Rating the Governors

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In 2005, Napolitano worked with the legislature to craft several bills that effectively cut property taxes for small businesses and provided them with targeted tax credits. She also signed into law a novel tax credit for angel investors who put money into high-tech and rural small businesses. The 2007 budget, which Napolitano signed in June, includes another $525 million in tax cuts, mostly from a 10 percent across-the-board income tax cut, and the suspension of a new property tax levied by counties to pay for schools. Both moves were favored by the Arizona business community.

The governor has also made progress this year on her health care agenda. She created a one-time $1,000 tax credit for small businesses that purchase health insurance for their employees. Even more important, in April she signed a bill allowing companies with two to 25 workers to buy no-frills health insurance--a priority for the state's small businesses that can't wait for a back-end tax credit, says Michelle Bolton, the head of the state chapter of the National Federation of Independent Business.

In terms of education, Napolitano's signature achievement is an $80 million package, included in the 2007 budget, to provide all-day kindergarten across the state. She also won funding for a new medical school in Phoenix and a pay raise for teachers.

Thanks to the state's relatively low taxes, booming economy, and expanding population, Arizona's business climate could hardly be better. But the big test for the governor, should she win reelection, will be immigration. Napolitano, who once did legal work for pro-immigrant groups, has taken a hard-line stance on illegal immigration as governor, calling for tougher border enforcement and higher penalties for employers who hire undocumented workers. By bashing Washington Republicans over lax border control, she has bolstered her political fortunes at home.

California

Arnold Schwarzenegger

Republican, age 59

Elected: 2003, after a recall
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He hasn't been the revelation that some people had hoped for, but the Governator's biggest business-related priority coming into office was reforming the state's onerous workers' compensation system, and he's done it. The new system dictates how doctors and lawyers measure the extent of worker injuries, something that had been subjective in the past. Since the law passed in 2004, businesses have seen their workers' comp costs fall by 40 percent on average, and the state has added 580,000 jobs, second only to Florida. "The importance of his work can't be overstated," says Michael Shaw, of California's NFIB chapter.

Connecticut

M. Jodi Rell

Republican, age 60

Elevated: from lieutenant governor to governor in 2004
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Rell is popular, and Connecticut is a rich state, boasting the second highest household income in the country behind New Jersey. In two years in office, she has focused on good government measures such as making state contracting more transparent. This impulse is understandable, given that her predecessor, John Rowland, resigned from office under indictment for corruption. But Rell could be more proactive when it comes to small-business policies, because Connecticut may well find itself at a crossroads in the coming years. The state routinely struggles to balance its budget. Cities such as Hartford and key industries such as manufacturing and insurance are in decline. Housing costs are high, which makes Connecticut an unappealing destination for younger workers. And even with some bright spots, such as the hedge fund industry, job creation is flat.

Georgia

Sonny Perdue

Republican, age 59

Elected: 2002
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Perdue is generally well liked by Georgia's business community. On his watch, the state streamlined its cumbersome corporate tax structure. Perdue also created tax credits for businesses that hire new workers and for small businesses that purchase capital equipment. And he spread economic development resources at the grassroots level among 22 small communities.