You may be wondering, after the last two decades, if there is anywhere left in America where fiscal conservatism remains important. The federal budget has ballooned out to Banana Republic-like proportions. It turns out there are still some pockets of America where governors put a priority on maintaining the financial strength of their states. At the Cato Institute, Chris Edwards and Ilana Blumsack have ranked America’s governors based on their fiscal performance. They write:
The nation’s economy was damaged by the pandemic in 2020, but it bounced back strongly and grew until the end of 2021. The rebound generated a large tax revenue increase for state governments, which also received a flood of pandemic aid from the federal government. The states used soaring revenues to expand their budgets and provide individuals and businesses with temporary or permanent tax cuts.
That is the backdrop to this year’s 16th biennial fiscal report card on the governors, which examines state budget actions since 2020. It uses statistical data to grade the governors on their tax and spending records: governors who restrained taxes and spending receive higher grades; those who substantially increased taxes and spending receive lower grades.
Five governors receive a grade of A: Kim Reynolds of Iowa, Chris Sununu of New Hampshire, Pete Ricketts of Nebraska, Brad Little of Idaho, and Doug Ducey of Arizona. Eight governors receive an F: Tim Walz of Minnesota, Tom Wolf of Pennsylvania, J. B. Pritzker of Illinois, Gretchen Whitmer of Michigan, Phil Murphy of New Jersey, Kate Brown of Oregon, Gavin Newsom of California, and Jay Inslee of Washington.
The report examines the tax and spending choices made by the governors and discusses recent policy trends. Twenty‐one states have cut individual or corporate income tax rates since 2020, and about 20 states have provided one‐time tax rebates. Meanwhile, many states have expanded tax revenues from marijuana, gaming, and online sales. Another important trend is the interstate migration of residents from high‐tax states to low‐tax states.
Current state budget surpluses may diminish if the U.S. economy continues to stagnate. Fortunately, most states have built large rainy day funds, which they can tap if tax revenues fall in the months ahead. Governors should focus on pruning low‐value programs from budgets and pursuing growth‐enhancing reforms such as income tax rate cuts.
America’s Top 5 governors on fiscal policy are:
- Kim Reynolds of Iowa – Grade A, score 78
- Chris Sununu of New Hampshire – Grade A, score 74
- Pete Ricketts of Nebraska – Grade A, score 73
- Brad Little of Idaho – Grade A, score 69
- Doug Ducey of Arizona – Grade A, score 66
Action Line: Three of these top five states score in the Top 10 of my Super States. If you’re looking for a new America, start your search with my Super States, where politicians treat you like a valued customer, not a piggy bank. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter, and I’ll push you to find the best America for you, even if that means staying right where you are.
