Introduction
Governors play a key role in state fiscal
policy. They propose budgets, recommend
tax changes, and sign or veto tax and spending
bills. When the economy is growing,
governors can use rising revenues to expand
programs, or they can return extra revenues
to citizens through tax cuts. When the economy
is stagnant, governors can raise taxes to
close budget gaps, or they can cut spending.
This report grades governors on their fiscal
policies from a limited-government perspective.
The governors receiving an “A” are
those who cut taxes and spending the most,
while the governors receiving an “F” raised
taxes and spending the most. The grading
mechanism is based on seven variables, including
two spending variables, one revenue
variable, and four tax rate variables. The
same methodology was used on Cato’s 2008
and 2010 report cards.
The results are data-driven. They account
for tax and spending actions that affect
short-term budgets in the states. But they
do not account for longer-term or structural
changes that governors may make, such as
reforms to state pension plans. Thus, the
results provide one independent measure of
how “fiscally conservative” each governor is,
but they don’t reflect all the fiscal actions
that governors may make.
Tax and spending data for the report came
from the National Association of State Budget
Officers (NASBO), the National Conference
of State Legislatures (NCSL), the Tax
Foundation, the budget agencies of each
state, and news articles in State Tax Notes and
other sources. The data cover the period January
2010 to August 2012, which was a time
of modest budget expansion in most states.1
The report covers 48 governors. It excludes
Mississippi’s governor because of his short
time in office, and it excludes Alaska’s governor
because of peculiarities in that state’s
budget.
The following section reviews the records
of the highest-scoring and lowest-scoring
governors, and it discusses some of the policy
trends that emerged from the analysis.
After that, the longer-term outlook for state
budgets is discussed, focusing on the crisis in
state debt and unfunded obligations. Appendix
A discusses the report card methodology.
Appendix B provides brief summaries of the
fiscal records of the 48 included governors.
Main Results and
Policy Trends
Table 1 presents the overall grades for the
governors. Scores ranging from 0 to 100 were
calculated for each governor based on seven
tax and spending variables. Scores closer to
100 indicate governors who favored smallergovernment
policies. The numerical scores
were converted to the letter grades “A” to “F.”
Table 1
Overall Grades for the Governors
State Governor Score Grade
Kansas Sam Brownback (R) 69 A
Florida Rick Scott (R) 69 A
Maine Paul LePage (R) 65 A
Pennsylvania Tom Corbett (R) 65 A
Louisiana Bobby Jindal (R) 62 B
New Hampshire John Lynch (D) 62 B
North Dakota Jack Dalrymple (R) 62 B
Alabama Robert Bentley (R) 61 B
Idaho C.L. “Butch” Otter (R) 58 B
Wyoming Matt Mead (R) 58 B
Ohio John Kasich (R) 58 B
New Jersey Chris Christie (R) 58 B
Michigan Rick Snyder (R) 57 B
Nebraska Dave Heineman (R) 57 B
Wisconsin Scott Walker (R) 57 B
Nevada Brian Sandoval (R) 57 B
Iowa Terry Branstad (R) 55 B
South Carolina Nikki Haley (R) 55 B
Oklahoma Mary Fallin (R) 55 B
Massachusetts Deval Patrick (D) 55 B
Indiana Mitch Daniels (R) 55 B
New Mexico Susana Martinez (R) 54 C
Missouri Jay Nixon (D) 53 C
Georgia Nathan Deal (R) 53 C
South Dakota Dennis Daugaard (R) 53 C
Colorado John Hickenlooper (D) 53 C
Arkansas Mike Beebe (D) 52 C
Montana Brian Schweitzer (D) 51 C
Texas Rick Perry (R) 51 C
North Carolina Beverly Perdue (D) 51 C
West Virginia Ray Tomblin (D) 50 C
Virginia Bob McDonnell (R) 50 C
California Jerry Brown (D) 49 D
Delaware Jack Markell (D) 48 D
Arizona Jan Brewer (R) 48 D
Kentucky Steven Beshear (D) 47 D
Utah Gary Herbert (R) 47 D
Oregon John Kitzhaber (D) 45 D
New York Andrew Cuomo (D) 45 D
Tennessee Bill Haslam (R) 43 D
Maryland Martin O’Malley (D) 42 D
Rhode Island Lincoln Chafee (I) 41 D
Vermont Peter Shumlin (D) 40 D
Washington Chris Gregoire (D) 38 F
Hawaii Neil Abercrombie (D) 32 F
Minnesota Mark Dayton (D) 21 F
Connecticut Dan Malloy (D) 17 F
Illinois Pat Quinn (D) 16 F

Highest-Scoring Governors
The highest-scoring governors are those
who have supported the largest tax and
spending cuts. Here are the four governors
who received grades of “A”:

●● Sam Brownback of Kansas signed into
law one of the most impressive tax
reforms of any state in recent years.
Brownback called for a “fairer, flatter,
and simpler” income tax system and
he proposed a detailed reform plan. In
May, the legislature delivered a plan to
his desk and he signed it into law. The
reform simplified the personal income
tax structure from three tax rates to
two and cut the top rate from 6.45 to
4.9 percent. It also increased the standard
deduction, reduced the taxation
of small business income, and repealed
numerous special-interest tax breaks.
The cuts are expected to save Kansas
taxpayers about $800 million a year.
●● Rick Scott of Florida has championed
major tax and spending reforms. He
has proposed substantial budget cuts,
vetoed hundreds of millions of dollars
of wasteful spending, and trimmed
state employment. Scott is also determined
to give Florida the best economic
climate for business investment and
job creation in the country. He wants
to phase out the corporate income tax
(CIT), and he has made progress toward
that goal by raising the CIT exemption
to end the tax for thousands
of small businesses. Scott’s plan to cut
taxes on business personal property is
on the November ballot. If citizens approve
the plan, it would end this tax for
about 156,000 businesses.

●● Paul LePage of Maine signed into law
a major income tax cut. The reform
reduced the top individual tax rate
from 8.5 to 7.95 percent, simplified tax
brackets, and reduced taxes on business
investment. LePage then signed
legislation to reduce the top individual
tax rate to 4 percent over time if there
are sufficient budget surpluses. The
governor says that his ultimate goal
is to phase out the individual income
tax completely, and he wants to cut the
corporate tax rate from 8 to 4 percent.
LePage has also focused on spending
cuts. He signed into law reforms to reduce
the costs of welfare, health care,
and pensions, and he wants to end
funding for Maine Public Broadcasting,
calling it “corporate welfare.”

●● Tom Corbett of Pennsylvania has been
a frugal budgeter. The state is expected
to spend less next year than it did when
he came into office. Corbett is also
pursing the phase out of the Capital
Stock and Franchise Tax, which is paid
by 100,000 Pennsylvania businesses.
So far Corbett has sliced the tax from
$819 million a year to $479 million,
and he plans to fully repeal it by 2014.
Corbett argues: “This tax is a job-killer.
. . . We don’t need it. We don’t benefit
from it, and we must get rid of it.’’

In this year’s results, there are fewer governors than in prior
reports who are out of step with the typical policies of their
parties.


Lowest-Scoring Governors
The lowest-scoring governors are those
who have increased taxes and spending the
most. These governors seem to view the government’s
financial priorities as more important
than the financial priorities of average
tax-paying citizens. Here are the six governors
who received a grade of “F”:

●● Pat Quinn of Illinois took office after
his predecessor, Rod Blagojevich, was
impeached and removed. Unfortunately,
Quinn is following the same
approach that earned Blagojevich an
“F” grade from Cato in 2008.3 In 2009
Quinn signed into law a $1.1 billion tax
increase. In 2011 he pushed through a
massive $7 billion tax increase, which
included higher individual income
taxes, corporate taxes, and estate taxes.
Quinn raised the top individual income
tax rate from 3 to 5 percent, and
raised the top corporate rate from 4.8
to 7.0 percent. Illinois corporations pay
a special tax on top of the basic rate to
bring the overall rate to 9.5 percent. In
2012 Quinn approved a large cigarette
tax increase. Quinn also spends too
much, and he has tried to paper over
the state’s fiscal problems by issuing
billions of dollars of bonds to cover
unpaid state bills and to fund the state
pension plan.

●● Dan Malloy of Connecticut signed into
law a huge $1.8 billion tax increase,
which increased the top individual income
tax rate from 6.5 to 6.7 percent,
the top corporate tax rate from 8.25 to
9.0 percent, and the sales tax rate from
6.0 to 6.35 percent. The governor also
increased hotel taxes, luxury goods
taxes, online sales taxes, alcohol taxes,
and the state death tax. After this taxhike
orgy, Malloy had the gumption
to claim that some small tax credits
he approved were a “far reaching” and
“rigorous initiative to grow jobs.”4
●● Mark Dayton of Minnesota soon revealed
his taste for bigger government
after he entered office in 2011. General
fund spending jumped almost
10 percent in his first year in office.5
To fund the spending, he proposed a
large tax increase to raise $2 billion a
year. The plan would have raised the
top personal income tax rate from 7.85
to 10.95 percent, with an additional 3
percentage point tax on top of that for
the highest earners. Dayton also wanted
business tax increases and a new
property tax on higher-valued homes.
The legislature rejected Dayton’s taxincrease
plans.

●● Neil Abercrombie of Hawaii has focused
on increasing both taxes and spending
as governor of the Aloha State since
2011. General fund spending jumped
about 12 percent during his first year
in office.6 To fund the spending, the
governor has supported a slew of tax
increases. He signed into law higher
income taxes, excise taxes, and taxes
on rental cars. He has also proposed
higher taxes on pension income, soda,
and alcohol.

●● Chris Gregoire of Washington earned
a well-deserved “F” on the last Cato
report card. There has been a neverending
stream of tax-increase proposals
coming from this governor since
2005. In her first year, she raised taxes
on cigarettes, gasoline, liquor, and vehicles.
She also re-established an estate
tax after a previous version had been
struck down by the courts. In 2009 she
signed into law increases in business
taxes, sales taxes, cigarette taxes, beer
taxes, soda taxes, and candy taxes. In
2010 she approved a large increase in
the cigarette tax, a huge hospital tax,
and increases in business taxes and
beer taxes. In 2011 she proposed a half
cent increase in the sales tax rate, but
that was rejected by the legislature. In
2012 Gregoire proposed a new tax on
crude oil to raise $275 million a year.


Are Republicans and Democrats Any Different?

Advocates of smaller government often lament that
politicians of both major parties tax and spend too much. While that is certainly true, Cato report cards have found that Republican governors are a bit more fiscally conservative than Democratic governors,on average. In the 2008 report card, Republicanand Democratic governors had average scores of 55 and 46, respectively. In the2010 report card, they had average scores
of 55 and 47, respectively. This pattern is even more pronounced
in the 2012 report card. This time around, Republican and Democratic governors had average scores of 57 and 43, respectively. And, as in prior report cards, the difference
between the two parties is slightly more pronouncedon taxes than on spending. The fiscal differences between governors of the two parties have increased a bit. In this year’s results, there are fewer governors than in prior reports who are out of step with the typical policies of their parties. In both the 2008 and 2010 reports, for example, Democrat Joe Manchin earned an “A,” while Republican Jodi Rell earned an “F.” But in this year’s report, all four “A” governors are Republicans and all five “F” governors are Democrats.

Business Tax Reforms
48 page report...

Sorry chuck, it was a PDF. I dont know how to link that. I lost the link that pulled up the PDF.

I'm not entirely sure about the take home message. It seems to be:

1. The Cato Institute is a conservative think tank; and

2. Governors are scored only on their fiscal policies.

That about it?

I was looking for the curve. At least CG wasnt rated at the top. I watched a little of Chris Christie to day. He mentioned that the former gov John Corzine (MF Global Fame) raised taxes 119 times in 8 years. That means every 25 days, they raise some kind of tax. But when Christie took office, he was informed by his budget guy, that if he did not cut 2 billion dollars out of the budget, by march, the state would not be able to make payroll.

The richest state per capita income in the nation was going to be insolvent. And a back bencher from Congress, is potentially going to run this state. Lets just change our name to Greece.

I'm not minimizing the importance of fiscal responsibility. But a lot of factors besides the governor go into a state's fiscal condition. And there is a lot more to governing a state than managing the budget. But I wouldn't expect the CATO to look at anything but the money.

The report was 48 pages. Knock yourself out.

Really.Good luck,
SZ