The State of the State Addresses: More Comfortable, Still Cautious

Mixed messages of the current economy keep at bay a full recovery from the Great Recession that officially ended in June 2009. The drop in oil prices has put money in consumers’ pockets, but these consumers seem wary of returning it into circulation, with many using the extra cash to pay off or reduce personal debt. In some ways, governors are similarly disposed as they map the policy and budget way forward for their respective states. Several chief executives are asking for more stringent laws, constitutional requirements, for budget balance or regarding the payment of debt, to keep their states on a path toward fiscal sustainability. Watch words this year include “cautious optimism” and “continuous improvement.”1 

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About the Authors
Keegan Smith is a graduate student in the master of public administration program in the Department of Public Management and Policy at Georgia State University in Atlanta. 

Katherine Willoughby is professor of public management and policy in the Andrew Young School of Policy Studies at Georgia State University in Atlanta. Her research concentrates on state and local government budgeting and financial management, public policy development and public organization theory. Willoughby has conducted extensive research in the area of state and local government budgeting as well as comparative budgeting, with a concentration on performance budgeting and management. 


Party control of governors did not shift significantly with the November 2014 elections. In fact, Republicans supplemented their stronghold on state executives, increasing to 31 the number of states with GOP governors.2 States with Democratic governors decreased by three for a total of 18. Four states—Arkansas, Illinois, Maryland and Massachusetts—now have Republican governors. Pennsylvania elected Democratic Gov. Tom Wolf, and Alaskans elected the lone Independent governor of the American states, Bill Walker.3

Just as the Republican Party extended its dominance of state gubernatorial seats, the party’s dominance of state legislatures was further cemented following the 2014 elections. The GOP now controls both chambers in 30 legislatures, compared to 11 controlled by Democrats. Republicans have majorities in 33 state houses and 34 state senates, while Democrats have majorities in 16 houses and 14 senates.4 Although the number of states (23) in which both the executive and legislative branches are controlled by the GOP remained constant from 2014 to 2015, the number of states under unified Democratic control was halved. The Democratic Party currently controls both branches of government in just seven states. There are 19 states in which the chief executive faces a state legislature that is either controlled by an opposing political party or is split across the chambers. Party control of the states in 2015 includes:

  • 23 with a Republican governor and Republican legislature; 
  • One with a Republican governor and a unicameral, nonpartisan legislature;
  • Three with a Republican governor, Republican house and Democratic senate; 
  • Four with a Republican governor and a Democratic legislature; 
  • One with an Independent governor and a Republican legislature;
  • Six with a Democratic governor and a Republican legislature; 
  • Five with a Democratic governor, Democratic house and Republican senate; and
  • Seven with a Democratic governor and Democratic legislature.5

Speeches Impact State Success

Governors use state of the state addresses to communicate their budget and policy agendas to state legislators and the public, generally. Numerous personal and institutional factors—as well as political party, term of office and the economy—affect how successful governors are in realizing these agendas as they are guided through state legislatures.6 The outcome, in turn, influences state economics. Recent research has focused on gubernatorial “verbal style” and its influences on a governor’s success with his or her budget and policy objectives.7 Robert Crew Jr. and Christopher Lewis determined that “words matter” on the part of governors in their communications with legislatures. Specifically, chief executives who generate expressions of “enthusiasm, activity, and realism” in conveying their agendas are more likely to realize legislative success.8

Other researchers have examined the tone of gubernatorial state of state speeches to determine any specific effects of these talks on the actions of firms and economic development within state borders. Art Durnev, Larry Fauver and Nandini Gupta coded American governors’ state addresses from 2002 to 2010, examining a total of 388 speeches to score degree of optimism on the part of governors in relaying their messages.9 These scholars compared the speeches, calculating net optimism as the “number of optimistic words less the number of pessimistic words per 500 words of text.”10 Then, they analyzed the association of these scores with investment and employment of firms located in the states. Their comparison of speeches according to level of optimism showed governors in Nevada, Georgia and Vermont as delivering the most optimistic speeches, while governors in California, South Dakota and Pennsylvania delivered the least optimistic ones for the period of the study. Their findings indicated a statistically significant, positive market response to speeches with highly optimistic tones. Greater certainty expressed by governors in articulating a way forward and specificity about proposed budget and policy actions also are associated with positive firm investment responses. additionally, firms engaged in state contracts “significantly increase investments if the budget-related parts of the speeches are more optimistic.”11 Speeches that are more pessimistic elicit no response from investors. These findings suggest speeches have their greatest impact during periods of economic uncertainty. “These results do not change even controlling for firm, political speech, and state characteristics.”12

Although the overall tone of addresses this year remains somewhat subdued, many governors seem comfortable in verbally mapping out their budget and policy goals as the “new normal” becomes simply “normal” in terms of state finances. For example, in his final state of the state address, Kentucky Gov. Steve Beshear channeled optimism and enthusiasm, referencing his state’s “tremendous momentum” throughout the course of the speech. This governor railed defiantly against “mainstream media,” “inflammatory rhetoric” and “negative dialogue,” calling instead for “collaborative leadership” among policymakers. “It’s easy to get caught up in this negative dialogue, … to believe that such rancor is mandatory and to conclude that consensus and collaboration are cardinal sins. But that’s not what being a leader is about.” Beshear framed his different budget and policy initiatives as opportunities “to keep the momentum going.”

The governor ended his speech on an upbeat note, claiming confidently, “Kentucky is back and we're not going to let up now.” 

On the other hand, new Maryland Gov. Larry Hogan presented a much bleaker picture of his state, declaring upfront that Maryland’s economy was “floundering.” In spite of describing his state as one of considerable assets, Hogan lamented that Maryland is not as strong as it “could or should be.” This governor cites polling data that finds, “nearly half of all Marylanders would leave the state if they could” and he details his concerns by specifying Maryland’s economic weaknesses, explaining how the state is “third in the nation in foreclosures and dead last in manufacturing.” Commenting on his upcoming budget negotiations with the Maryland General Assembly, Hogan engaged an assertive tone to drive home his aversion to raising taxes as the answer for spending needs, declaring that, “If ever Maryland needed a dose of honesty, it’s now.” His address concentrated heavily on tax relief to individuals and businesses, and programmatic reforms to address poorly performing areas, especially the environment (Maryland’s Chesapeake Bay “received a D+ on a recent report card”) and health (Maryland has a “heroin epidemic”). The Kentucky and Maryland addresses provide good examples of the characterization of words and tones explained by the scholars.

Gubernatorial Agendas in 2015
Table A presents analysis of governors’ state of state speeches for the past five years, indicating the proportion of governors mentioning specific issues as relevant to their budget and policy agendas in the 2016 fiscal year and beyond. This year, at least two-thirds of governors addressed four policy areas—education, jobs, taxes and transportation. Of these issues, transportation made the greatest leap in gubernatorial interest from being discussed by 50 percent of governors in 2014 to consideration by 68.2 percent in 2015.

Our examination of state of the state addresses in 2014 characterized issues as perennial (addressed consistently year-to-year), cyclical (addressed more or less across years) or temporal (addressed in a punctuated manner across years) in nature.13 This year, education remained a perennial issue for governors; it is a concern of more than 90 percent of governors. This is not surprising, given the predominant portion of state budgets made up of education spending, as well as its consistent linkages by governors to a well-performing state. 

Economic development and jobs remained a perennial issue as well—more than 80 percent of governors again this year are pushing their budget and policy goals in this area. Taxes and revenues remained cyclical in interest—with a bit more or less than an average of 72.5 percent of governors discussing their ideas for generating new revenues or tax changes across the past five years. Gubernatorial consideration of budget balance and rainy day funds is cyclical, too. This makes sense given the nature of balance and fund use—drawing down funds in one period necessitates replenishment in the next. 

Governors’ interest in transparency is also cyclical, spiking in 2012 and again in 2014, then settling back in 2013 and 2015. Other perennial issues or those shifting to perennial include debt reduction (after a punctuation last year, 6.8 percent of governors specifically mention this in 2015), natural resources and energy (after a punctuation in 2012, the proportion of governors mentioning this issue has hovered around 58 percent), and illegal immigration (the proportion of governors discussing this issue has averaged 8.4 percent in the past five years). 

Interest in transportation spiked this year, perhaps indicative of a shift from a perennial policy issue of moderate interest to a temporal one of stronger concern. Most governors highlighting this issue lamented that past investments just have not been enough to keep up with state transportation needs. South Dakota Gov. Dennis Daugaard spoke for many regarding transportation funding when he said, “the slow-motion disappearance of the [federal] Highway Trust Fund” calls into question any state “waiting for the federal government to act.” He reminded his state’s residents of the funds necessary to meet the goal of “80 percent of pavements in excellent or good condition at any given time.” Other governors also specified state investment to combat decay, expansion and maintenance of highways, roads and/or bridges—including those from Georgia, Idaho, Indiana, Iowa, Kentucky, Michigan, New Mexico, New York, North Carolina, South Dakota, Texas, West Virginia and Wyoming. Texas Gov. Greg Abbott referenced his own personal experience when he stated, “it’s a sad day in Texas when a guy in a wheelchair can move faster than traffic on our congested roads. … My budget adds more than $4 billion a year to build more roads in Texas without raising taxes, fees, tolls or debt.” 

Some governors called for investment in ports and/or airports—those in Georgia, New York, Pennsylvania and Virginia—while others pointed to commuter rail needs—including governors from Hawaii, New Hampshire and New York. Governors in several states discussed strategic, regional or local transportation investment—Indiana, Maryland, Montana and North Carolina—and a few envisioned “world class” integrated, multimodal transportation systems—chief executives in New York, Pennsylvania and Washington. Illinois Gov. Bruce Rauner attacked his state’s bidding process, calling for a “restructuring of bidding for construction projects at every level of government.” Missouri Gov. Jay Nixon encouraged the development of improved linkages of source funding to transportation infrastructure in order to better connect “state goods and global markets.”

Among the issues listed in Table A, the greatest spike in interest by governors in 2015 occurred with performance and accountability, a temporal issue that indicates high variability across years. This year, a majority—57 percent—of governors are discussing performance and accountability, up 24 percent from last year. Most of these governors discuss general management efficiencies like “going paperless,” reorganizations and/or process streamlining, reforming state contracting and/or program improvements—Hawaii, Illinois, Michigan, Mississippi, Nebraska, New Hampshire, New Jersey, South Dakota and Wisconsin. North Carolina Gov. Pat McCrory asked for focused study of workers’ compensation costs to ferret out abuse in order to “pay legitimate claims.” Tennessee Gov. Bill Haslam wants to link state employee pay raises to performance and market adjustments, “rewarding employees like the private sector does, on their performance and results, not just on seniority.” He also suggested pairing this with increased management flexibility and discretion. Kansas Gov. Sam Brownback encouraged reform to the selection of state Supreme Court judges. 

Governors mentioned numerous performance and accountability improvements related to public schools. New Mexico Gov. Susana Martinez pressed for tossing aside “comfortable notions” that all teachers should be treated similarly” by pairing excellent teachers with “struggling ones” to enhance teaching performance. Nevada Gov. Bryan Sandoval advanced better pay for performance laws related to teachers, increased support for their professional development and “calling out” under-performing schools. Ohio Gov. John Kasich suggests a similar “crackdown on charter school sponsors involved with failing schools.” Vermont Gov. Peter Shumlin agreed that consistently poor-performing schools should be closed. New York Gov. Andrew Cuomo described a residency program to encourage a pipeline of able teachers. He offered up full tuition to state university graduates who commit to five years teaching in New York schools. Pennsylvania Gov. Tom Wolf asked for a fair funding formula for local school districts, while Utah Gov. Gary Herbert stressed the need for a 10-year strategic education plan that sets benchmarks for education performance. 

Other state activities mentioned by governors as ripe for performance and accountability initiatives include higher education in Oklahoma, campaign finance and election reform in Kansas and Maryland, childcare facilities in Kentucky, and public private partnerships in Virginia. Michigan Gov. Rick Snyder suggested that the state legislature prepare fiscal notes with proposed legislation, “so we can see the budgetary impact and how to be more efficient.” 

Most of the other issues listed in Table A can be characterized as temporal, indicating moderate to dramatic shifts in gubernatorial interest across years. The interest of governors in safety and corrections seems to have built for the past four years (by 2014, 74 percent of governors discussed this issue in their addresses), only to drop off in 2015 (64 percent of governors mentioned safety and corrections plans this year). Most governors (80 percent) addressed their state’s health care plans in 2013, the year before implementation of the federal Affordable Care Act. By 2015, while still a majority, just 59 percent of chief executives include a discussion of health care in their speeches. 

Compared to 2011, the proportion of governors addressing the functioning and fiscal health of local governments this year has more than doubled. This could be attributable to the building pressures on local governments to improve and increase public service delivery and infrastructure maintenance in the face of declining federal, as well as state, financial support. Many of the governors discussing local government this year offered up ideas to boost the fiscal sustainability of this level of government, including: targeted spending and/or “growth tools” to economically challenged communities in Delaware, Kansas and Wyoming; strengthening localities via greater control of school funding, consolidation, employee empowerment zones, and/or reducing unfunded state mandates in Illinois, Nevada, Texas, Utah and West Virginia; allowing localities to vote for local sales taxes targeted to local projects in Kentucky; development of a local financial performance scorecard in Michigan; reforming municipal courts in Missouri; through local infrastructure projects in New Hampshire, North Carolina and South Dakota; and by reforming local education funding in Ohio. 

Narrow and Broad Agendas

Of the 15 budget and policy issues defined here, governors considered, on average approximately seven issues, though there is great variability among the chief executives in agenda items addressed. In 2015, Connecticut Gov. Dan Malloy focused almost exclusively on transportation. He highlighted the economic consequences of his state’s underfunded transportation infrastructure. Malloy estimated Connecticut’s deficient and overly congested roads and bridges cost the state $4.2 billion a year. He offered specific project proposals to remedy the state’s transportation woes, identified locations for new commuter rail stations in addition to calling out particular highways in need of widening. This governor made it clear that he was unwilling to raise any new revenues, however, unless such funds would be directly tied to funding transportation infrastructure:

“Today, I am proposing that Connecticut create a secure transportation lock box that will ensure every single dollar raised for transportation is spent on transportation, now and into the future. … Send me a bill that accomplishes these goals and I will sign it immediately. Until that legislation is passed and signed, I will veto any attempt to levy additional sources of new revenue for transportation.”

On the other end of the spectrum, Texas Gov. Greg Abbott offered a much more expansive address to Texans, tackling 13 policy issues during the course of his speech. Addressing more issues—of those defined here—than any other governor in 2015, Abbott provided some fairly basic policy initiatives, regarding debt reduction, “my budget requires most state agencies to reduce their general revenue spending by 3 percent.” His educational plan calls for “additional funding for schools that adopt high-quality pre-k programs,” expansion of community colleges “that serve as the gateway to better jobs,” and tamping down on the “spiraling cost of higher education so more Texans can reap the rewards that come from college.” Abbott was more explicit regarding other policy proposals—he discussed specific improvements to the state’s border security and a detailed transportation funding plan, offering:

“My budget adds more than $4 billion a year to build more roads in Texas without raising taxes, fees, tolls or debt. This funding comes from three places: One is the funding received from Proposition 1. Two, it ends diversions of state highway funds—tax dollars paid for roads should be spent on roads. Third, my plan constitutionally dedicates one-half of the existing motor vehicle sales tax to fund roads.” 

Governors and State Finances

 In 2015 and the near term, modest growth is perhaps the best way to describe the fiscal situation in states. The National Association of State Budget Officers’ —also known as NASBO—fall 2014 Fiscal Survey of the States concludes, “overall, states are in a better position than they were a few years ago, but as the economy continues along a trajectory of slow growth, fiscal challenges are likely to persist.”14 Revenue growth in the 2014 fiscal year was 1.3 percent, but is projected to trend upward to 3.1 percent in 2015. State general fund expenditures are higher in 2015 than in 2014, although total state spending growth is tepid. According to NASBO, the general fund spending acceleration of 4.9 percent in 2014 gives way to weaker growth this year of 3.1 percent. Despite improving revenues and employment rates, NASBO noted, poor growth in wages may freeze the ability of states to break out from fiscal doldrums.15

Chief executives of states in stronger fiscal positions were more likely than others to use their state of the state address to push for moderate investment to begin tackling long-term liabilities, such as underfunded infrastructure. For instance, governors in Michigan and Georgia used their speeches to propose further investments in transportation projects. After highlighting the state’s improved fiscal position, Georgia Gov. Nathan Deal discussed his plans for transportation investments to ensure sustained economic growth: “It’s estimated that truck traffic out of the [Savannah] port will increase by 50 percent in less than 10 years. We have to be ready to meet that need. Without Plan C, a new strategy for transportation investment, we will be forced to go to Plan D, which is to do nothing. If that is our plan, then our roads will slowly slip into disrepair, the safety of our citizens will be jeopardized and our economy will be stagnated by increased congestion.” 

Governors in Florida, Nebraska, New York, North Dakota and Ohio viewed their states’ revenue growth and improved fiscal footing as an opportunity to cut taxes to further advance state economies. Ohio Gov. John Kasich described his commitment to this approach succinctly, “I believe the most important thing that we can do to plan ahead is to continue strengthening Ohio's economy by further cutting taxes.” South Carolina Gov. Nikki Haley explained that the state’s growing economy is not the result of raising taxes. She proclaimed to veto any “straight up increase in the gas tax.” Haley also is looking to cut the state’s income tax “by nearly 30 percent over the next decade.” However, governors in other states face substantive drops in revenues. At least 16 states are struggling with budget gaps as revenues continue to fall short.16 The precarious nature of his state’s budget has led even the self-described “lifelong conservative” Alabama Gov. Robert Bentley to call for multiple different tax increases, bemoaning in his address that:

“We cannot put off solving these problems anymore. We cannot cut our way out of this. There is nothing more conservative than paying your debts and getting your financial house in order.

And by keeping spending at a reasonable level we will actually save money, and potentially create a surplus in the General Fund in future years.” The decline in oil prices has had a significant, negative effect on revenue projections for oil-rich states, including North Dakota, Oklahoma and Texas. North Dakota Gov. Jack Dalrymple specifically  mentioned increasing “state support to oil and gas producing counties by an additional $1 billion” to help these governments manage. Still, perhaps no state has been hit quite as hard as Alaska. This state relies on crude oil production for 90 percent of its operating budget.17 Gov. Bill Walker in his speech discussed Alaska’s dire fiscal status, given a $3.5 billion deficit and the rapid rate at which the state is burning through its savings. He explained that, “the price of oil has dropped by more than 50 percent over the past six months. This has moved us from a $7 million-per-day deficit just six months ago to a $10 million-per-day deficit today.” 

Conclusion
Politically in 2015, almost half of states are totally red, under GOP hold in both the executive and legislative branches; just seven states are unified Democratic. Economically, states have vastly different challenges. Governors in some states with stronger balance sheets are calling for investment, while others believe such circumstance offers a chance for tax relief. On the other end of the spectrum, oil rich states are in a fiscal scramble. For example, Alaska’s governor emphasized the need for his state “to hold off on projects to assess their overall costs and benefit to the state.”

On average, governors this year addressed seven of the 15 issues studied here—the mean considered by chief executives for the past five years. At least two-thirds of governors lay out their education, jobs, taxes and transportation agendas. Of these top issues, transportation realized the biggest jump in interest by governors, a punctuation of concern about a normally perennial issue of moderate interest. Federal foot-dragging on funding, in combination with aging infrastructure, seemed to push state chief executives to present their plans to address the safety, building, maintenance and economic development components related to transportation. Of all issues examined, performance and accountability, a temporal one, realized the greatest surge in interest by governors in 2015. Perhaps because of the mixed economic picture, many state chief executives realize the need for pressure on enhanced accountability and
continuous improvement.

In addition to political rhetoric, addresses like state of state speeches communicate as uplifting, grim or somewhere in between. has determined that upbeat addresses more likely to spur positive economic investment state borders. Greater specificity of a vision forward also spurs positive private investment response. Examination of state of the state speeches in 2015 finds a broad range in the level of optimism expressed, number of issues addressed and amount of detail provided by governors for their plans. It remains to be seen if 2016 state economies will realize the effects of these various words and tones.


Notes
1 Governors report annually or biennially to their legislatures regarding the fiscal condition of their state, commonwealth or territory. They often use their address to lay out their policy and budget agendas for their upcoming or continuing administration. The 2015 state of the state addresses were accessed from Jan. 1 – March 30, 2015, via www.nga.org, www.stateline.org, www.nasbo.org or the state government’s homepage. This research considers the 44 states with transcripts available at these sites as of March 30, 2015. Governors from Arkansas, Louisiana, Massachusetts, Minnesota, Oregon and Rhode Island did not give their state of state address by March 30, 2015. (Governor John Kitzhaber of Oregon, who had won a fourth term as governor in that state in November 2014, resigned Feb. 18, 2015, amid controversies related to his fiancée, her work and state activities.) All quotes and data presented here are from the addresses accessed on these websites, unless otherwise noted. To conduct a content analysis of governors’ state of state addresses, as in the past, topics were considered addressed if the chief executive specifically discussed them as relevant to state operations and the budget going forward. The governor needed to relay that the function, activity or issue is an important item in next year’s—fiscal 2016—budget and policy direction. Just mentioning a state function or policy area like health care in a speech did not classify the issue as an agenda item addressed by a governor. Further, a review by a governor of his or her past accomplishments in any particular issue area did not count in this content analysis.

2 National Governors Association. (2015). Current Governors by State, Party Affiliation, and Terms in Office. Accessed on March 1, 2015, via http://www.nga.org/files/live/sites/ NGA/files/pdf/GOVLIST.PDF.

3 National Governors Association, 2015.

4National Conference of State Legislatures. (2015). 2015 State and Legislative Partisan Composition. Accessed on March 1, 2015, via http://www.ncsl.org/Portals/1/Documents/Elections/Legis_Control_2015_Feb4_11am.pdf.

5 National Conference of State Legislatures, 2015. 

6 Kousser, T. and Phillips, J.H. (2012). The Powers of American Governors: Winning on Budgets, Losing on Policy. Cambridge University Press. See also, Ferguson, M.R. (2003). “Chief Executive Success in the Legislative Arena.” State Politics and Policy Quarterly. June, 3(2), 158–182.

7 Crew, Jr., R.E. and Lewis, C. (2011). “Verbal Style, Gubernatorial Strategies, and Legislative Success.” Political Psychology. August, 32(4), 623–642.

8 Crew, Jr. and Lewis, 2011.

9 Durney, A., Fauver, L. and Gupta, N. (2013). “Political Speech and Economic Outcomes: Running the Numbers.” ISB Insight. October-December, 1(1), 8–14.

10Durney, Fauver and Gupta, 2013, 9.

11Durney, Fauver and Gupta, 2013, 11.

12 Durney, Fauver and Gupta, 2013, 12–13.

13 Smith, K. and Willoughby, K. (2014). “The State of the State Addresses: Holding Steady in the New Normal,” in Audrey S. Wall, ed. The Book of the States. Vol. 46 (Lexington, KY: The Council of State Governments), 134–135.

14 National Association of State Budget Officers. (2014). Fiscal Survey of the States (Fall). Accessed on March 1, 2015, via http://www.nasbo.org/publications-data/fiscalsurvey-of-the-states.

15 National Association of State Budget Officers, 2014, 41–42.

16Wilson, R. (2014). “Even Amid Recovery, State Budgets Bleed Red Ink.” The Washington Post. (December 12). Accessed on April 15, 2015, via http://www.washington post.com/blogs/govbeat/wp/2014/12/12/even-amid-re....
17 Krohn, J. and McManmon, R. (2015). “Oil Price Decline Leads to Lower Tax Revenues in Top Oil-producing States.” U.S. Energy Information Administration. (March 12). Accessed on April 16, 2015, via http://www.eia.gov/todayinenergy/detail.cfm?id=20332#.

 

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