In legislatures nationwide, it’s the kickoff to state budget season and the challenging task of addressing states’ top fiscal issues.
Passing a budget, either annually or biennially, is the only thing legislatures must do; but crafting a budget that funds important programs and addresses state challenges is no easy feat. Adding to the challenge, economic and fiscal conditions across the country constantly shift. Even in states that passed a biennial budget last year and do not have to pass a full budget this session, there can be supplemental budgets and other issues with budget implications that require lawmakers’ attention.
So, what fiscal topics will legislatures take up this session? NCSL surveyed legislative fiscal officers in January to find out. Here’s what they told us.
Education Funding
Education funding is a priority this year in several states, including New Hampshire and Pennsylvania, where judges ruled parts of the funding mechanisms unconstitutional. Other states, including Delaware, Iowa, Kentucky and South Carolina, are considering strategies to increase teacher salaries, a topic that was top of mind for many lawmakers last session. The Tennessee Legislature is debating a universal school voucher program proposed by the governor.
Tax Policy
Many legislatures expect to consider tax changes this year. Reducing property taxes remains a priority in several states, including Colorado, Idaho, Nebraska and Wyoming. Lawmakers in Arkansas, Georgia, Idaho and Kentucky will consider reducing individual income tax rates. A proposal in South Dakota would make permanent a temporary sales tax reduction to 4.2% from 4.5%, though Senate budget writers have set the issue aside for now. Iowa and Mississippi are among the states that might consider tax reductions.
Capital Budgets and Infrastructure Investments
The Ohio Legislature will enact a new two-year capital budget, and Minnesota will debate the governor’s proposed infrastructure investment package, which includes transportation and water projects as well as deferred maintenance. The South Carolina Legislature is likely to make investments in road and bridge enhancements as the state’s population continues to grow. New Jersey’s current capital plan is set to expire this year, and the state will also consider investments in mass transit as federal funding runs out. At least three states, Alabama, Arkansas and South Dakota, will consider investments in prisons.
State Employees
Many states have faced workforce issues for the past few years. For some, attracting and retaining employees has been a challenge since the pandemic. Others have needed to invest in employee retirement and other benefit programs. States such as Delaware, Mississippi and New Jersey may look at increasing or maintaining funding for employee benefit programs this year, while Arkansas, Georgia and Nebraska may focus on pay plan revisions and potential wage increases for state employees.
Other Priorities
Other priorities fiscal officers cited include funding for Medicaid and affordable housing. These challenges come at time when state revenue growth is slowing after robust increases following the pandemic. A handful of states, including California, Arizona, Maryland and Pennsylvania, may address short-term budget shortfalls or long-term structural budget issues this session. Other states have noted that adjusting to more modest revenue growth patterns and the end of federal pandemic aid to states is a fiscal challenge. Legislators have had ample funding for one-time projects and programs over the last couple of years, which may not be the case in many states for the upcoming fiscal year.
The issues above are at the top to-do lists in many states, but legislative sessions can be unpredictable, and every state faces unique fiscal conditions and circumstances that will shape the fiscal debate.
Erica MacKellar is a program principal in NCSL’s Fiscal Affairs Program.