Fiscal Policy Report Card on America’s Governors: 2008

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Revenue poured into state governments as theU.S. economy expanded between 2003 and 2007,prompting the nation's governors to expand statebudgets and offer the occasional tax cut. But nowthat the economy has slowed and revenue growthis down, governors are taking various actions toclose rising budget deficits.

This ninth biennial fiscal report card examinesthe tax and spending decisions made by thegovernors since 2003. It uses statistical data tograde the governors on their taxing and spendingrecords – governors who have cut taxes andspending the most receive the highest grades,while those who have increased taxes and spendingthe most receive the lowest grades.

Three governors were awarded an "A" in thisreport card – Charlie Crist of Florida, Mark Sanfordof South Carolina, and Joe Manchin of WestVirginia. Eight governors were awarded an "F" – Martin O'Malley of Maryland, Ted Kulongoski ofOregon, Rod Blagojevich of Illinois, Chet Culver ofIowa, Jon Corzine of New Jersey, Bob Riley of Alabama,Jodi Rell of Connecticut, and C. L. "Butch"Otter of Idaho.

Republican governors, on average, receivedslightly higher grades than Democratic governors.More importantly, there has been a disappointinglack of major spending reforms amonggovernors of both parties in recent years. Statetax policies have also been uninspiring. Most taxcuts pursued by the governors have been smalland targeted breaks, not broad-based rate cutsthat can foster economic growth.

Fiscal policies need to be improved if the statesare to meet the huge challenges ahead. Medicaidcosts continue to rise, state debt is soaring, and thepension and health care plans of state workershave huge funding gaps. At the same time, risinginternational tax competition makes it imperativethat states cut tax rates to attract jobs and investment.Governors don't have an easy job, but theydo need to pursue more aggressive fiscal reformsto meet the challenges of an increasingly competitiveeconomy.