Most state governments are in an expansionary phase, as revenues are growing at a steady clip. Some governors are using the growing revenues to expand spending programs, while others are pursuing tax cuts and tax reforms.
That is the backdrop to this year’s 13th biennial fiscal report card on the governors, which Cato released today. It uses statistical data to grade the governors on their taxing and spending records since 2014—governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.
Five governors were awarded an “A”: Paul LePage of Maine, Pat McCrory of North Carolina, Rick Scott of Florida, Doug Ducey of Arizona, and Mike Pence of Indiana.
Ten governors were awarded an “F”: Robert Bentley of Alabama, Peter Shumlin of Vermont, Jerry Brown of California, David Ige of Hawaii, Dan Malloy of Connecticut, Dennis Daugaard of South Dakota, Brian Sandoval of Nevada, Kate Brown of Oregon, Jay Inslee of Washington, and Tom Wolf of Pennsylvania.
The report describes the record of each governor and discusses the outlook for state budgets. Medicaid costs are rising, and federal aid for this huge health program will likely be reduced in coming years. At the same time, many states have high levels of unfunded liabilities in their pension and retiree health plans.
Those factors will create pressure for states to raise taxes. Yet global economic competition demands that states improve their investment climates by cutting tax rates, particularly on businesses, entrepreneurs, and skilled workers.
News reports about the states often focus on policymaker efforts to balance their budgets. Balanced budgets are important, but policymakers should also be running their governments in a lean and frugal manner, reforming tax codes to spur growth, and generally expanding fiscal freedom for state residents.
Cato’s new report helps to sort out the governors who are moving in that direction from those who are not. An oped describing the main results is here.
