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Against the backdrop of the worst state bud-get crunch in years, this report presents the find-ings of Cato Institute’s sixth biennial fiscal poli-cy report card on the nation’s governors. Thereport card’s grading is based on 17 objectivemeasures of each governor’s fiscal performance.Governors who have cut taxes and spending themost receive the highest grades. Those who haveincreased spending and taxes the most receivethe lowest grades.This year, two governors receive the highestgrade of A: Bill Owens of Colorado and Jeb Bushof Florida. Four governors receive the lowestgrade of F: Gray Davis of California, DonSundquist of Tennessee, Bob Taft of Ohio, andJohn Kitzhaber of Oregon.The governors of some of America’s mostpopulous states and their grades are GeorgePataki of New York, B; George Ryan of Illinois,D; and John Engler of Michigan, B.State governments faced a combined budgetgap of more than $40 billion in 2002, largely as aresult of an overspending binge in the 1990s.Most governors will confront more tough bud-get choices in 2003. We hope that governors donot make the mistake of raising taxes to try tobalance budgets, as many did in the economicslowdown of the early 1990s. Instead, by reduc-ing spending and cutting tax rates, governorscan return their states to fiscal and economichealth. If they do, we will have many high gradesto reward on the next Cato fiscal report card.
Fiscal Policy Report Card on America’sGovernors: 2002
by Stephen Moore and Stephen Slivinski
_____________________________________________________________________________________________________
Stephen Moore is a senior fellow at the Cato Institute. Stephen Slivinski, a former fiscal policy analyst at the Cato Institute, is director of tax and budget studies at the Goldwater Institute.
Executive Summary
No. 454September 20, 2002
 
Introduction
This report provides the results of theCato Institute’s sixth biennial fiscal policyreport card on the nation’s governors.
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Thestudy is a comparative analysis of the budgetand tax records of 42 governors. (Seven gov-ernors were excluded because they assumedoffice too recently for their records to be fullyassessed. Alaska’s governor was also exclud-ed.)
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The report card provides an index of fis-cal restraint for each governor. Those whocut taxes and spending the most receive thehighest grades. Those who raised taxes andspending the most receive the lowest grades.The grading mechanism is based on 17objective measures of fiscal and economic per-formance and follows the methodology of previous Cato governors studies. The sourcesof the tax and spending data in the study arethe U.S. Bureau of the Census, the NationalAssociation of State Budget Officers(NASBO), and the National Conference of State Legislatures (NCSL).
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The first section of the study discusses themain results for both the spending and taxsides of state fiscal policy. Following themain results, the report discusses trends instate fiscal policy during the past decade,causes of current budget gaps, and the rela-tionship between state taxes and economicperformance. Appendix A discusses the pur-pose of the study and explains study caveats.Appendix B provides a detailed discussion of the report card’s methodology and the 17policy variables that were examined.Appendix C contains detailed tables.Appendix D provides a one-page fiscal sum-mary for each governor in this year’s report.
Main Results
Table 1 presents the main results of thestudy. Two governors received the highestgrade of A this year: Bill Owens of Coloradoand Jeb Bush of Florida. Four governorsreceived an F: Gray Davis of California, BobTaft of Ohio, Don Sundquist of Tennessee,and John Kitzhaber of Oregon.
Results for Spending Restraint
The governors with the best spendingrestraint records are Kenny Guinn of Nevada,Bill Owens of Colorado, and Roy Barnes of Georgia. The worst budget restraint record wasrecorded by John Kitzhaber of Oregon. Duringhis tenure, real per capita state spendingincreased at an annual average rate of about 9percent through 2000. Davis (California), JaneSwift (Massachusetts), Jane Hull (Arizona), andJesse Ventura (Minnesota) also have very poorrecords on spending restraint.The spending scores in the study highlightbig differences in the direction of fiscal policybetween the states in recent years. In contrastto the large proposed spending increases of Kitzhaber (Oregon) and Davis (California),Governors Guinn (Nevada), Barnes (Georgia),and Owens (Colorado) have recommendedsubstantial real cuts in spending.
Results for Tax Policy
The best record on cutting taxes andrestraining revenue growth was recorded byBill Owens of Colorado. It is true that his jobwas made easier by Colorado’s Taxpayer Billof Rights, a state constitutional amendmentpassed by voters in 1992 that requires taxrefunds when state revenue growth exceedsthe growth rate of population plus inflation.Nonetheless, Owens has proactively soughtsubstantial tax cuts even before TABORrefunds automatically kick in. Owens hassucceeded in bringing the state’s flat incometax rate down to 4.63 percent. He has bothproposed and signed into law sales tax andcorporate income tax cuts.Some governors, such as Gary Locke of Washington, have chafed under voter-imposed budget restrictions and tried tooverturn them. But Colorado’s Owens hasfully respected the fiscal discipline imposedby TABOR. Indeed, Owens has proposed taxcuts averaging about $235 million per year—or about 2.6 percent of general fund spend-ing—in addition to the TABOR refunds.
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Two governorsreceived the high-est grade of A thisyear: Bill Owensof Colorado andJeb Bush of Florida.
 
Table 1Overall Fiscal Policy Grades
GovernorStateScoreGradeOwens (R)Colorado76ABush (R)Florida67ABarnes (D)Georgia64BPataki (R)New York63BGuinn (R)Nevada63BJanklow (R)South Dakota60BJohnson (R)New Mexico60BLocke (D)Washington60BEngler (R)Michigan58BMartz (R)Montana58BKeating (R)Oklahoma58BRowland (R)Connecticut58BSwift (R)Massachusetts56BMinner (D)Delaware54CPatton (D)Kentucky53CMusgrove (D)Mississippi53CKempthorne (R)Idaho53CCayetano (D)Hawaii52CO'Bannon (D)Indiana52CHuckabee (R)Arkansas52CGeringer (R)Wyoming52CJohanns (R)Nebraska52CAlmond (R)Rhode Island50DHodges (D)South Carolina50DHull (R)Arizona49DRyan (R)Illinois49DLeavitt (R)Utah48DGraves (R)Kansas48DShaheen (D)New Hampshire48DVentura (I)Minnesota48DSiegelman (D)Alabama48DKing (I)Maine47DVilsack (D)Iowa46DGlendening (D)Maryland46DDean (D)Vermont46DHoeven (R)North Dakota45DFoster (R)Louisiana44DWise (D)West Virginia44DDavis (D)California42FSundquist (R)Tennessee40FTaft (R)Ohio40FKitzhaber (D)Oregon30F
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