Herein we provide the results of the CatoInstitute’s fifth biennial fiscal policy reportcard on the nation’s governors.
The study isa comparative analysis of the budget and taxrecord of 47 governors. (Mel Carnahan of Missouri is not graded in this study becausehe died in office in October 2000. Mississippigovernor Ronnie Musgrove assumed officetoo recently for us to be able to fully assesshis record. Tony Knowles of Alaska is exclud-ed because of peculiarities in Alaska’s budgetthat make interstate tax comparisons prob-lematic.) The report card provides an index of the fiscal restraint imposed by each governor.Those who cut taxes and spending the mostreceive the highest grades. Those who raisedtaxes and spending the most receive thepoorest grades.Table 1 presents the results. Two gover-nors receive an A on our 2000 report card:Paul Cellucci of Massachusetts and KennyGuinn of Nevada. Three governors receive anF: Tom Vilsack of Iowa, Gray Davis of California, and John Kitzhaber of Oregon.Several trends uncovered in our report war-rant special mention. First, there has been aclear trend toward more spending at the statelevel since our last report card in 1998. Thenational economic expansion has filled statecoffers with revenues, and many governors haverecommended using those windfall funds formodest to major new expenditures. For fiscal2000, roughly a quarter of all governors—bothRepublicans and Democrats—recommendedincreasing spending by more than 7 percent,almost three times the rate of inflation. Morethan half proposed increasing spending bymore than 5 percent. For the past three years,state spending has grown more than twice asfast as federal expenditures. Many governorshave proposed the same types of spending ini-tiatives that populated Bill Clinton’s budgetrequests. Hence, the talk of a fiscally conserva-tive trend in the states under Republican gover-nors seems to be exaggerated.It is also noteworthy that, as the nationaleconomy now shows signs of a slowdown,many of the states that hiked their budgetsthe most in recent years are talking of poten-tial fiscal crises in 2001. Those states includeNew Hampshire, Tennessee, North Carolina,and Virginia.Second, the governors elected in recentyears (in particular those elected in 1998)have tended to be more aggressive in cuttingtaxes than those first elected before 1997.Although many Republican governors elect-ed in the early 1990s—Christine ToddWhitman of New Jersey, George Pataki of New York, and Don Sundquist of Tennessee,for example—gained reputations as tax-cut-ting warriors when first elected, they havemore recently tended to shift their prioritiesfrom tax cutting to new spending. By con-trast, none of the recently elected governorshas pushed for income tax hikes in his or herfirst term, and most recommended tax cutsof one kind or another. In fact, the major taxcuts proposed by the new governors are, as aproportion of the budget, four to six timesbigger on average than those proposed by the“old” governors.Third, although states are still cuttingtaxes, the size of state tax reductions fell off sharply in 2000 despite record budget sur-pluses. We are now in the midst of thelongest sustained run of net state tax cuttingin American history, a run that began sevenyears ago. But in fiscal 2000, states cut theirtaxes by only $5 billion. That tax-cuttingeffort is minuscule, given that at the begin-ning of fiscal 2000, the states had a surplusof more than $30 billion. Moreover, tax cutshave not kept pace with the huge surge in taxcollections that have resulted from thenational economic expansion. When gover-nors have cut taxes, their emphasis usuallyhas been on income and property tax cuts.However, in 1999 and 2000 four states—Connecticut, Colorado, Minnesota, andWisconsin—offered tax rebates, and Florida,New York, Oklahoma, and Texas createdsales tax holidays. In Indiana governor Frank O’Bannon cut the state gas tax in response torising oil prices.
The governorselected in recentyears (in particu-lar those electedin 1998) havetended to bemore aggressivein cutting taxesthan those firstelected before1997.