Family Ties and Term Limits

By Stefani Millie, Vice President

The Kennedys, the Bushes, the Daleys–all families that come to mind when I think of political dynasties.  Lesser known families include the Goodmans of Las Vegas, the Runners of California or the Chu/Engs also of California. In each of these examples, a spouse chose to run for the other’s seat once term-limits forced the spouse out of office.  Are term limits creating more of these political family dynasties?

In July 2011, Carolyn Goodman was sworn in as the new Mayor of Las Vegas, replacing her husband, Oscar B. Goodman, who was term-limited from running again.  Mr. Goodman was a vocal critic of term limits in the media, and stated that he wanted to run for mayor again.  Instead, his wife ran for the seat.  While campaigning, Mrs. Goodman frequently introduced herself as “Oscar’s wife” and campaigned on continuing her husband’s policies. 

Family member successions are becoming more common in California, since the state has strict term limits. One example is George and Sharon Runner. When Mr. Runner was term limited out of the California Assembly in 2002, Mrs. Runner ran and won his former seat.  In 2010, after Mr. Runner was elected to the state Board of Equalization, Mrs. Runner again ran and won election to his newly vacated seat. In the other California example, Judy Chu was termed out of the Assembly in 2006 and her husband, Mike Eng, ran and won the seat he still holds today.

However, this is not necessarily a new phenomenon.  In 1966, Alabama Governor George Wallace was facing term limits, and attempted to change the law.  Unable to get the law changed in time, he had his wife run on his platform and promise voters that he would serve as her “number one assistant.” Mrs. Wallace was successful—she beat 10 primary opponents and won the general election by an overwhelming margin.

If the purpose of term limits is to prevent career politicians and encourage citizen legislators, is familial succession usurping the process?  When family members run for a termed-out relative’s seat, they essentially run as an incumbent. If voters know what is in their best interests and decide to keep an incumbent (or his or her familial replacement) in office, then aren’t they, in essence, rejecting term limits?

Of course, elections impose term limits every 2-4 years. If voters decide an elected official is no longer fit for the office, they elect someone new. This was a widespread occurrence in 2006, 2008 and 2010, and is likely to happen again in 2012.

In looking specifically at the Goodman example, many expect Mr. Goodman to act as Las Vegas’ “shadow mayor.” In an interview, when Mrs. Goodman was asked to discuss what budget cuts she would make, she deferred to her husband, “you might speak to that.”  If Mr. Goodman truly acts as the “shadow mayor,” would Las Vegas voters have been better off with Mr. Goodman continuing as Mayor?

Critics of term limits argue that they reduce institutional memory and knowledge of those in the elected office, causing more reliance on lobbyists.  A recent study conducted by the Center for Governmental Studies, “Citizen Legislators or Political Musical Chairs: Term Limits in California,” concludes that term limits are undermining the relative power of the legislative branch.  The report discusses how legislative leadership and experience has weakened, leading to less effective oversight of the executive branch and lower levels of legislative expertise. This leaves us, as government relations professionals, dealing with a less effective counterpart in elected officials, and in many cases, forcing us to act as an educator of the issues at play. While familial succession does not fully solve this problem, when family members assume the reigns of elective office, the voting public usually retains a level of institutional knowledge and governing expertise.

As a state government affairs professional, how do you feel about term limits?  Have term limits proven to be a well intentioned failure?  Do you see familial succession happening more frequently in states with term limits?  How do term limits affect institutional knowledge and relationships built up over time and how does the electoral transfer of office from one family member to another help or hinder our efforts to represent clients?

State Answers to Federal Debt Questions

By Steve Arthur, Vice President

With an agreement finally having been reached over the debt limit, what are the next steps for Congress and the President?  We can look to the states to see what may happen in DC over the next two to three years. 

Some will argue that because 49 states have a balanced budget requirement, there is nothing to hold Congress accountable for deficit spending.  I would disagree.  The credit rating agencies’ threats to downgrade U.S. government debt may have a serious impact on elected officials and force them to finally get serious about the nation’s deficit spending.  As the states have shown, it won’t be an easy process and will likely take more than one year, but the states’ experience is a guide to what we can expect at the federal level.

Like the federal government, the states have faced significant budget deficits as a result of the recession.  The National Conference of State Legislatures (NCSL) reports that the states faced a combined $174 billion shortfall for FY 2010 (for most states beginning July 2009) on a combined General Fund budget total of approximately $600 billion, or 23%.  This is a smaller, but comparable amount to the federal gap. 

To get a general sense on how states resolved their budget deficits for the last three years, you can look at NCSL’s database that tracks each state’s budget cuts and revenue increases for the past three years.  The data shows states have been making spending cuts each year for the past three years, but it also appears that major cuts were made in both 2010 and 2011, with fewer cuts being made this year as revenues have begun to improve.

However, the revenue data is very interesting.  If you print out a chart of all revenue increases for each year, there are 12½ pages of increases for FY 2010.  That number drops to six full pages for FY 2011, but drops down to just over 2 pages for 2012.  Clearly, many states are moving away from revenue increases to deal with their budget deficits and doing so in a more serious manner.  For example:

• New York – With the budget 120 days overdue in 2010, this year’s budget was on time and included significant cuts.
• California – After the budget was passed over 100 days late last year, the state also passed a budget on time with no new taxes.  No taxes were included because the state’s Constitution requires a 2/3 vote for tax increases.
• Washington – After raising taxes in 2010 to balance its budget, Washington State passed a no tax increase budget this year, in part because of a 2/3 vote requirement to raise taxes.

Even though most states appeared to lean more heavily on cuts to balance their budgets this year, there were significant exceptions:

• Illinois – Approved a significant increase in the personal and corporate income tax rates to balance their budget this year.  
• Connecticut – Among other items, the state increased income and sales tax rates and added a “luxury” tax for certain items to balance its budget.

Of course, there were also some states that never had to face huge budget fights.  Either because of their tax structure, economic profile or history of good fiscal stewardship, those states were able to pass budgets without making news.  Unfortunately, those states are unlikely to provide much guidance for the federal government because of the serious fiscal condition of our federal government.

Even for those states with larger problems, they did take a variety of paths to balance their budgets, and for the most part budgets were passed on time.  One widely reported exception was Minnesota, where a budget disagreement shut down the government for three weeks.  The approved budget did not include any tax increases, but did include some significant accounting gimmicks used by other states that prevented more significant budget cuts.  One of the most interesting items to come out of Minnesota was that It appeared most Minnesotans didn’t seem to be clamoring for the government to be re-opened until liquor licenses started to lapse.  This weakened Governor Dayton’s hand in negotiations because he felt there would be a public outcry for services when the state shuttered its doors.

So what can we learn from the states’ experiences that might be relevant in DC?

First, there are going to continue to be significant fights over the level of funding.  Just as the states have seen very divergent views on the size and scope of government, that fight is going to continue in Washington, DC.  As the states have shown, there are no easy answers to bridge those differences.

Second, the Minnesota experience may be bad news for Democrats.  This is not 1995 and a government shutdown may not cause the outcry that it did during the Clinton-Gingrich faceoff.  If the nation receives a federal shutdown like Minnesotans treated their state shutdown, Republicans may be in a very good position to extract additional concessions from Democrats during the appropriations process.

Third, state legislators are dealing with their budget problems directly.  It did take most states a couple of years of gimmicks and one-time fixes before getting serious, but once the reality of long term reduced revenue projections sinks in, states are now making serious choices to address their budget imbalances.  This is one reason even Democratic Governors have started taking on the state employee unions.  Expect to see this at the federal level in the next couple of years.

Finally, the 2/3 vote requirement for tax increases did force budgets to be balanced with spending cuts.  Both California and Washington State saw this happen with Democrats in control of both houses and the Governor’s mansion.  In addition to pushing for a balanced budget amendment, there will be a significant push by Republicans for some sort of super majority requirement.  Those state examples will also encourage Democrats to push back hard against those proposals.

While there are huge differences between the states and federal government such as a balanced budget requirement, the pressure to fix our budget problem is mounting and it will force more aggressive action than we have seen proposed to date.  If Congress wants to know how the debate will play out, they should look to the states.

By Steve Arthur, Vice President

Will States Be Ready and Willing to Implement Health Benefit Exchanges?

By Robert A. Holden, Esq., Vice President

The United States Department of Health and Human Services (HHS) issued a Notice of Proposed Rulemaking July 11, setting out guidelines for the creation of State Health Benefit Exchanges under the Patient Protection and Affordable Care Act (PPACA) as well as a process for federal approval of those exchanges. Comments on the proposed rules will be due in late September 2011, fifteen months prior to the statutory January 1, 2013 deadline for federal approval of state exchanges.

For states that have been waiting on these federal guidelines, this does not leave much time to authorize and establish a new regulatory entity to govern access to individual and small group health insurance. This is, in some sense, anticipated by the new rules. As proposed, HHS could grant conditional approval to states that cannot meet the January 2013 deadline for full approval, but that are proceeding toward the PPACA’s January 2014 operational deadline for exchanges. This is still a tall order for states not already well down the road to full implementation, and the federal rules anticipate granting approval to states for new exchanges after the 2014 deadline, outlining a transitional period from a federally run exchange.

Where Are The States On Implementation?

A number of states did not wait for the federal rules to begin implementation. Prior to the enactment of the PPACA, Utah and Massachusetts were operating health insurance exchanges that have now become the models for subsequent exchanges. Last legislative session, California became the first state to adopt legislation authorizing the creation of a new state health benefit exchange pursuant to the PPACA. This session, eleven other states have passed legislation authorizing the creation of a new entity to govern a state exchange. Because these states understood that federal rules could preempt their legislative directives, these laws have been very broadly conceived with little specificity in areas not clearly outlined in the PPACA. This strategy worked, as the new federal rules do not appear to have preempted any of the exchange authorization policies adopted by these states.

Federal Flexibility and State Exchange Creation

The Notice of Proposed Rulemaking reflects federal flexibility in the options for a state to organize the governance of its exchange, either as an independent public entity, a separate state agency, or as part of an existing state agency. Of the states that have already passed legislation, most have opted to create an independent public entity. California, Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Nevada, Oregon, Vermont and Washington have all placed governance of their exchanges into independent entities.  The exceptions are North Dakota and West Virginia, which have authorized governance within the Department of Insurance, and Utah, which has its exchange within the Office of Consumer Health Services.

Beyond governance, the Notice of Proposed Rulemaking recognizes both the “active purchasing” model typified by the Massachusetts as well as the “any-willing plan” model associated with Utah. Both models address how plans would be certified as available through the exchange. In an active purchasing state, the exchange would select a limited number of plans to contract with for provision of services through the exchange. Under the any-willing model, all plans that met federal requirements could be admitted to the exchange.  Interestingly, post – PPACA state legislation has been mostly silent on the type of exchange states would develop. While California, Connecticut, Hawaii, Maryland, Oregon and Washington have been proceeding down the active purchasing route, they are not required to by state law. Similarly, North Dakota, Virginia and West Virginia are expected to follow Utah’s example, but did not specify this in their legislation. The only state legislature to direct its exchange was Colorado, which has forbidden its exchange from pursuing an active purchasing model.

The new state exchange entities will fill in the gaps left by the state legislatures, and have been granted room by the federal rules to determine not only the standards for health plans as far as marketing requirements and network adequacy, but will also serve to make decisions as far as premium stability is concerned. The federal guidelines leave to the states whether they will engage in a reinsurance program, or a risk adjustment program to manage the risk to their exchange markets as higher cost enrollees come online in 2014.  States will also have the flexibility to create multiple state regional exchanges, but also to quilt together intra-state exchanges covering smaller areas, so long as the entire state is covered.

Federal Exchanges

The question for those states that have not already passed authorizing legislation and are in the process of establishing governance for their exchanges remains: how quickly will they be able to come online? At a minimum two states, Louisiana and Oklahoma, will rely on a federal exchange. There will also be a temporary reliance on federal exchanges for those states that are not ready by the 2014 deadline, which may be a majority of states. Now that the federal rules have been proposed, current state interim discussions and the 2012 legislative session will be the last opportunity for states to begin charting their own way before the imposition of a federal exchange. This poses a number of questions. What will the federal exchange look like?  How will it incorporate state Medicaid enrollment information?  Will there be regional or a unitary federal exchange?

By Robert A. Holden, Esq., Vice President