CATO Institute Releases Biennial Fiscal Policy Report Card on America’s Governors

October 6, 2020 by Sara Wilkerson
Iowa Gov. Kim Reynolds at the National Governors Association Winter Meeting in Washington. (Photo by Dan McCue)

Today the CATO Institute, a non-profit public policy research foundation, released its 15th biennial fiscal policy report card on the nation’s governors. This year’s CATO report card examines the country’s governors and their state budget actions since 2018. 

Prior to the COVID-19 pandemic, the nation was reaching its 11th year of economic expansion since the 2008 Great Recession. However, CATO notes that since the start of the pandemic, state governments experienced variable reactions as to how they handled the resulting COVID-19 recession. 

According to the report’s executive summary, “State governments have seen their projected revenues decline and have started trimming spending to keep their 2021 budgets balanced. Some states had accumulated large rainy day funds and were prepared for the downturn, but other states have been overspending, accumulating debt, and saving little for the rainy day that has now arrived.” 

The CATO Institute based its grading on the governors’ tax and spending records that were obtained from various sources such as the National Association of State Budget Officers, the National Conference of State Legislatures, the Tax Foundation, the budget agencies of each state, and news articles from the media. 

To score a high letter grade from CATO, data from the state governors’ records needed to have indicated that they cut taxes and reduced state government spending, whereas those scoring lower grades ended up raising taxes and increased state spending. 

It is worthwhile to point out that not all of the country’s governors were evaluated in CATO’s fiscal report card. 

“The report rates 47 governors. It excludes the governors of Kentucky and Mississippi because they have been in office only a brief time, and it excludes the governor of Alaska because of peculiarities in that state’s budget,” stated the CATO report. 

In terms of those who fared the best of those evaluated, four governors were awarded A’s from CATO: Chris Sununu, R-N.H., Kim Reynolds, R-Iowa, Pete Ricketts, R-Neb., and Mark Gordon, R-Wyo. 

Meanwhile, there were seven governors who received a F grade for their fiscal policy management: Ralph Northam, D-Va., Andrew Cuomo, D-N.Y., Gretchen Whitmer, D-Mich., Phil Murphy, D-N.J., J. B. Pritzker, D-Ill., Kate Brown, D-Ore., and Jay Inslee, D-Wash. 

In discussing the partisan division in the awarded letter grades, the institute stated that for this year’s report card, “Republicans received higher scores than Democrats, on average, on both spending and taxes, although the Republican advantage on taxes was greater than on spending, which was also the case in prior reports.” 

When it comes to the economy, CATO explained that there are noticeable partisan differences in how governors govern their state. 

“When the economy is growing and state coffers are filling up, Democrats tend to increase spending, while Republicans tend to both increase spending and cut taxes. During economic downturns, Democratic governors often pursue tax increases to balance their budgets, while Republicans put greater focus on spending restraint,” according to the report. 

In conjunction with the release of the report card, CATO hosted a live discussion between Peter Goettler, the president and CEO of CATO, Chris Edwards, CATO’s Director of Tax Policy Studies, and New Hampshire Governor Chris Sununu, who received the highest fiscal grade (75) out of those evaluated by CATO. 

In their discussion, Goettler and Edwards highlighted the report’s findings and Gov. Sununu’s leadership and fiscal policies in the state of New Hampshire. 

“Other states should look to the New Hampshire model and Gov. Sununu’s outstanding example of fiscal leadership,” said Goettler at the beginning of the discussion. 

In reflecting on his government’s fiscal success, Sununu said that his government focused on deregulatory measures such as tax cuts to help benefit those in his state. 

“The best thing that government can do is to get out of people’s way… Putting individuals and businesses first [is] one of the philosophies we [in New Hampshire] try to bring to the table,” said Sununu. 

Sununu further reflected on his state’s success by commenting on the A grade he received from the CATO Institute. 

“Getting an A from CATO is huge. And I’m not going to lie to you, the first person I’m going to call is my father to show him I can get A’s. They were a little hard to come by at MIT back in the day,” the governor joked. 

Sununu added, “It’s an incredible honor [coming from] such a reputable, world-renown organization to be recognized for the fruits of your labor.” 

Further on in the discussion, Sununu and Edwards discussed New Hampshire’s recovery amid the COVID-19 Pandemic. 

Edwards pointed out that New Hampshire has brought its unemployment rate of 17% spike since the pandemic started down to 4.5%. Sununu attributes his state’s success at lowering their unemployment rate to the state’s priority of putting businesses first by allowing “stakeholder input” in the state’s business reopenings. 

“It’s just about putting others first as opposed to big government,” Sununu said.

The CATO Institute’s report provides an in-depth analysis of not just the performance of the country’s governors, but the report also gives insight into recent fiscal policy developments and trends of the nation. To read more about the report, view the CATO Institute’s full report online

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