Economy is overriding issue in governors' races

In his bid to become the next governor of Missouri, Rep. Kenny Hulshof survived a bitter primary that at one point saw the candidates bashing each other for supporting public funding for drugs such as Viagra.

Then came the catastrophe on Wall Street. Now the economy has become the overriding issue that is tightening governors races across the nation. In Indiana, for example, Gov. Mitch Daniels faces an unexpectedly close race against a Democratic challenger who has blasted his economic policy.

The economy is "going to be the No. 1 reason someone keeps their job or loses it," said Del Ali, who has conducted polls in several governors' races.

Eleven states elect governors this fall, offering Republicans a chance to reduce the Democrats' current 28-22 majority of governors' seats.

And this year is only a prelude to 2010, when three of every four states will elect a governor. The winners of those races will have a crucial edge when it comes time to redraw electoral maps based on the 2010 census.

Earlier in the year, gubernatorial candidates talked about education and health care, along with the economy.

Then came soaring gas prices, a drumbeat of negative news about state budgets and Wall Street's unprecedented meltdown. The faltering economy now trumps other topics in several closely watched governors' races.

The financial meltdown "puts an exclamation point on the challenges we're facing and every state is facing now," said Vermont Gov. Jim Douglas, a Republican seeking his fourth two-year term in office.

Some states are already reporting problems accessing credit markets for short-term borrowing. The number of states with deficits is increasing. Tax revenue is flat or falling, and many states' unemployment compensation funds are dangerously low.

In Missouri, Republican Gov. Matt Blunt declined to seek a second term, clearing the way for the contest between Hulshof and Democratic Attorney General Jay Nixon. The economy was the top issue in recent polls that showed slight gains for Nixon.

The race is important enough that President Bush held a fundraiser for Hulshof earlier this month. That led to a swift retort from Nixon linking his opponent to the "failed economic policies of President Bush."

At a Thursday debate, Hulshof tried to link Nixon to the state's past economic troubles: "There was no hand-wringing by the attorney general when the previous Democratic governor actually presided over the state's economy."

In Indiana, Daniels leads Democrat Jill Long Thompson in fundraising and spending. But Long Thompson is running even or just slightly behind in recent polls while she hammers Daniels with the claim that the state's economy is in trouble.

She rushes to remind people that Daniels was Bush's budget director.

"In Indiana, people know he's responsible for the largest deficit in the history of the world," Long Thompson said.

Jobs were up in August in Indiana, but the state's unemployment rate also rose. The state lost 17,600 jobs in July.

"There's no way to deny some of the national problems are impacting Indiana, but the governor's leadership has certainly put Indiana in a much better position than our neighboring states," said Daniels spokesman Cam Savage.

In North Carolina, a state with a history of electing Democratic governors, the Republican Governors Association is running ads bashing Democratic Lt. Gov. Beverly Perdue over the economy. She's responded with a spot promoting her work providing jobs.

Republican Pat McCrory, the mayor of Charlotte, says education was the top issue in the past. Now the economy and jobs, along with energy prices, are "definitely on the minds of almost every area I go," he said.

Most polls show a close race.

In Washington, GOP challenger Dino Rossi is criticizing Gov. Christine Gregoire over the state's projected budget deficit of as much as $3.2 billion. The two are locked in a rematch of their razor-thin 2004 race, which Gregoire won by 133 votes after two recounts and a lawsuit. The economy was a top issue at two debates this month, and both candidates are scrambling to take advantage of the crisis.

"In the past four years of Gregoire's administration, she has left us with piles of debt, higher taxes and rising unemployment," Rossi said.

Responds Gregoire: "I saw this national economic crisis brewing and fought for the rainy day fund and a budget surplus." Earlier this week, Gregoire announced cuts that she says could cut the deficit to $1.7 billion.

In Vermont, the economy was a top issue from the beginning. Fear of record heating oil prices was a growing concern for the state, known for its long, cold winters.

Last year, Vermont's Douglas used estimates by investment bank Lehman Brothers to propose leasing the state lottery to a private entity for a one-time payment of about $50 million.

Lawmakers were cool to the idea, and now Lehman Brothers has filed for bankruptcy, a fact Douglas' opponent, outgoing Democratic House Speaker Gaye Symington, is quick to point out.

The result: The case Symington had been making about the state's economic troubles just got a whole lot easier to sell.

"Vermonters are making the connection that this guy basically has had that sort of 'trust corporations, trust Wall Street mentality," said Symington spokesman Michael Carrese.

Douglas brushes off criticism of his economic plan, arguing that the economy moves in cycles and he's the best person to take advantage of a recovery when it begins.

"My long experience and ability to provide the leadership necessary to get through a tough time makes it all the more important that I stay on the job," Douglas said.

The most recent poll last month had Douglas with 48 percent of the vote and Symington with 33 percent. Independent Anthony Pollina had 7 percent, and 12 percent were undecided.

Other states electing governors in races not expected to be as close are: Delaware, New Hampshire, Montana, North Dakota, Utah and West Virginia.

(This version CORRECTS that 3 out of 4 states, not 3 out of 5, will have governors' races in 2010.)