Posts Tagged ‘NCSL’

An Early Look at the 2012 Legislative Session

October 28, 2011

By Stateside Associates

Over the course of the past month Stateside Associates professionals interviewed contacts in all 50 states to get a sense of the top issues that will face lawmakers in the coming year.

With state budget debates looming and a busy election cycle serving as the backdrop for the 2012 legislative session, we provide you this list as a preview of some of the issues expected to dominate agendas and headlines in 2012.

Please note that next year is the second year of the biennium for most state legislatures—only New Jersey and Virginia start their biennium in even years. Twenty-seven states and Puerto Rico allow for at least some legislation to carry over from the 2011 session into 2012. Four states (Montana, Nevada, North Dakota and Texas) will not hold regularly scheduled sessions.

While the issues described herein will dominate the dockets of state legislatures next year, this list is far from exhaustive. The wrangling for early primaries and the focus on the presidential election will likely lead to electoral reforms cropping up in statehouses. Issues surrounding labor and public employee unions, such as pension reform and collective bargaining, will certainly be discussed in the wake of the vocal debates in Wisconsin, Ohio and New Jersey. Public safety and the environment issues are always prevalent, and technological advances spur new legislative initiatives every few months.

Legislative Elections

In the 50 states 86 of the 99 total legislative chambers will be holding elections, in which 81% of all state legislative seats will be considered. The partisan splits in chambers in more than half of states, ten or fewer seats separate the majority from the minority. Even though party control is not expected to change in the majority of states, a presidential election and redrawn legislative districts provide little reassurance when it comes to the balance of power within and across states. When it comes to campaign issues, expect legislators to focus pull out issues popular with both Democratic and Republican constituencies meant to excite each party’s base.

Budgets

After several years of deep cuts, state budget situations are showing signs of recovery, but remain significant effects from the recession remain. According to the National Conference of State Legislatures (NCSL), FY 2012 marks the fourth consecutive period that states have faced significant mismatches between revenues and spending. After lengthy budget debates in the 2011 session only New Hampshire and Washington project deficits at the end of FY 2012.

But state budget experts are still very worried about the situation. The budget projections used by states are based on tax collection rates that continue to lag behind expected tax revenues. Stimulus money is gone. Clever accounting can only push off costs for so many years. More than 20 states are anticipating a budget gap for FY 2013 and FY 2014 and all projections show this number growing in the coming years. Therefore, the 2012 legislative sessions will be marked by sharp budgetary battles in which legislators will be forced to reform state government, continue cost cutting and/or increase revenue.

Economic Development and Job Growth

Numerous states have seen jobless rates continue to climb, including states that have traditionally outperformed the rest of the country in the South and the West. Legislators in at least 15 states, including Arizona, Florida, Georgia, Louisiana, Mississippi and Utah have indicated that job growth and economic development will be the centerpiece of the next session. Legislators are expected to advocate several priority proposals in this regard including manufacturing facility development and modernization incentives, small business financing programs and financial incentives for job creation. Tax credits and incentives for hiring unemployed residents were approved in states like Alabama, Florida and Maryland in the 2011 session and many of the states mentioned above will consider similar legislation in 2012.

Education

Education funding and reform is a priority for lawmakers every year. One trend on the education front is the effort by states to pull away from federal education mandates. Eight states have indicated an intention to pursue waivers from the federal “No Child Left Behind” law. The new policy announced by the President last month is that in order to receive these waivers states will need to develop and implement certain standards for math and reading, create systems to measure school performance and develop teacher and principal evaluation programs. All this will take place during the 2012 session—lawmakers will approach public education with even less funding while trying to perform at a higher level.

Energy

The hot energy issues next year will be the plans that propose increased development of energy resources while aiming to develop future energy transmission corridors and other infrastructure. In the 2011 session three in every five states considered energy transmission language. The number of states tackling energy will likely increase in next year’s session—legislators in more than 25 states have noted energy issues as a major priority for 2012.

No energy proposal will be one-size fits all. The focus of any energy legislation will depend on the specific energy issues at play in each state. Transmission line deployment is a big issue in Western states like Wyoming and Montana. Pipeline development and hydro-fracking regulations will dominate the oil and natural gas discussions in states throughout the Marcellus Shale region and in Southern and Western States. Alternative and renewable energy sources will be discussed in states throughout the country, including in Maryland where Governor O’Malley (D) is in favor of an off-shore wind energy project.

Immigration Reform

Although state legislatures considered more than 240 immigration-related measures in 2011, only 10 states enacted legislation. Despite the plethora of bills considered, lawmakers have been hesitant to expend political capital on immigration reform until federal challenges to state immigration reform attempts are finalized. Until that happens the discord between the federal government and states on immigration policy will continue to set the tone for immigration efforts throughout the 2012 session.

While a federally-driven comprehensive immigration reform package is possible, it’s more likely we’ll see one or more bills narrowly targeting employment and the electronic verification of workers.

One development that will make states more willing to tackle immigration measures was a recent ruling from U.S. District Judge Sharon Blackburn to allow much of Alabama’s H.B. 56 to take effect. This ruling, along with previous rulings in Arizona and Georgia, may start to provide a roadmap for other states to follow.

Medicaid

Health care reform and funding for state Medicaid programs are always a priority issue in the states. Add to that the fact that revenue growth is not expected to keep pace with anticipated increases in Medicaid costs mandated by federal health care changes. To defray these costs, states will look to increase utilization of Medicaid managed care in place of traditional fee for service plans. At least 19 states decided to expand Medicaid managed care in 2011 and nearly all states will continue to consider additional proposals as they prepare for the projected addition of 16 million adults to the Medicaid rolls by 2014.

Redistricting

Only the four states with elections this calendar year (Louisiana, Mississippi, New Jersey and Virginia) were required to have redistricting completed this year. All four were approved in time for elections to take place on-time, but not without legal challenges. The deadlines for the other 46 states to finalize their maps are before state primary and general elections are held next year. While a number of other states have already redrawn districts, the threat of legal challenge have been ubiquitous in almost every case. Several legislatures have scheduled special sessions through the remainder o the year to tackle redistricting, but expect the debate to carry-over well into next year. The closer to a regularly scheduled election a given state redistricting battle gets, the more noteworthy an issue redistricting will become.

Tax Expansion and “Reform”

Legislators are wary of tax increases in good times—broadening revenues by raising taxes during an economic slump becomes a very hot-button issue. According to NCSL, 2011 marked the first year in the last ten that states reported lowering taxes more than they increased them. While the numbers may have been skewed by some large cuts or by the expiration of few temporary tax hikes, it demonstrates the pressure legislators feel when it comes to raising taxes.

Corporate tax rates have been cut in 20 states since the year began and 12 states lowered general sales tax rates. To make up for lost revenue from these and future tax cuts, states will get creative in identifying revenue streams by reforming business taxes, reducing or eliminating certain credits and exemptions and expanding the sales tax base.

One of the visible efforts taking hold is the move by many states to collect sales taxes from online retailers. Internet sales taxes have been a target for states for a number of years and its lean economic times that increase pressure to pursue it as a possible new revenue stream. Lawmakers in 15 states considered “Amazon Tax” style language this year. Numerous other states examined different approaches to capture this revenue. The legislation that passed in California, coupled with the recent agreement between the state and Amazon to begin collecting online sales taxes in 2013, may serve as a striking model for action elsewhere.

Despite only passing in five states, bills to the increase the taxes levied on alcohol and tobacco products were considered in 43 states this year. In addition, policymakers in nearly half of all states attempted to tax foods and beverages that are deemed to lack nutritional value. Ostensibly designed to promote health, the taxes are earmarked to fund the healthy lifestyle and obesity prevention programs that have become a priority across the country.

Observations from the 2011 NCSL Legislative Summit

August 16, 2011

By Michael Behm, Senior Vice President

The National Conference of State Legislatures (NCSL) Annual Legislative Summit in San Antonio, Texas ended last Thursday on a high note for the organization. The Summit was NCSL’s largest meeting since 2007, in terms of attendance and featured over 150 policy and working sessions. And the organization announced at its Executive Committee Meeting that it ended the 2011 fiscal year with a positive balance, despite earlier gloomy forecasts and a volatile national economy. NCSL’s Foundation for State Legislatures announced similar good news – it had exceeded its annual fundraising goals by nearly $200,000 this year and was aiming for an even higher, record fundraising goal for FY 2012.

Attendance at the meeting far exceeded those projections made earlier in the year, with well over 5,000 people registering. Among those registering – and perhaps a more important to the private sector – were a larger number of legislators and staff than had participated in the 2010 Legislative Summit. November’s elections brought a trove of new faces to the annual event, including many of the newly-elected Republican leaders – a number of whom had never attended an NCSL meeting.

The new attendees brought a level of energy that I haven’t sensed at an NCSL meeting in several years, the dialogue was spirited and I have to tell you that the meeting and sessions rooms were packed. Convention staff wheeled extra chairs into dozens of conference rooms throughout the week. One education session I attended, scheduled on the last day of the Summit, at the early hour of 8:00 AM – and after the famous, and sometimes raucous, late-night party that accompanies the Summit – was nearly full.

The new faces also brought a different political tone to the meeting. You could not avoid a distinctly conservative and business-focused vibe in the policy discussions and reception and hallway conversation. Chalk that up to the Summit being hosted in the big red (and unseasonably hot) state of Texas, or perhaps to the majority of state legislatures now controlled by Republicans, but a conservative-leaning theme defined much of the meeting dialogue.

Texas Governor and newly-announced Republican presidential candidate Rick Perry (R) helped to frame that tone on the second day of the Summit with a red meat speech to the nearly 1,500 attendees who crammed the convention center theater see him. The governor demanded more power for the states, less interference from the federal government and more focus on job creation, announcing that Texas’ low-tax, low-regulation and cost-cutting approach to governing created “40 percent of the net new jobs in this country” over the last two years. By contrast, Governor Perry argued, “government doesn’t create jobs, otherwise the last two years of stimulus spending would have worked.” Hinting at his weekend announcement speech, Governor Perry told the NCSL crowd that he stood ready to “work with [my] fellow governors to return power to the states – where it belongs.”

Many of the more popular sessions at the Summit continued with similar business-focused, conservative themes. Session titles such as the “Long Term Impact of Environmental Regulation on Industry and Consumers” and another called “Creating Jobs by Reducing Regulation” were standing room only. Conservative themes, but also very reflective of the policy debates occurring in the states during the latest legislative session.

Another policy session, “Renewable Energy Facility Siting: Examining the Roadblocks and Opportunities”, explored the many, mostly state and federal regulatory, challenges the states and their industry stakeholders face while exploring renewable energy generation opportunities. The serious budget challenges states are now facing from government employee pension liabilities were featured in another, animated session during the Summit, following on the debates in the states this spring. And yet another session, “Bringing Legislators to the Table: Examining Hunger in America”, perhaps more accurately examined private-public partnerships and the wide variety of corporate directed efforts – which more and more states now rely on – to address food insecure communities around the country.

If you attended the Legislative Summit, did you notice a more conservative political tone? What were your observations about the policy sessions and discussions? What would you like to see featured at next year’s NCSL Legislative Summit?

State Answers to Federal Debt Questions

August 3, 2011

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 face-off. 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.


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