The U.S. economy is in its 10th year of economic expansion, and state government budgets are benefiting from a solid growth in tax revenues. State general fund revenues have grown 40 percent since 2010. Many of the nation’s governors have used the growing revenues to expand spending programs, whereas others have pursued reductions in taxes.
That is the backdrop to this year’s 14th biennial fiscal report card on the governors, which examines state budget actions since 2016. 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, whereas those who have increased taxes and spending the most receive the lowest grades.
Five governors were awarded an A on this report: Susana Martinez of New Mexico, Henry McMaster of South Carolina, Doug Burgum of North Dakota, Paul LePage of Maine, and Greg Abbott of Texas. Eight governors were awarded an F: Roy Cooper of North Carolina, John Bel Edwards of Louisiana, Tom Wolf of Pennsylvania, Jim Justice of West Virginia, Dennis Daugaard of South Dakota, David Ige of Hawaii, Kate Brown of Oregon, and Jay Inslee of Washington.
Governors of every state are having their fiscal choices shaped by the federal Tax Cuts and Jobs Act of 2017. State income tax bases are tied to the federal tax base, so governors have been considering which federal changes to conform to. Also, the capping of the federal tax deduction for state and local taxes has increased the bite of those taxes for millions of households. The cap has increased the relative burden of living in a high-tax state, and it may induce higher out-migration from those states over time.
The state fiscal environment is also being shaped by recent Supreme Court decisions regarding online sales taxes and public-sector labor unions. Furthermore, the legalization of marijuana has created a new source of revenue for some states.
This report discusses these fiscal policy developments and examines the tax and spending actions of each governor in detail. The hope is that the report encourages more state policymakers to adopt the fiscal approaches of the top-scoring governors.