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Fiscal Policy Report Card on America's Governors: 2004 Cato Policy Analysis No. 537

Fiscal Policy Report Card on America's Governors: 2004 Cato Policy Analysis No. 537

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Published by Cato Institute
Executive Summary
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
Executive Summary
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

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Published by: Cato Institute on Mar 26, 2009
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Ted Kulongoski, Democrat

Legislature: Divided
Took Office: January 2003

Grade: D

Fiscal
Performance Data
n/a

Average Annual Change in Real per Capita Direct General Spending through 2002

n/a

Average Annual Change in Direct General Spending per $1,000 Personal Income through 2002

-6.8%

Average Annual Recommended Change in Real per Capita General Fund Spending through 2005

6.8%

Average Annual Change in General Fund Spending per $1,000 Personal Income, 2002–2005

n/a

Average Annual Change in Real per Capita Tax Revenue through 2002

n/a

Average Annual Change in Tax Revenue per $1,000 Personal Income through 2002

0.0%

Average Annual Recommended Change in General Fund Revenue per $1,000 Personal
Income through 2005

-0.7%

Average Annual Change in Real per Capita General Fund Revenue, 2002–2005

2.8%

Average Annual Recommended Tax Changes as % of Prior Year’s Spending through 2005

0.80

Change in Top Personal Income Tax Rate, proposed and/or enacted (% points)

0.0

Change in Top Corporate Income Tax Rate, proposed and/or enacted (% points)

15.6

2004 Combined Top Income Tax Rates, personal plus corporate

n/a

Change in Sales Tax Rate, proposed and/or enacted (% points)

0.0

Change in Gas Tax Rate, proposed and/or enacted (cents per gallon)

10.0

Change in Cigarette Tax Rate, proposed and/or enacted (cents per gallon)

Ed Rendell, former Philadelphia mayor and
chairman of the Democratic National
Committee, was elected governor in 2002. He
came into office with a reputation for being a
fiscal conservative who was willing to take on
the powerful unions in Philadelphia. Rendell’s
first budget would have eliminated the state
deficit with $1.6 billion in spending cuts. But
he quickly stated that he proposed it as a gim-
mick to show how painful it would be to close
the budget gap without a tax increase. The leg-
islature, however, called his bluff and passed
his no-tax-hike budget before he had intro-
duced his promised package of tax increases.
Those tax increases were accompanied by
around $2 billion in new education spending.
Rendell made good on his threat and vetoed
his own budget to prevent the state from bal-

ancing its books without hiking taxes. He then
pushed for his massive $2.8 billion tax hike
package, which boosted personal income taxes
by 35 percent, and hiked beer taxes and busi-
ness taxes as well, with only about half of that
amount set aside to reduce local property
taxes. Even when the federal government
bailed out Pennsylvania with $900 million,
Rendell didn’t back down from his tax hike.
The state legislature fought Rendell’s plan in a
bruising year-long fight during which even
Democrats in the Pennsylvania House refused
to vote for his tax plan. Ultimately, they accept-
ed a $700 million tax hike, including a 10 per-
cent income tax increase. Pennsylvania taxpay-
ers are probably disappointed by the death of
the tax-cutting spirit that guided Rendell when
he was mayor of Philadelphia. We certainly are.

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