ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, October 6, 1996 TAG: 9610070120
SECTION: EDITORIAL PAGE: 3 EDITION: METRO
SOURCE: STEPHEN MOORE AND DEAN STANSEL
HOW DOES Virginia Gov. George Allen's fiscal record stack up against those of other governors? Only fair. In our just-completed "Fiscal Policy Report Card on America's Governors," Allen received a grade of "C".
That study presents an objective, comparative analysis of the spending and tax policies of America's governors. Governors who have cut spending and taxes the most get the highest grades; governors who have raised spending and taxes the most get the lowest grades.
Allen's grade of "C" puts him right in the middle of the impressive class of governors elected in 1993 and 1994. He has had a frustrating time of it during his three years in Richmond. In December 1994, he proposed a five-year $2.1 billion tax cut - a reduction in the personal income tax and a phase-out of the locally collected business gross receipts tax - to be paid for through cuts in welfare, education and the state workforce. But throughout his term he has feuded with a Democrat-controlled legislature, and his tax and spending cuts were shredded.
Allen made the November 1995 state legislative elections a mandate on his tax-cutting agenda, but failed to win majorities in either house. Allen's 1996 budget was a complete capitulation to the big spenders in the legislature: The tax cut was abandoned, school spending was increased by nearly $1 billion, and his request for funding for school vouchers was dropped. The budget Allen signed into law increases spending by 6 percent at a time when most other states are cutting spending. The Washington Post recently described the new, compromising Allen as the "kinder, gentler governor."
Still, there have been some triumphs in Allen's term - mostly before 1995. He pushed through the legislature a welfare-reform bill with a tough work requirement. He secured relief for small businesses from the state's onerous business gross receipts tax. And the state economy has created 90,000 new jobs during his tenure. The tax-cutting, combative Allen was preferable to the accommodationist.
Allen's record does not compare too favorably to the national trend toward smaller, less costly government. From Albany to Trenton to Lansing to Phoenix, the culture of big-government liberalism is in clear retreat and fiscal conservatism is on the rise.
Last year was the largest tax-cutting year for states in more than a decade. Twenty-one states - led by New York, New Jersey, Arizona, Connecticut and Pennsylvania - cut taxes. This year the tax-cutting torrent continues: 27 governors recommended lower taxes in their latest budgets. Just as impressive, no states have enacted major tax increases over the past two years.
The state spending buildup of the late 1980s and early 1990s - particularly in the Northeast, where budgets expanded at double-digit annual growth rates - also has subsided. Since 1994, many states, such as Michigan, New Hampshire and, most recently, New York, have held spending at or below the rate of inflation. This year, state general fund expenditures are projected by the National Association of State Budget Officers to grow by just 2 percent - the smallest increase in 14 years. Even with the national economy growing at only a modest pace, most states now have a clean bill of fiscal health.
It appears that, for now at least, the supply-side philosophy that low tax rates and expenditure controls are the key fiscal tools for promoting state economic competitiveness is the new governing doctrine in the nation's state capitals. Unquestionably, the primary torchbearers for the government-downsizing agenda are the new governors elected in 1993 and 1994.
"We are overthrowing all the unworkable liberal abstractions of the past and replacing them with a revolution of conservative ideas," boasts Gov. George Pataki, who defeated Mario Cuomo in New York. The reality does not always match the rhetoric, but an ideological sea change is evident in most state capitals.
In Richmond, that change is not as apparent. While Virginia is a relatively low-tax state, it is not moving as aggressively as other states to assure it stays that way. Americans want more freedom to decide what to do with their own money. Many state governments are responding to that call by reducing taxes and moving toward private provision of public services.
The nationwide trend is toward giving taxpayers the smaller, less expensive government they want. Virginia ignores the trend at its own peril.
Stephen Moore is director of fiscal policy studies and Dean Stansel is a fiscal-policy analyst at the Cato Institute in Washington, D.C.
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