Many legislatures hold short sessions in even-numbered years, their budget work largely completed and everyone eager to hit the campaign trail. The desire to put policy aside in favor of electioneering will be especially strong this year, with the vast majority of slots for legislators who will oversee the next round of redistricting up for grabs.
Nonetheless, state lawmakers have an awful lot on their plates. With Congress mired in gridlock, domestic policy is something that will be left largely up to the states. Theyll be acting on numerous fronts where the feds are unable or unwilling to reach agreement.
In some cases, theyll be stepping into a perceived void with, for example, blue states formulating their own responses to climate change in the face of President Donald Trumps professed skepticism about the issue. And although federal lawmakers got into the criminal justice reform game in 2018 with the First Step Act, it remains largely the province of states to implement that law, which largely sends grants out to them, while pursuing other changes that might limit incarceration rates.
In other areas, legislators will receive, or think theyll receive, green lights from Washington. Red states, emboldened by what appears to be a majority of justices on the U.S. Supreme Court who oppose abortion rights, will continue to pursue further limits on abortion, along with potential outright bans and criminal penalties. When it comes to health care, conservatives have been encouraged by the Trump administration to impose work requirements on Medicaid recipients, even though the courts have largely been skeptical about that idea.
Some states are taking up an issue that has traditionally been the province of local governments namely housing since its such a widespread concern that some policymakers say it demands a statewide response. And with technology seeping into every corner of contemporary life, legislators and governors increasingly have to think about issues such as privacy, cybersecurity and artificial intelligence that may not even have been a concern back when they started their careers.
There are other, more traditional issues that states wont be able to avoid this year. More than 30 of them have increased their gas taxes since 2013. A Senate committee passed an infrastructure bill last summer, but state officials will have to wait until Congress acts to be sure they wont have to wait years for a proper bill, as they did the last time the federal infrastructure law was due for reauthorization.
Unemployment is at historic lows and the economy remains in good shape. Still, theres enough nervousness about the potential for slipping into recession somewhere down the road that states have already made record deposits into their rainy-day funds. That particular form of thriftiness is expected to accelerate this year. However, public pensions remain in terrible shape, with state and local funds, on average, less than 75 percent funded against projected future obligations.
As states wrestle with all these problems, and more, its clear theyll do so in wildly differing ways. While power in Washington is divided, in most states its held by a single party. Minnesota is the only state with a legislature under split control. In all but 13 states, one party has all the power, holding the governorship as well as legislative majorities.
Every policy action seems to invite an opposite reaction, if not necessarily an equal one. Despite Democratic gains in 2018 and 2019, Republicans still control 30 legislatures, compared to 19 for Democrats, with the GOP holding a slight 26-24 advantage among governors.
The past decade has been an era of conservative governance at the state level, with red states rewriting the rules on taxes, voter ID, union representation and much else. Theres now quite a lot of ferment on the progressive side, but whether the number of true-blue states will increase and be able to put a more liberal stamp on the brand-new decade is something we wont know until after the November elections, if then.
And there are a lot of bills to pass before that time.
Alan Greenblatt
Abortion opponents enter 2020 having enjoyed considerable legislative success. In several states, they intend not only to restrict the procedure but to ban it entirely.
Last year, multiple states imposed new limits on abortion, banning the procedure after six weeks of pregnancy. Those laws have met with resistance in federal and state courts, but legislators in states including Idaho, Nebraska, South Carolina and Tennessee are proposing outright bans. An Ohio bill would ban abortion and create a category of crime known as "abortion murder," punishable by life in prison. "There are legislatures where abortion bans and restrictions will be on the front burner," says Elizabeth Nash, senior manager for state issues at the Guttmacher Institute, which supports abortion rights. "In part, it will be to continue this drumbeat around passing as many abortion bans as possible to move these cases through the courts."
The U.S. Supreme Court is expected to issue a ruling this term on a Louisiana law that requires abortion providers to have admitting privileges at hospitals, which would have the effect of leaving the state with only one doctor qualified to perform the procedure. The Supreme Court struck down a similar Texas law in 2016, and its willingness to consider the Louisiana case is the most tangible evidence so far that the court now has a majority of five justices opposed to abortion or at least willing to consider severe restrictions.
In December, the court allowed a lower court's ruling to stand, upholding a Kentucky law requiring doctors to show fetal ultrasounds to women seeking abortions. Still, Carol Tobias, the president of the National Right to Life Committee, cautions against expecting that the Supreme Court is ready to eliminate abortion rights entirely. "We don't know what the courts will do," she says. "Anyone who says they do is speculating."
States have enacted hundreds of abortion restrictions over the past decade. Some anti-abortion advocates continue to favor an incremental approach, imposing enough restrictions to create de facto bans. But others, convinced there's now a Supreme Court majority ready to overturn the court's 1973 Roe v. Wade ruling, believe that the time is now ripe to pursue outright bans. "The people who want to ban abortion have been very successful in the past year," Nash says. "Because we've seen so many states adopt restrictions over the past decade, there's not much to do, other than to ban abortion."
The situation is different in states controlled by Democrats. Fearing that the Supreme Court might well overturn Roe, blue states such as New York and Rhode Island moved last year to enshrine Roe-style abortion rights under state law. Massachusetts and New Mexico may repeal their pre-Roe abortion restrictions this year, while Illinois might roll back its parental notification law. In October, California became the first state to require public colleges and universities to provide drugs that induce abortion to students free of charge.
In all, nine states took steps in 2019 to protect or expand abortion access. Tobias, the National Right to Life Committee president, describes such actions as a "mixed blessing." She certainly doesn't support codifying Roe in state law, but says such actions have been a motivator for her side. "Those states are awakening the American public to what can happen," Tobias says. "We're seeing a groundswell of support. In effect, it's helping us build a backlash against what they're trying to do."
Political and legal momentum is clearly with abortion opponents, as even supporters of abortion rights readily concede. "There are some places where we'll see proactive measures," says Kristin Ford, national communications director for NARAL Pro-Choice America. "In other places, just beating back these extreme attacks is a victory." Alan Greenblatt
Photo: David Kidd
Of all the problems facing government today, none seems as intractable as climate change. Back in 2018, the United Nations' Intergovernmental Panel on Climate Change warned that we had but a decade to hold global warming to even moderate levels, while acknowledging in its report that "there is no historic precedent" for what would need to be done to significantly reduce the world's carbon emissions. But while dealing with climate change seems overwhelming to many, it is already having an impact that state and local governments cannot ignore.
The most immediate impact is on budgets, which increasingly must cover infrastructure hardening. The city of Miami Beach, Fla., for example, is spending $500 million to raise roads and seawalls. Louisiana is planning to spend more than $25 billion to deal with rising sea levels, including new levees and shoreline restoration; entire communities need to be moved inland because not only is the sea rising, the land is sinking.
The land is actually rising along coastal Washington state. Even so, the water is now four inches higher than it was in 1950, causing flooding, potential infiltration of drinking water and disruption of a $17 billion annual coastal tourism industry.
Forty-five states have a balanced-budget requirement, which means money needed for mitigating climate-related problems must come from new taxes or at the expense of other programs. But the biggest problem facing governments may be public indifference. According to various polls, a third to nearly half of the public thinks the problem has been greatly exaggerated. A poll conducted last year asked respondents, without prompting, to "name the most important problem facing this country today." Only 3 percent mentioned "environment/pollution/climate change." Despite the scientific community's consensus about the danger ahead and abundant signs of the impact climate change is already having, from receding glaciers to extreme weather events the public remains skeptical.
But many elected officials are not waiting for their constituents to become alarmed or for the federal government to act. On the same day in 2017 when President Trump withdrew the United States from the Paris Agreement, three governors announced the formation of the U.S. Climate Alliance, intended to fill the void. Now made up of 25 governors, mostly Democrats representing 55 percent of the population and 60 percent of U.S. GDP, the alliance is committed to advancing the goals of the Paris Agreement by reducing greenhouse gas emissions by at least 26 percent below 2005 levels by 2025.
In addition, 12 Northeastern and Mid-Atlantic states, plus the District of Columbia, have banded together to form the Transportation and Climate Initiative. Since more than a third of all carbon emissions come from transportation, the regional collaborative intends to make transit the focus of its initiatives to reduce those emissions and develop a clean-air economy. Among the organization's core principles is that states can lead on climate change and show the world that the issue is not the intractable one that so many assume. David Kidd
There is a growing consensus that we spend too much money keeping too many of our citizens behind bars for too long. With bipartisan support, the First Step Act was signed into law by President Trump a little over a year ago, reforming the federal prison system. The bill addressed over-zealous federal sentencing laws and provides $100 million to the states to promote successful outcomes after incarceration.
In December, New Jersey Gov. Phil Murphy signed into law a bill returning the right to vote to anyone on parole and probation. Earlier that month, Kentucky Gov. Andy Beshear issued an executive order automatically restoring voting rights to people convicted of nonviolent felonies who have completed their sentence. He then called on the Legislature to adopt a constitutional amendment codifying it into law. Colorado and Nevada adopted similar laws last spring, raising to 18 the number of states that allow any adult not currently in prison to vote. Included in that number are Maine and Vermont, which allow people to vote while incarcerated. Iowa remains the sole state enforcing a lifetime ban on voting rights following any felony conviction.
In recent years at least 35 states and over 150 cities have adopted versions of so called "ban the box" laws and policies. Named for the box on job application forms that asks for a yes or no answer about a prior criminal record, a yes answer makes it difficult for former felons to get a good job after serving time. About 19 million Americans have felony convictions. Many more have been charged with a misdemeanor or arrested. Justice reform advocates argue that putting up economic barriers for millions of citizens with records is a burden on local economies.
Finding housing and obtaining a professional license for occupations such as barbering, cosmetology and nursing are also more difficult with a criminal record. Under the Clean Slate law, Pennsylvania recently became the first state to automatically seal criminal records. Last June, an automated computer process began wiping cases from public databases. Arrest records, dropped charges and nonviolent crimes that occurred more than 10 years ago will be expunged. Police and other law enforcement will still have access to the records. Courts have until June to finish sealing all the cases. Utah and Connecticut have since introduced similar bills of their own.
Virginia Gov. Ralph Northam recently announced his plans for decriminalizing marijuana possession, raising the threshold for felony larceny and considering incapacitated or terminally ill prisoners for early release. In addition, Northams budget will include $4.6 million for probation services and $2 million to support reintegration of released inmates. David Kidd
During the 2016 presidential election, the Russians systematically studied the vulnerabilities of all 50 U.S. states' election systems. This dramatic revelation, contained in a Senate Intelligence Committee report issued last July, showed just how far Russian interference extended during that election. While the good news was the committee's conclusion that the Russians did not appear to have interfered with voter tallies, the scope and precision of the Russian probe was far worse than many had feared.
And many expect the Russians to continue what they started. Asked at a congressional hearing about the potential for Russian meddling with our voting systems in the 2020 elections, Special Counsel Robert Mueller's reply couldn't have been been more eye-opening: "It wasn't a single attempt. They're doing it as we sit here, and they expect to do it during the next campaign."
Given the highly decentralized approach to how the country runs its elections, the age of some voting systems currently in place, and the quality of the technology inside some machines, it's clear that our election system is vulnerable to highly trained state-backed hackers. According to the Department of Homeland Security (DHS), the top vulnerabilities include the administration of voter registration databases and the tabulation of data.
In 2002 in the wake of the 2000 presidential election that brought terms like "hanging chads" into the national vernacular the federal government imposed certain standards through the Help America Vote Act (HAVA), which helped to drive out the more obsolescent voting technology. Today, most voting machines are either touchscreen devices or optical scanners for paper ballots. Yet each state has its own set of standards to address accessibility, functionality, usability, privacy and security.
In 2018, Congress appropriated $380 million through HAVA to help states improve election cybersecurity and replace the most vulnerable systems. The same year, DHS designated the country's election systems as "critical infrastructure," making the feds partly responsible for it, a move that was met with protests from some states. By September 2019, under growing pressure to do more, Senate Leader Mitch McConnell backed an additional $250 million in funding to strengthen election security, and in December Congress boosted funding by another $425 million (though he has continued to block bills that call for specific election security fixes).
Despite those steps, a number of security experts aren't sure the funds will make a difference. Some have argued that the best election security in 2020 is to unplug the technology and return to paper ballots. In last November's elections, their proposal got a boost when a Pennsylvania county suffered a massive voting machine failure. A software problem resulted in some Northampton County residents who tried to vote straight-ticket Democratic initially registering as straight-ticket Republican. The vote tabulation also inaccurately showed a judicial candidate winning by a nearly statistically impossible margin.
Because the system was backed up by paper ballots, the problem was sorted out. But 16 million American voters spread across eight states won't have paper backups for their votes in 2020, according to the Washington Post.
Given the polarized, highly politicized conditions for this year's elections, expect a lot of attention to be focused on just how well election security works or doesn't. Tod Newcombe
Health-care policy is on hold. In December, a federal circuit court panel upheld a lower courts ruling that found unconstitutional the Affordable Care Acts mandate requiring individuals buy insurance. The panel sent the case back to a lower court to determine whether that means the rest of the law is unconstitutional also.
Ultimately, the fate of the Affordable Care Act will be determined by the U.S. Supreme Court, although probably not this term. That leaves the laws Medicaid expansion and much else in a sort of legal limbo. Everything in health care is going to be dependent on the appellate courts ruling, says David Blumenthal, president of the Commonwealth Fund, a health-care research and philanthropy group. You cant think about trends in Medicaid without thinking about that opinion.
States wont just be sitting around and waiting for the final word on the much-litigated law, however, as Kansas recently demonstrated. Last year, the state's Senate leaders blocked a vote on expanding Medicaid that was a top priority for Democratic Gov. Laura Kelly. On Jan. 9, Kelly and Senate Majority Leader Jim Denning announced a plan that will allow a vote on Medicaid expansion, with the promise of a potential vote on a plan to reduce private health insurance premiums.
Medicaid expansion was passed by ballot initiative in three states in 2018 and is expected to be on the ballot this year in Missouri and Oklahoma. Republican legislators and governors continue to push the idea of requiring Medicaid recipients to perform some sort of work or volunteer activity to receive the health-care benefit, although courts have largely frowned on the idea. In December, South Carolina received a waiver from the federal government allowing it to become the first state to impose a work requirement on the traditional Medicaid population, not just beneficiaries under the ACA expansion.
Legislators are concerned with a number of health policy issues beyond Medicaid. Closure of rural hospitals remains a major concern, while almost 900 bills were introduced in 2019 to address pharmaceuticals and their costs. Behavioral health continues to be at the top of legislators minds, particularly when it comes to opioids and other substance abuse. Last year, more than a dozen states created maternal mortality review commissions or task forces. As part of its Medicaid waiver request, South Carolina proposed offering a year or postpartum coverage, but the feds didnt act on that part of their application.
In December, Congress raised the minimum age for buying tobacco products and e-cigarettes to 21, following the lead of 19 states and hundreds of localities. The new law does not ban flavored e-cigarettes, however. On Jan. 2, the Trump administration announced a plan to ban most, but not all flavors. Several states banned flavored e-cigarettes last year, at least temporarily. Certainly, legislators have looked at vaping among youth in the past few years, but a lot of the news about lung injury impact happened when most legislatures were out of session, says Kate Blackman, who directs NCSLs health policy group. Alan Greenblatt
Photo: David Kidd
Americas roads and highways are in desperate need of attention. Every four years the American Society of Civil Engineers issues an exhaustive infrastructure report card. The last report, published two years ago, gives U.S. infrastructure a grade of D+, the same grade it got in 2013. Americas roads earned a D. The report concludes that the U.S. has been underfunding its highway system for years, resulting in a $836 billion backlog of highway and bridge capital needs. And thats just roads and bridges.
Not only are our roads broken, so is the system that funds them. The Senate Environment and Public Works Committee voted unanimously last July to authorize $287 billion in expenditures from the Highway Trust Fund, replacing the current five-year transportation program set to expire in September. The measure represents a 27 percent increase over current spending levels. Yet trust fund revenue, which comes from federal fuel taxes, has remained stagnant at rates set in 1993. The growing number of newer, fuel-efficient and electric cars means less taxes collected. New and sustainable ways are needed to prop up a fund that is already $18 billion short of being solvent. The House is expected to take up the measure this spring.
But the states are not waiting for Washington to act. In July, Ohio drivers started paying an additional 10.5 cents per gallon of gas, less than the 18-cent increase requested by Governor Mike DeWine. The price of diesel went up by 19 cents. Looking to avoid periodic fights over future increases, Alabama, Arkansas and Illinois recently raised fuel taxes using a variable-rate formula indexed to inflation.
States are also looking to bring in revenue from the growing number of electric vehicles on the road. Last year, 24 states considered legislation to implement or adjust an electric vehicle fee. Utah now permits electric and alternative fuel vehicle owners to opt into a road usage charge. Mileage-based user fee studies and pilot programs are under review in 14 states and five states are looking at tolling as a source of new revenue. Thirty states approved a total of $7.7 billion in transportation funding last year and $9.6 billion was approved by voters through state and local ballot measures. According to estimates by the American Road and Transportation Builders Association, highway, street and related construction investments by state and local governments will increase six percent to $77.5 billion this year after growing 15 percent in 2019.
Whether or not the political class and the public can stomach the necessary levels of funding remains to be seen. Michigan Gov. Gretchen Whitmer ran on a campaign pledge to fix the damn roads. She proposed a 45-cent increase to the gas tax last year that would make it, by far, the highest in the country. Her transportation director was heard to say in September that it would actually take an 80-cent increase to fully address the needs of all state and local roads, a number Whitmer has not endorsed. The Legislature is instead offering a one-time infrastructure expenditure of $400 million, an amount the governor says will only be enough to fix four bridges in a state with 1,000 bridges in poor condition. David Kidd
The costs of building, owning or renting a home keep rising, but incomes are not keeping pace. One in six American families spend more than half their income on housing. Its worse in California, where the rate is closer to one out of every three households. Besides having less to spend on lifes necessities like food, transportation and health care, these people can be one paycheck away from losing their homes. Meanwhile, the supply of affordable rental units is rapidly shrinking. Booming metro areas, including Seattle, San Francisco and Austin, have lost nearly two-thirds of their low-rent housing stock in the last decade.
The federal government has retreated on past commitments to provide housing for low- and moderate-income families. Federal funding for housing assistance has fallen to its lowest level relative to the economy since 1980. Funds for affordable housing are not entirely safe at the state level either. Last year, Florida diverted millions of dollars from its affordable housing trust fund, something it has done every year since the Great Recession. New Jersey Gov. Phil Murphy has also used housing money to shore up the state budget, despite a campaign promise to the contrary.
But efforts to deal with the problem are taking form in different parts of the country. Born out of the housing shortage created by the oil boom a decade ago, North Dakotas Housing Incentive Fund provides money for the construction, rehabilitation, or preservation of multifamily housing targeted to essential workers and low- to moderate-income households, including seniors and people with special needs. Individual and corporate contributors receive a credit against their state tax liability. Minnesota has since established its own version of the successful program.
Several cities are focusing their efforts on reforming zoning and regulation, major contributors to the high cost of new housing development. Estimates show regulations account for 30 percent of the cost of multifamily housing development. Minneapolis has famously done away with single-family zoning citywide, allowing duplexes and triplexes to occupy lots once reserved for one home. Reductions in minimum off-street parking requirements are another part of the plan, something other large cities have done or are considering. On a statewide scale, Oregon now requires cities to allow denser development, including duplexes in single-family zoned areas. Cities in Utah, working with the Legislature and housing commission, came up with a law tying transportation funding to moderate income housing needs.
But cities and states dont always agree on how to deal with the housing crisis. Pre-emption by a state can limit what a city can do or dictate policy. When Nashville attempted to change its zoning policy to require more affordable housing, the state Legislature enacted a law to stop it. On the other side of the country, Oregon last year became the first state to pass mandatory statewide rent control, tying the hands of local jurisdictions. David Kidd
While it may look like any effort to bring change to our current immigration program seems hopelessly stalemated, it's not for lack of trying. Since January 2017, nearly 750 bills relating to immigration have been introduced in Congress, while only a handful have been enacted. State legislatures, meanwhile, consider more than 1,200 bills annually that touch on immigrants and enact an average of 200 pieces of such legislation each year, according to the National Conference of State Legislatures.
Despite the heated rhetoric around illegal immigrants and whether or not the country needs a bigger, stronger wall along the border with Mexico, the fact remains that the overwhelming majority of immigrants living in the United States, 34 million, are here legally. Each year, nearly 1 million immigrants enter the country through the green card program, with approximately two-thirds arriving as part of the family-based (or "chain migration") category of immigration, according to the Pew Research Center.
The Trump administration has proposed shifting immigration away from family reunification and broadly based employment-based migration to a point-based system that prioritizes immigrants with education and particular employment qualifications. At the same time, according to Pew, the administration has proposed regulations that would deny immigrants entry if they are deemed likely to use Medicaid, food stamps or other forms of public assistance.
With little progress at the federal level, states have succeeded in enacting a number of policies that impact immigrants, according to NCSL. They include eligibility for benefits such as in-state college tuition and driver's licenses; partnerships on criminal immigration enforcement and employment verification with the Department of Homeland Security; and streamlined paths for professional licenses for professionals in demand.
Mayors also have stumped for federal action regarding immigration reform. A big concern had been the proposal to add a citizenship question to the 2020 Census. Mayors opposed the move, worried that it would trigger undercounting in the urban areas where both legal and illegal immigrants are concentrated. However, federal courts have blocked the Census Bureau from asking the question.
States have also been active implementing policies for and against providing sanctuary for immigrants. Nine states have enacted anti-sanctuary laws, requiring local police to assist the U.S. Immigration and Customs Enforcement agency. Even in states that have declared themselves pro-sanctuary, resistance has occured. Some counties in California have opposed the state's sanctuary policies. In Texas, the opposite has happened, with Austin declaring itself a "freedom city" in a state that is strongly anti-sanctuary.
With 2020 a presidential election year, immigration could become one of those key issues that could make or break a candidacy. Just don't bank on the problem going away once the voting is done. Tod Newcombe
At first glance, it might seem that nearly everyone has an opinion on net neutrality, the Obama-era rule that prohibited Internet service providers from blocking or slowing down websites, or setting higher rates for premium services. In 2017, when the Federal Communications Commission laid down plans to reverse the rule, the agency received 22 million online public comments for and against the proposal or so it seemed: Actually, 94 percent of the comments had been submitted multiple times, in some cases thousands of times, according to a study by the Pew Research Center.
Organized campaigns to influence a controversial policy proposal are nothing new. But the effort to persuade the FCC on whether to keep or remove net neutrality was truly epic, thanks to some technological chicanery. The FCC ended up repealing the rule, removing what had been a publicly popular control but one that had been hotly contested by broadband providers.
The FCC's ruling against net neutrality didn't stop states from acting on their own. In 2018, 120 bills and resolutions regarding net neutrality were introduced in 34 states, with five of them California, New Jersey, Oregon, Vermont and Washington enacting legislation or adopting resolutions that protect net neutrality, according to the National Conference of State Legislatures. California's law requiring all ISPs to treat Web traffic equally is being closely watched as model legislation that protects neutrality without conflicting with the FCC's rules. For now, the state has agreed to hold off on enforcing its law until the courts decide whether or not it pre-empts the FCC.
This year could be a bellwether year for net neutrality, but not for obvious reasons. Once again, technology appears to be racing ahead of policy. Mark Jamison, director of the Public Utility Research Center at the University of Florida and a visiting scholar at the conservative-leaning American Enterprise Institute, is no fan of net neutrality. He calls it a "policy initiative in search of a problem." But he thinks that 5G, the next-generation high-speed wireless networking technology now beginning to roll out across the country, will render the issue of net neutrality moot in a few years.
"Its very technological design violates net neutrality," he says. The 5G technology carves out space on the network for different services. Voice and data are treated one way, video another, he explains. "That's the way 5G is designed, which directly conflicts with the principle of net neutrality, which says everything has to be treated the same." Policymakers may not like it, but Jamison is confident that consumers will. Tod Newcombe
The last fiscal year was a strong one for state revenues, but when it comes to the health of state and local pension plans, it's a different story. Just look at the Illinois teachers' pension system, which has a funding ratio of 40.7 percent, one of the worst in the country. In Chicago, the situation is even more dire, with both the city's police and municipal pension plans funded at less than 30 percent of what they need to meet retiree obligations.
Fortunately, most public pension plans are faring a lot better than that, but with the average state and local government pension funding ratio stagnating at 72.4 percent, according to the Center for Retirement Research (CRR) at Boston College, the cheering is muted. One big problem: Pension plans are missing their investment-return targets. While plans with more than $1 billion in assets had an expected rate of return of 7.25 percent for the fiscal year that ended last June 30, they ended up with a median return of 6.79 percent, according to data from the Wilshire Trust Universe Comparison Service.
Another issue is that despite increases in contributions from states and localities, the amount is still short of what actuaries are demanding. In 2001, cities and states contributed, on average, just over 5 percent of their payroll to meet pension obligations, according to The Economist; today, the figure is more than 15 percent, but still not enough in many cases.
Facing a persistent funding gap, some states and localities are looking at different options for their pension plans, including reducing the benefits they have promised to pay retirees. But for the most part that approach has run afoul of the courts, which have ruled in favor of the workers. In Illinois, for example, the state's constitution forbids lawmakers from reducing pension benefits. To change that, state legislators are thinking of adding pension reform to the 2020 ballot, asking voters to allow what the courts will not via a constitutional amendment.
Will it work? In 2012, voters passed a similar change to San Diego's pension benefits, but it was thrown out by the courts, in part because the city didn't negotiate with worker unions prior to putting the proposal before the voters. However, Arizona, which has a constitution similar to Illinois', was able to amend its pension law, thanks to negotiations with labor that set up a two-stage reform.
Nevertheless, don't expect to see much more in the way of benefit cuts in 2020, says Jean-Pierre Aubry, associate director of state and local research at CRR. "The move towards direct benefit cuts has slowed to a trickle," he points out.
One approach to shoring up weakened local government pension plans involves consolidation. In Massachusetts, for example, any local retirement system that underperforms the state's pension funds by a certain percentage has its assets rolled into the state's plan. Consolidation helps with investment issues, but has drawn limited interest from other states, most notably Illinois and Pennsylvania.
Meanwhile, given that their investments have fared poorly amid strong stock-market performance, it's a fair bet that many pension plans will continue to fall short of their assumed rates of return in 2020. And state and local policymakers will continue to look for ways to shore up ailing plans without tax hikes or program cuts as they try to deal with the core problem: too much risk and how it's being shared. Tod Newcombe
What happened on the West Coast may happen on the East. Following Oregon's lead on statewide zoning changes, Maryland and Virginia are now considering bills that would block local governments from having single-family zoning regulations in place, a move motivated by the desire to increase the supply of housing.
What these geographically diverse states have in common is that they're all run by Democrats. Pre-emption of the powers of local governments isn't just for red states anymore.
Over the past decade, states have passed hundreds of pre-emption laws, preventing cities and counties from setting their own policies in areas including gun control, paid-family-leave mandates and taxes. In 2019, North Dakota blocked local minimum wage laws, while Oklahoma, Pennsylvania and Tennessee overturned local bans on plastic bags. Maine blocked local paid-sick-time requirements, and Arkansas and Florida prohibited sanctuary cities. Florida and Texas saw dozens of pre-emption bills last year.
Much of the action has involved Republican-controlled states quashing liberal policies pursued by large cities. "It's mostly, although not exclusively, a result of the Republican takeover of state legislatures, beginning in 2010," says Richard Briffault, a law professor at Columbia University. "The state governments have moved sharply to the right, and many of the cities have moved to the left and adopted more activist agendas, as well."
But blue states have pursued their own pre-emption efforts. And states in general are shifting their focus away from laws regarding social, labor and environmental issues toward matters that primarily affect businesses, such as occupational licensing. Nearly half of the states have laws pre-empting localities when it comes to 5G wireless technology, limiting their revenues and blocking regulations regarding deployment of towers.
"It's getting into nuts and bolts," says Lori Riverstone-Newell, an Illinois State University political scientist who studies pre-emption. "They're looking for new issues that they're going to jump on. They're getting into everything. That's a sign of their success, but it's also a sign of their creativity."
If the idea of pre-empting local governments continues to have currency, it's also prompted a countertrend. Last year, Colorado repealed its own pre-emption law regarding local minimum-wage levels. Arkansas repealed a 2011 law that blocked municipalities from setting up their own broadband networks. Other states saw repeal bills that didn't make it into law.
Advocates for local control are heartened by the realization among some state legislators that pre-emption may have gotten out of hand. "This is a new and encouraging trend," says Spencer Wagner, who tracks state pre-emption for the National League of Cities. "These are highlights at the end of a decade where we saw pre-emption really take off." Alan Greenblatt
Photo: David Kidd
States ended the last fiscal year with record savings in their rainy-day funds. The reason is obvious. Governors and legislators are worried about the potential for recession.
Most economists believe that the economic expansion already the longest in U.S. history will last at least throughout 2020. There were a lot of fears about recession last summer remember the inverted yield curve? but anxiety about trade tensions with China or the impact of Brexit has mostly abated. In November, Fed Chair Jerome Powell told Congress that America has the worlds star economy and theres no reason to believe a recession is imminent. The research firm IHS Markit has lowered its odds of a recession from 1 in 3 last summer to 1 in 5 now.
This past year, most states came in at or above their revenue projections. For all that, theres still some nervousness about the fact that the good times cant go on forever. A recent Conference Board survey found that recession is the top concern of CEOs. Tensions in the Middle East and their effect on oil prices are likely to renew those fears.
According to the National Association of State Budget Officers (NASBO), states ended fiscal 2019 with $72 billion in their rainy-day funds, or 7.6 percent of their general fund spending. That compares with $33 billion in fiscal 2007, at the start of the Great Recession, representing 4.7 percent of state budgets.
Theres always the impulse to spend down savings. In Minnesota, a budget formula will transfer nearly $500 million out of the rainy-day fund in 2021. Washington Gov. Jay Inslee recently proposed taking $300 million out of reserves to shelter the homeless.
In general, however, NASBO predicts that states will continue to put away more money. Theres definitely caution in the air, says Kathryn Vesey White, NASBOs director of budget process studies. Recoveries dont die of old age, but given the fact that we are now in the longest recovery period of the modern era, there is a sense that a recession is likely on the horizon.
No one knows exactly how far off on the horizon, but states are running stress tests, seeing how their budgets would hold up under various recession scenarios. Some states that have highly progressive income tax codes, such as California and New York, are more vulnerable to steep revenue drops during recessions, when top earners arent getting bonuses and investors arent collecting capital gains.
Phil Ting, who chairs the California Assembly Budget Committee, notes that even a relatively small increase in spending could push the state into deficit, if and when a recession occurs. We continue to have an economy that is growing, Ting said in December. However, we do know that we are eight years into recovery, and its not very clear when we may enter into recession.
That note acknowledging that the economy remains strong, but worrying that it may slow at some point in the not-too-distant future is one being sounded by budget officials all over the country. States are cautious in planning for their next budget cycle, says NASBOs White. They are focusing on strengthening reserves and structural balance. Alan Greenblatt
Legislators won't start drawing new political maps until 2021, but redistricting will still be a front-of-mind concern in 2020.
With the Census coming up in April, states and cities around the country are spending heavily on outreach programs, hoping to ensure as full and accurate a count as possible. This year, paper forms will still be available, but the Census Bureau is promoting online responses as its first choice. No one is sure exactly how that will play out.
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The Biggest Issues to Watch in 2020 - Governing