by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The libertarian Cato Institute delivered N.C. Pat McCrory some good news this morning, naming him one of just five governors across the country who earn A grades for their fiscal policy.
State governments have been in an expansionary phase in recent years. Even though U.S. economic growth since the last recession has been sluggish, general fund revenues of state governments have grown 33 percent since 2010. Some of the nation’s governors have used the growing revenues to expand spending programs, while others have pursued tax cuts and tax reforms.
That is the backdrop to this year’s 13th biennial fiscal report card on the governors, which examines state budget actions since 2014. It uses statistical data to grade the governors on their taxing and spending records—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” on this report: 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.
With the growing revenues of recent years, most states have balanced their short-term budgets without major problems, but many states face large challenges ahead. 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.