Governors debate who gets credit for improving economy

By ROBERT TANNER
AP NATIONAL WRITER

Many state economies are finally pulling out of the doldrums, with governors chipping in through tax relief and other measures. The question in this election year is whether the president also deserves credit for the recovery.

State executives gather in Seattle on Saturday for a meeting of the National Governors Association - three days of politics, policy talk and lobbying. Going in, many - though not all - say they've found enough breathing room in their budgets to score financial successes and boost the economy in their state.

Democrats, critical of what they claim was President Bush's lack of attention during three years of tough times, say the progress is due to governors' innovations. Republicans counter that Bush's policies are helping states.

Some of the governors' victories include:

- Property tax cuts in Pennsylvania, fueled by a breakthrough agreement to expand gambling;

- Nearly $100 million worth of tax holidays in Florida, including breaks on books and gasoline;

- Workers compensation reform in California, and an ambitious health care experiment in Maine.

"We have moved forward economically because of our own measures," said New Mexico Gov. Bill Richardson, a Democrat. "And most states that are doing well economically, like California, are because of steps they are taking at the state level."

Property tax relief emerged this year in Illinois, where businesses warned the legislation could drive their costs up, and Pennsylvania, where Democrat Ed Rendell pushed gambling expansion through a deeply divided legislature to help pay for state support of K-12 education.

Where taxes increased, they were often targeted at cigarettes or liquor. Other states hiked user fees like tuition or court costs.

"The conventional wisdom is it's tough to raise taxes on people during tough times," said Florida Republican Jeb Bush, who said tax holidays help both consumers and businesses. "And I would suggest that during good times it doesn't make sense to raise taxes, either."

The president's brother said Florida's financial picture had also benefited from the federal tax cuts supported by the other Bush.

In Seattle, governors hope to discuss one element of tax policy - the effort to capture sales taxes on Internet commerce, an ongoing NGA project.

But Democrat Tom Vilsack of Iowa said partisan disagreements this year made for a "conscious decision" to leave many topics off the table. What's left includes elderly care, homeland security and economic development.

Most states have finished their budget work for fiscal years that began, in all but four states, this month. Stronger economies meant the chance for some to turn to other priorities.

Maine Democrat John Baldacci won passage of a program designed to make health insurance accessible to the state's 138,000 uninsured residents by 2009. The first year of the program is expected to cost $90 million.

California Republican Arnold Schwarzenegger, who is struggling with billion-dollar deficits and a stalemate on the budget, was still able to win changes to workers compensation that he says will significantly lower insurance rates.

Arkansas Republican Mike Huckabee said those who maintain their economy is still suffering are like someone "getting their weather reports from an underground bunker from news reports six months ago. They're just not looking out the window."

Economist Steve Cochrane, who tracks state finances for Economy.com, said the news is good on balance, with strong and weak elements. "Improving, yes. Middling, yes," he said.

While critics have enough ground to stand on, at least a half-dozen states that were lagging behind financially are now catching up, he noted. Said Cochrane: "There's a pretty synchronous economic recovery across the board."

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