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Top Fiscal Issues for 2013 Legislative Sessions

Top Fiscal Issues for 2013 Legislative Sessions

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About This Report

Legislative fiscal directors are keenly attuned to the budgetary pressures confronting their states, which is why NCSL asked these experts to identify the top three fiscal issues their states expect to address in the 2013 legislative sessions. This brief highlights these issues and includes a summary table and appendix for additional information.

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As the nation’s legislatures convene their 2013 sessions, state policymakers will face a wide range of fiscal issues. A fall 2012 survey of state legislative fiscal officers found that while most states continue to report stable conditions—with solid revenue performance and spending in line with budgeted estimates through the first few months of fiscal year (FY) 2013—states continue to face serious budget dilemmas that require tough choices (For more information on state fiscal conditions please see State Budget Update: Fall 2012).

The key fiscal issues awaiting legislatures in 2013 include the rising costs and expansion (under the Affordable Care Act) of Medicaid, education funding, state employee pensions and benefits, transportation and infrastructure related projects and the impact of federal deficit reduction measures on the states.

The next few months are critical for state lawmakers as they make spending adjustments in current budgets and develop new ones for FY 2014. These issues provide the context for their work in the coming months.

Medicaid and Health Care

Medicaid and health care concerns will dominate legislative discussions in 2013, with at least 34 states expecting to address rising costs and the implementation of the Affordable Care Act.

  • Officials in Maine reported that Medicaid spending continues to grow despite a reduction in caseloads.
  • Lawmakers in New Mexico are expected to explore the costs and benefits associated with Medicaid expansion.
  • In Oklahoma, the state’s current Medicaid structure, along with provisions in the Affordable Care Act, is likely to be central to the development of future budgets.

Education

Education is anticipated to be a principal fiscal priority in 23 states. Discussions will center on adequate funding levels, school finance formulas and increased student enrollment.

  • Officials in Arkansas expect funding for adequate education opportunities to all public school students to be considered this coming session.
  • In Louisiana, K-12 and higher education funding are expected to dominate discussions.
  • In Oregon, funding a redesign initiative to establish a seamless pre-kindergarten through graduate school system will be a key issue in the upcoming session.

Pensions and Employment Benefits

Pensions and employee benefit related issues garner top attention in 13 states. Addressing unfunded liabilities and enacting significant reforms are likely to be on the agenda for state lawmakers.

  • In Alabama—although measures have been taken to reduce future state obligations for retirement and health care benefits—appropriations requests for FY 2014 have increased.
  • Lawmakers in Kentucky will consider recommendations from a task force on public employee pensions in the 2013 session.
  • In New Hampshire, pending court rulings on changes made in 2011 to employee retirement benefits and contribution rates could push the legislature into action this coming session.  

Transportation and Infrastructure

At least 12 states and the District of Columbia will focus on transportation and infrastructure. Concerns include static funding levels, reforming finance models and meeting increased infrastructure needs.

  • In Maryland, officials noted that a funding increase is likely to be considered in 2013 as a majority of transportation spending is currently dedicated for maintaining the existing system with little funds available for system expansion.  
  • Massachusetts officials reported that a transportation finance overhaul will be taken up early in the upcoming session.
  • In North Dakota, oil, gas and agricultural activity is increasing infrastructure needs. 

Federal Deficit Reduction

Federal deficit reduction was cited as the potential leading issue in 11 states and the District of Columbia. Lawmakers are likely to address the impact that sequestration, or an alternative agreement, has on state budgets and the economy. It is important to note that the information in this report was collected prior to Congress passing a bill (HR 8) that, for the time being, avoids most of the effects of the “fiscal cliff.” Significant decisions remain on how to reduce the federal deficit, which may affect state budgets.

  • Officials in Maine remarked that the potential impact of a failure to address the “fiscal cliff’ on the state’s revenue picture will be substantial.
  • In Tennessee, lawmakers may have to deal with potential revenue losses from measures under the federal Budget Control Act.
  • Wyoming officials noted that the legislature is likely to address the uncertainty surrounding the availability of federal funds.

Budgets

Concerns about structural gaps, spending pressures, and budget reductions are predicted to capture the most attention in 12 states.

  • Balancing the current and next biennial budget will be a prominent fiscal issue in Connecticut.
  • Kansas lawmakers will need to address a shortfall of $300 million.
  • Officials in Minnesota noted that a general fund budget gap of $1.1 billion (2.8 percent) is currently projected for the FY 2014-FY 2015 biennium.

Taxes and Revenues

Taxes and revenues will receive attention in at least 11 states, with discussions centering on tax reform and tax credits.  

  • Delaware reported that the legislature is expected to address several major taxes that will sunset in
    FY 2014 and FY 2015.
  • Officials in Louisiana noted that tax reform is likely to be a focus of the 2013 session.
  • In Oklahoma, discussions on reforming and/or reducing certain taxes, including the personal income tax, are probable.

Other Fiscal Issues

State officials note that several other miscellaneous issues are expected to top fiscal agendas in 2013. These include corrections funding, local government assistance, natural disaster recovery and government reform and restructuring. More information can be found in Table 1 and Appendix A.  
Collectively, all of these issues provide insight to what will likely occupy lawmakers during their legislative sessions in 2013 and in some instances, beyond.

 

Table 1.  Summary of Top Fiscal Issues for 2013 Legislative Sessions

State Medicaid/ Health Care Education Pensions/  Benefits Transportation/ Infrastructure Federal Deficit Reduction Budget Taxes/ Revenue Other
Alabama x   x         x
Alaska   x x       x  
Arizona (N/R)                
Arkansas x x            
California x             x
Colorado x x     x x    
Connecticut x   x     x    
Delaware             x  
District of Columbia       x x     x
Florida (N/R)                
Georgia x              
Hawaii     x         x
Idaho x x            
Illinois x   x         x
Indiana x x   x        
Iowa x x     x      
Kansas x x       x    
Kentucky     x       x x
Louisiana x x         x  
Maine x       x x    
Maryland       x x x    
Massachusetts   x   x       x
Michigan x           x x
Minnesota x       x x x  
Mississippi x x           x
Missouri x x           x
Montana x   x   x      
Nebraska         x x   x
Nevada x x   x        
New Hampshire x x x          
New Jersey   x       x   x
New Mexico x x         x  
New York         x     x
North Carolina x x     x     x
North Dakota       x     x x
Ohio   x       x x  
Oklahoma x         x x  
Oregon x x x          
Pennsylvania x   x x        
Rhode Island (N/R)                
South Carolina (N/R)                
South Dakota x x           x
Tennessee x     x x      
Texas x x   x        
Utah x x   x        
Vermont x   x x       x
Virginia x   x x        
Washington x x       x    
West Virginia x   x x        
Wisconsin x x         x  
Wyoming         x x   x
Total 34 23 13 13 12 12 11 18
Source: NCSL survey of legislative fiscal offices, fall 2012.

 

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