Top 10 of 2013: January 2013 | STATE LEGISLATURES MAGAZINE

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As sessions begin, lawmakers may find some solace in knowing they face several common challenges.

Compiled By Mark Wolf

A still-sluggish economy, uncertainty about federal fiscal issues and a host of other challenges will greet the nation’s 7,383 legislators this month as many begin their sessions. Even though half of these lawmakers will have fewer than two years’ experience in the legislature, they will take on a host of major issues ranging from stabilizing budgets to controlling health care costs, from planning for future energy needs to encouraging job growth.

NCSL’s policy experts have identified several issues most likely to be on the greatest number of legislative agendas this year. This an overview of those top 10 issues.

1. Stabilizing Budgets

As the nation’s economy yawns and stretches its way out of the Great Recession, state officials are forecasting year-over- year tax revenue growth for the third consecutive year and 10th consecutive quarter, what some have called a “weakovery.” The growth in tax collections has slowed, and the robust return of state collections that typified previous economic recoveries remains elusive. Projections for fiscal year 2013 reflect this slow growth trend as officials in nearly three-fourths of the states and the District of Columbia anticipate total tax revenue growth between 1 percent and 4.9 percent.

With “fiscal cliff” and “sequestration” now at the front of the economic lexicon, states are increasingly wary of how federal actions to reduce the deficit will spill onto their budgets. Actions to reduce the federal deficit may pose a real challenge to states since state-federal discretionary and other grant programs constitute approximately 12 percent of the federal budget. Many see them as the “softest” or most vulnerable part of the budget. Think sequestration, and reductions to education, energy, social services, job training, environment and justice programs come to mind. And even if sequestration is swept aside, 10-year statutory discretionary spending caps and other cuts await.

State lawmakers will spend much of their time on budgets, with revenue increases and tax cuts sure to be topics for heated discussions. Some states will examine tax expenditures (exemp- tions, deductions and credits) as an alternative to hiking rates. And some will look for new avenues of potential revenues.

2. Addressing Health Care

Within this uncertain economic context, lawmakers must tackle the federal Patient Protection and Affordable Care Act (PPACA), which has created a push-pull situation for states aim- ing to control costs as well as make decisions about the law’s provisions. With health care costs continuing to outpace infla- tion, state lawmakers are searching for ways to reduce expendi- tures and improve efficiencies, especially in Medicaid programs.

At the same time, policymakers must decide whether to expand Medicaid eligibility to millions of uninsured Americans with incomes less than 133 percent of the federal poverty guide- line. Other decisions regarding the federal law involve establish-ing insurance exchanges, ensuring that health information tech-nology works properly, addressing shortages in health workers, and developing prevention and treatment strategies to reduce the incidence and severity of chronic conditions.

Changing the way health care is delivered and charged has become a priority for legislators, especially as they deal with the federal law. Payment models that reward results rather than services provided, is considered by many crucial to corralling Medicaid expenses.

More states will be experimenting with the medical home model, which relies on a team of providers—such as phy- sicians, nurses, nutritionists, pharmacists and social workers—to meet patients’ needs for certain Medicaid or Children’s Health Insurance Program beneficiaries.

States are also looking to bundled payment models and accountable care organizations that give providers an incentive to improve efficiencies in their practice.

3. Fixing Public Pensions

State legislatures are in the midst of a multi-year wave of rebuilding public pension plans to combat long-term funding problems. Studies by the Pew Center on the States and the National Conference of Public Employee Retirement Systems show pension funding levels currently hovering around 75 percent instead of the 80 percent usually considered desirable.

State legislatures have adopted a variety of approaches to correct the concerns, but may be looking at further adjustments. Alabama, Kansas, Louisiana and Virginia have replaced defined benefit plans with cash balance or hybrid plans for new employees. Michigan has added an optional defined contribution plan for public school employees.

States have also raised age and service requirements for retirement, increased the time period used to calculate compensation and lowered the multiplier for calculating benefits. Stay tuned. More legislative developments on pensions are likely in 2013, as concerns remain and not all state lawmakers are convinced the changes already enacted will be enough.

4. Saving on Corrections Costs

One of the bright spots of state policy concerns how corrections resources are being reallocated. Many states have enacted reforms in recent years to prioritize prison space for the most dangerous offenders, and make investments and improvements in community supervision, including as part of reentry. States also are rethinking some mandatory minimum sentences, decreasing penalties for low-level drug crimes and giving drug offenders more opportunities to get treatment.

At least eight states have developed state-local incentive funding mechanisms to support supervision and services for some adult offenders in local communities. These reforms, often referred to a “justice reinvestment,” have been found to reduce recidivism and crime—and save dollars. In bipartisan fashion, at least half of states have taken steps in this direction and about half a dozen enacted significant reforms in 2012 alone. Other states are ripe for similar changes this year.
State legislatures are also re-evaluating their juvenile justice systems to identify more effective and less costly ways to deal with kids who get in trouble. A dozen states have lowered the number of young offenders sent to state facilities and reallocated the savings to community-based treatment programs. Other states are reforming detention, increasing due process protections for juveniles, and reviewing juvenile life without parole sentences in light of the 2012 U.S. Supreme Court decision ending such mandatory sentences. More legislatures this year are expected to consider similar policies to save money, maintain public safety and provide better results for young people.

5. Ensuring Future Energy

A recent report from the International Energy Agency predicted the United States will surpass Saudi Arabia as the world’s top producer of oil by 2020 and be nearly self-sufficient in energy by 2035. To reach that plateau, efficiency and energy production will have to be a dominant focus at both the federal and state levels.

State legislatures, utilities and public utility commissions already know the benefits of a diverse energy portfolio. New developments, such as the rise of hydraulic fracturing for natural gas extraction, portend major change for the energy industry. How best to incorporate these new developments into a balanced energy portfolio will be debated in legislative halls across the country. Legislators are also addressing the challenges of how the outdated regulatory structure in many states can help utilities adapt to the coming changes while ensuring a secure, reliable and affordable energy supply.

6. Paying for Transportation Infrastructure

States will be facing a well-documented and worsening transportation funding crisis. Forecasters agree the nation as a whole is spending only about one-third to one-half of what is required to maintain, improve and expand roads and transit systems adequately. To help pay for the much-needed improvements, state lawmakers will consider several different funding and finance options such as gas tax increases, public-private partnerships, tolling and mileage fees. Lawmakers may also look at measures that make state transportation programs more efficient.

State legislatures also are beginning to address the problems of rural America more and more. These areas face especially challenging transportation safety and mobility problems. For example, even though only 19 percent of the U.S. population lives in rural  areas, 55 percent of all traffic deaths occur there. As well, a disproportionate share of rural residents have few transportation choices. Lawmakers will be debating policies to alleviate these safety and mobility concerns, and they’ll be keeping their eyes on the Moving Ahead for Progress bill in Congress that would provide $105 billion for surface transportation in 2013 and 2014, including several provisions that would affect rural communities.

7. Strengthening Education

Education is high on legislative agendas most years, and this year will be no different. Legislators are expected to continue to pass significant reforms to improve student achievement. With state funding for education a continued concern, lawmakers will be considering reallocating a portion of their precious state dollars to school districts only after they have demonstrated higher student achievement. And they will look at reallocating other resources to policies and programs that demonstrate the most success in boosting student learning.

Legislatures will continue to debate school choice options, like vouchers and parent trigger laws, in addition to reforming charter school policies. And they will discuss “21st century learning” that involves incorporating new technology and digital materials into current curricula.

Forty-six states will continue working on the Common Core State Standards, which involves training teachers, writing curricula, developing assessments, procuring assessment technology and more. At the same time, many states will be preparing for—or looking to pass—new accountability, compensation and evaluation systems for teachers tied to student performance. All these efforts aim to ensure that students are ready for college or a career after high school.

Federal competitive grants to states, such as Race to the Top, and Elementary and Secondary Education Act waivers will inevitably drive some of these legislative discussions and timelines.

8. Creating Jobs

States legislatures will continue to look for ways to boost economic development to create jobs, especially manufacturing jobs. Some states will consider incentives, such as granting tax rebates to certain types of businesses to encourage the growth of manufacturing jobs.

Louisiana grants rebates to businesses that manufacture specific durable goods or pharmaceuticals, convert natural gas to refined fuels or store data. Georgia lawmakers recently passed legislation that requires a comprehensive revision of income tax credits for businesses that establish or relocate new high-quality jobs in less-developed areas, or manufacture alternative energy products or electric vehicles.

9. Educating the Workforce

It’s hard to consider how best to create jobs without considering whether the workforce is prepared for them. Yet, although the benefits of a college-educated citizenry are widespread, barriers persist for many in receiving a college degree. Lawmakers will be looking at college tuition costs that continue on an unabated upward trajectory, in part because of decreased state funding; the large burdens of debt many students carry even before they enter the workforce; and dreary graduation rates that hover around 55 percent at four-year schools and only 30 percent at two-year colleges.

Of interest to many state legislatures is funding higher education more strategically by looking at results rather than student enrollments. This method considers, for example, graduation rates, transfer rates, the number of degrees awarded, and the number of minority graduates. At least 10 states have made some changes toward performance-based funding and 23 are moving in that direction or studying the merits of the approach.

Community colleges have long been the most nimble institutions to respond to the needs of employers in their communities. State legislatures will continue to establish statewide commissions and working groups to look for ways to strengthen partnerships between community colleges and businesses to align accelerated training and certification programs to specific job skills needed from the local workforce.

10. Helping Strengthen Families

The recession, long-term unemployment and reduced state revenues have squeezed human services programs at the same time needs have increased. Fifteen percent of families are living below the federal poverty level, use of food stamps has increased 70 percent in the last five years and one-fourth of all children are owed child support.

Although foster care caseloads have declined significantly, the statistics for young people leaving the foster care system are not so positive. Sixty-three percent of them do not earn a high school diploma or GED, 24 percent have no earned income the first two years after leaving foster care, and 30 percent of the young men are incarcerated by age 19,  according to recent studies.

NCSL’s efforts were instrumental in convincing Congress to grant more waivers to states, giving them more flexibility in adopting effective programs, including coordinating services better so children who grow out of foster care don’t get lost or forgotten. Nine states received child welfare waivers last year, and 10 more waivers are available in FY 2013 and FY 2014.

Child support lifts many children out of poverty and is an important source of income for many families. State lawmakers will debate ways to get parents to pay child support, including offering employment opportunities, engaging parents more in the lives of their children and other services. Lawmakers will continue to grapple with what is the best way to streamline services yet still protect these vulnerable citizens.

A Big Year Ahead

These issues—and variants of them—will be embedded in the agendas of state legislatures this year and for years to come. States will grapple with an array of other issues as well, ranging from managing federal land within state boundaries to legalizing marijuana to allowing same-sex marriages.

State lawmakers have all this and more to deal with, along with whatever fallout results from federal action to avert tumbling over the fiscal cliff. But they have proved they are up to the challenge. States often find the kind of innovative solutions that not only earned them the epithet “laboratories of democracy,” but also become models for congressional action.

Hold on, 2013 looks anything but boring.