Across the 50 states, recent tax increases have been by far the largest in many years. Many states raised taxes even though the federal government showered them with billions of dollars of added funding in last year’s “stimulus” bill.

To their credit, many governors have trimmed their budgets to match lower revenue levels. But overall state debt levels have doubled during the past decade, and many states face giant funding gaps in their pension and health care plans.

Further budget cuts are needed to deal with these problems. At the same time, rising competition in the global economy calls for the states to reduce their business taxes to attract investment.

America needs a lot more “A” governors to face these fiscal challenges and make the needed tax and spending reforms.

Download “Fiscal Policy Report Card on America’s Governors 2010”

 


 

Fiscal Policy Report Card on America’s Governors 2008

Economic Freedom of the World 2008
By Chris Edwards

Revenue poured into state governments as the U.S. economy expanded between 2003 and 2007, prompting the nation’s governors to expand state budgets and offer the occasional tax cut. But now that the economy has slowed and revenue growth is down, governors are taking various actions to close rising budget deficits.

This ninth biennial fiscal report card examines the tax and spending decisions made by the governors since 2003. It uses statistical data to grade the governors on their taxing and spending records — governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Three governors were awarded an “A” in this report card — Charlie Crist of Florida, Mark Sanford of South Carolina, and Joe Manchin of West Virginia. Eight governors were awarded an “F” — Martin O’Malley of Maryland, Ted Kulongoski of Oregon, Rod Blagojevich of Illinois, Chet Culver of Iowa, Jon Corzine of New Jersey, Bob Riley of Alabama, Jodi Rell of Connecticut, and C. L. “Butch” Otter of Idaho.

Republican governors, on average, received slightly higher grades than Democratic governors. More importantly, there has been a disappointing lack of major spending reforms among governors of both parties in recent years. State tax policies have also been uninspiring. Most tax cuts pursued by the governors have been small and targeted breaks, not broad-based rate cuts that can foster economic growth.

Fiscal policies need to be improved if the states are to meet the huge challenges ahead. Medicaid costs continue to rise, state debt is soaring, and the pension and health care plans of state workers have huge funding gaps. At the same time, rising international tax competition makes it imperative that states cut tax rates to attract jobs and investment. Governors don’t have an easy job, but they do need to pursue more aggressive fiscal reforms to meet the challenges of an increasingly competitive economy.

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Fiscal Policy Report Card on America’s Governors 2006

Economic Freedom of the World 2008
By Stephen Slivinski

This report presents the findings of the Cato Institute’s eighth biennial fiscal policy report card on the nation’s governors. The report card’s grading is based on 23 objective measures of fiscal performance. Governors who have cut taxes and spending the most receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades.

Only one governor receives an A this year — Republican Matt Blunt of Missouri. The next two highest-scoring Republicans are Rick Perry of Texas and Mark Sanford of South Carolina. The highest-scoring Democratic governors are John Lynch of New Hampshire and Phil Bredesen of Tennessee.

Nine governors receive Fs. In alphabetical order, they are Kathleen Blanco of Louisiana, Michael Easley of North Carolina, Kenny Guinn of Nevada, Christine Gregoire of Washington, Mike Huckabee of Arkansas, Ruth Ann Minner of Delaware, Janet Napolitano of Arizona, Bob Riley of Alabama, and Brian Schweitzer of Montana.

Governors who received praise in previous editions of the report card but have lower grades this year include Arnold Schwarzenegger of California (current grade, D); Jeb Bush of Florida (current grade, C); Bill Owens of Colorado (current grade, D); George Pataki of New York (current grade, D); and Bill Richardson of New Mexico (current grade, C).

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Fiscal Policy Report Card on America’s Governors 2004

Economic Freedom of the World 2008
By Stephen Moore and Stephen Slivinski

As states continue to claw their way out of the worst state budget hole in years, this report presents the findings of the Cato Institute’s seventh biennial fiscal policy report card on the nation’s governors. The report card’s grading is based on 15 objective measures of fiscal performance. Governors who have cut taxes and spending the most receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades. Our analysis shows that states that keep tax rates low and restrain spending growth have the best economic performance and thus the best longterm fiscal health.

This year, four governors receive the grade of A: Arnold Schwarzenegger of California, Craig Benson of New Hampshire, Bill Owens of Colorado, and Judy Martz of Montana. Four governors receive Fs for their poor performance in dealing with the state fiscal crisis: Bob Holden of Missouri, Bob Taft of Ohio, Edward Rendell of Pennsylvania, and James McGreevey of New Jersey.

The grades of the governors of some of America’s most populous states are Jeb Bush of Florida, B; George Pataki of New York, B; Rick Perry of Texas, B; and Jennifer Granholm of Michigan, D.

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Fiscal Policy Report Card on America’s Governors 2002

Economic Freedom of the World 2002
By Stephen Moore and Stephen Slivinski

Against the backdrop of the worst state budget crunch in years, this report presents the findings of Cato Institute’s sixth biennial fiscal policy report card on the nation’s governors. The report card’s grading is based on 17 objective measures of each governor’s fiscal performance. Governors who have cut taxes and spending the most receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades.

This year, two governors receive the highest grade of A: Bill Owens of Colorado and Jeb Bush of Florida. Four governors receive the lowest grade of F: Gray Davis of California, Don Sundquist of Tennessee, Bob Taft of Ohio, and John Kitzhaber of Oregon.

The governors of some of America’s most populous states and their grades are George Pataki of New York, B; George Ryan of Illinois, D; and John Engler of Michigan, B.

State governments faced a combined budget gap of more than $40 billion in 2002, largely as a result of an overspending binge in the 1990s. Most governors will confront more tough budget choices in 2003. We hope that governors do not make the mistake of raising taxes to try to balance budgets, as many did in the economic slowdown of the early 1990s. Instead, by reducing spending and cutting tax rates, governors can return their states to fiscal and economic health. If they do, we will have many high grades to reward on the next Cato fiscal report card.

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Fiscal Policy Report Card on America’s Governors 2000

Economic Freedom of the World 2000
By Stephen Moore and Stephen Slivinski

This report presents the findings of the Cato Institute’s fifth biennial fiscal policy report card on the nation’s governors. The grading mechanism is based on purely objective measures of each governor’s fiscal performance. Those governors with the most fiscally conservative records — the tax and budget cutters — receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades.

Two governors receive an A on our 2000 report card: Paul Cellucci of Massachusetts and Kenny Guinn of Nevada. Three governors receive an F: Tom Vilsack of Iowa, Gray Davis of California, and John Kitzhaber of Oregon.

The recent governors of America’s most populous states and their grades are George W. Bush of Texas, B; George Pataki of New York, B; Tom Ridge of Pennsylvania, B; George Ryan of Illinois, D; Bob Taft of Ohio, D; John Engler of Michigan, B; Jeb Bush of Florida, B; and Christine Todd Whitman of New Jersey, C.

Overall, we are concerned that the trend during the past several years of prosperity for states has been to ratchet up state budgets instead of returning revenue surpluses to taxpayers. By our estimates, roughly two of every three surplus dollars in the state coffers since 1996 have gone to new spending, not to tax reduction. Ironically, Republican governors were more aggressive in cutting taxes in the early 1990s, when the states were in fiscal shortfall, than they are today with the largest budget reserves in nearly two decades. The Republican governors tend to be touted as the GOP’s policy stars, but our report card suggests that, although there are a number of tax-cutting fiscal conservatives among the group, far too many of those top state executives have become big-government Republicans.

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Fiscal Policy Report Card on America’s Governors 1998

Economic Freedom of the World 1998
By Stephen Moore and Dean Stansel

This report presents the findings of the Cato Institute’s fourth biennial fiscal policy report card on the nation’s governors. The grading mechanism is based on purely objective measures of each governor’s fiscal performance. Those governors with the most fiscally conservative records — the tax and budget cutters — receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades.

Two governors receive an A on our 1998 report card: William Janklow of South Dakota and John Rowland of Connecticut. Three governors receive the grade of F: John Kitzhaber of Oregon, Lawton Chiles of Florida, and Mel Carnahan of Missouri.

The governors of America’s most populous states and their grades are Pete Wilson of California, C; George W. Bush of Texas, B; George Pataki of New York, B; Tom Ridge of Pennsylvania, B; Jim Edgar of Illinois, D; George Voinovich of Ohio, D; John Engler of Michigan, B; and Christine Todd Whitman of New Jersey, B.

There has been a clear trend toward more spending at the state level during the past two years. This year many governors recommended budget increases of more than 7 percent, roughly three times the rate of inflation. Since 1996 state spending has grown roughly 50 percent faster than federal expenditures. Inflated budgets are now being promoted even by Republican governors who came into office in 1994 and 1995 promoting tax-cutting agendas. In our 1996 report we noted that the governors had moved states in a pronounced fiscally conservative direction. Now we are much less sanguine.

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Fiscal Policy Report Card on America’s Governors 1996

Economic Freedom of the World 1996
By Stephen Moore and Dean Stansel

This study presents an objective, comparative analysis of the spending and tax policies of 46 of America’s governors. It is a report card on their fiscal conservatism. Governors who have cut spending and taxes the most get the highest grades; governors who have raised spending and taxes the most get the lowest grades.

For each of the governors who took office before 1993, we constructed a 14-variable index of fiscal performance. Those variables measure the change in state spending, tax burdens, and tax rates during each governor’s tenure. For the 20 governors who were first elected in 1993 or 1994, we explore similar, but fewer, fiscal policy variables based on budget and tax changes proposed and enacted for fiscal 1996 and 1997.

In general, we find that the states have moved dramatically in a fiscally conservative direction since 1994, with most states cutting taxes and holding general fund expenditures at or below inflation in 1995 and 1996. Three governors had outstanding records of fiscal restraint and received an A grade on our Report Card: George Pataki of New York, Steve Merrill of New Hampshire, and Fife Symington of Arizona. Four governors received an F: Gaston Caperton of West Virginia, Tom Carper of Delaware, Lawton Chiles of Florida, and George Voinovich of Ohio. Other prominent governors and their grades are William Weld of Massachusetts, B; Tommy Thompson of Wisconsin, B; John Engler of Michigan, B; Evan Bayh of Indiana, B; Christine Todd Whitman of New Jersey, B; Tom Ridge of Pennsylvania, B; Pete Wilson of California, C; and Jim Edgar of Illinois, D. With few exceptions, the 16 Republican governors elected in 1993 and 1994 have admirable records of supply-side tax cuts and budget downsizing.

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Fiscal Policy Report Card on America’s Governors 1994

Economic Freedom of the World 1996
By Stephen Moore and Dean Stansel

This study presents an objective, comparative analysis of the spending and taxing policies of 47 of America’s governors. In effect, it is a report card on their fiscal performance.

For each of the governors who were elected before 1991, we constructed a 14-variable index of fiscal performance. The variables used include measurements of the change in state expenditures, the change in state tax rates, and the change in the tax burden in each state under each current governor. For the 13 governors who took office after July 1991, we explored similar but fewer fiscal policy variables based on budget and tax changes enacted through fiscal 1994.

Three governors receive A’s on our fiscal policy report card: L. Douglas Wilder of Virginia, Stephen Merrill of New Hampshire, and Kirk Fordice of Mississippi. Five governors receive F’s: Lowell Weicker of Connecticut, James Florio of New Jersey, John Waihee of Hawaii, James Hunt of North Carolina, and Thomas Carper of Delaware. Other prominent governors and their grades, from best to worst, are William Weld of Massachusetts, B; Tommy Thompson of Wisconsin, B; John Engler of Michigan, B; Lawton Chiles of Florida, B; Mario Cuomo of New York, C; Jim Edgar of Illinois, C; Ann Richards of Texas, D; and Pete Wilson of California, D.

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Fiscal Policy Report Card on America’s Governors 1992

Economic Freedom of the World 1996
By Stephen Moore

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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