Another Report Card

Via Norm over at One Man’s Trash, we learn that the Cato Institute is releasing a report card on the Nation’s Governors this morning.

A preview of the report appeared in the Wall Street Journal (pay site) yesterday. Apparently, Virginia’s Governor Warner got a “D” for raising taxes. “F” students were “bi-partisan” Governors Taft (R) of Ohio and Rendell (D) of Pennsylvania. Schwarzenegger got an “A” for cutting spending and Bill Richardson of New Mexico got the highest grade for a Democrat, a “B.”

It wasn’t that long ago that we were reviewing the “A” Governing magazine gave Governor Warner for raising taxes.

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  1. Jim Bacon Avatar
    Jim Bacon

    As much as I’m a supporter of tax and spending cuts, I’m inclined to question the methodology of this study. I have been as critical of Gov. Warner for raising taxes as anyone. I’ve probably devoted more column inches in Bacon’s Rebellion questioning the premises behind his tax hikes than any other commentator in the state. But I wouldn’t rate his fiscal performance a D.

    Warner undeniably botched his economic forecasts. It’s pretty embarrassing to call for $1.4 billion in tax hikes, only to have a $1.2 billion budget surplus materialize right afterwards. (Oops. We blew the short-term forecast, but trust us on our long-term forecast!) I also dispute the way the Guv and others like John Chichester characterized the recent budget crisis, claiming to have closed a so-called “$6 billion budget shortfall.”

    All that said, Warner HAS cut spending in certain areas, particularly in administrative overhead. He HAS made significant strides in reforming government processes. And it turns out that, in the budget debates of the 2005 General Assembly session, he proposed pissing less money down the transportation drain than either the Senate or the House leaderships.

    Finally, I would point out, a cautious approach to budget forecasts is desirable. Yeah, the Guv underestimated the strength of the Northern Virginia economy, fueled by federal spending on defense and homeland security. But that’s a fragile foundation. The federal government cannot continue increasing its spending in these areas at the same rate as it did immediately following 9/11. It would be foolish to think that Northern Virginia can sustain the extraordinary growth rate of the past two-three years. Meanwhile, the performance of the rest of Virginia’s economy has been most unimpressive. The Richmond region has created new jobs at the rate of the national average. According to the most recent data I’ve seen, however, every other metro region has under-performed the national averages.

    Stability in revenue streams is important for the efficient operation of state/local government. As GMU economist Mark Crain (a supporter of low taxes) has argued, stable revenues allow governments to make long-term commitments and pursue policies with long-term paybacks. In other words, stable revenues translate into more efficient government. And more efficient government translates into lower taxes. Warner is correct to err on the side of caution in his budget projections.

  2. Phil Rodokanakis Avatar
    Phil Rodokanakis

    Jim: The methodology behind the CATO institute’s report was probably just as flawed as the report from Governing Magazine that gave Gov. Pinocchio an A–how can a government that has no independent oversight body to account for its $60 billion budget ever get an A grade?

  3. Steven Avatar

    Let me assist with the debunking of the $6 billion dollar state budget shortfall. Because it’s a myth. There’s no doubt, Governor Warner botched the economic forecast.

    But it’s a spending shortfall.

    Back in August 2003, VA Secretary of Finance John Bennett announced the year over year growth for the first three months of the current fiscal year, 2004. It was in the newspapers. The actual number I believe was 8.4% for the first three months of this fiscal year. At the time, 2004 FY budget projected 4.6% annual growth, so if that trend continued then Virginia was going to have several hundreds of millions in extra revenue not already allocated.

    Basically, Governor Warner knew state revenues were growing at 8-percent according to the state data and then advocated a historical tax increase with state revenue eventually ballooning to double-digits in FY 2004.

    Secondly, the Bush tax cuts were responsible for the economic trend. Warner has never been responsible for the state’s economic growth — Regardless of the many press releases touting his pro-business philosophy and taking credit for everything positive that happens in the Commonwealth.

    If the state could be managed on hundreds and hundreds of millions in new revenue for the rate of growth increases, then Warner and company have really made even a bigger mess of the budget than the public will ever realize.

    With a $1.4 billion tax increase and a $1.2 billion surplus, why is the state still underfunding education? Why does the state have a transportation funding challenge?

    In addition, the Governor promised to eliminate the car tax in his 2001 campaign. That would cost about 1 billion dollars a budget cycle. But look around the hollow 3rd Floor in Richmond … because nothing, and I mean absolutely nothing is being done by this self-promoting governor.

    It’s crystal clear that Gov. Warner couldn’t handle the money already sent to him, so he deserves an F-rating.

    Not a D-rating because that’s a passing grade.

    “The ruin or prosperity of a state depends so much upon the administration of its government, that to be acquainted with the merit of a ministry, we need only observe the conditions of the people.” ~ Letters of Junius, January 21, 1769

  4. Phil Rodokanakis Avatar
    Phil Rodokanakis

    Steve said: “With a $1.4 billion tax increase and a $1.2 billion surplus, why is the state still underfunding education?”

    Steve, can someone please first answer the question of what is an adequate level for funding education?

    State spending on education has more than doubled in the last decade. According to the last CAFR report, spending on education went from $3.1 billion in FY 1995 to $6.2 billion in FY 2004.

    According to JLARC’s Review of State Spending, June 2002 update, Virginia inflation-adjusted spending for public schools over the past two decades has increased almost ten times faster than enrollment.

    So at what level should we fund our public schools? This is a question that goes unanswered. All we hear is the cry that public education is under-funded. Yet when you look at the figures, the argument that our public education is under-funded, doesn’t pass the smell test when examined from a historical perspective.

    This unrelenting cry for more funding for education is beginning to remind me of the story of the little boy that cried wolf!

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