Top 10 Government issue of year 2014

Medicaid

About half the states have signed on to a Medicaid expansion funded entirely by the federal government for the first three years, and most have done so by simply extending the program to adults earning up to 138 percent of the federal poverty level. But there have been a few experiments, among them Arkansas’ plan to use Medicaid expansion money to purchase private coverage for new beneficiaries.
That program required a special waiver from the feds, but Arkansas leaders successfully argued that it better fit the state’s needs and politics. As new states choose to expand Medicaid, many will be asking the Department of Health and Human Services for similar latitude in bringing in different payers, trying greater cost-sharing with beneficiaries and other changes that they argue will make expansion both palatable and sustainable. Among the states that could vote on a Medicaid expansion are Idaho, Pennsylvania, South Dakota, Utah, Virginia, Wyoming and Tennessee, where Gov. Bill Haslam has likened finding an acceptable way to expand to “trying to thread a needle from 80 yards.”
In many statehouses in 2014, expansion will be discussed alongside revisions in how Medicaid is delivered and accessed. There could also be proposals to cover more low-income populations without expanding Medicaid, as Oklahoma and Indiana have done. But the idea of fitting Medicaid to needs and political dynamics within individual states is as old as Medicaid itself. “No two Medicaid programs have ever been the same, and it would not surprise me if we saw innovation on that front, not just in expansion but whatever their needs may be,” says Melissa Hansen, a health policy analyst at the National Conference of State Legislatures.

Income Tax Revision

As state finances stabilize in the post-recession economy, some states will look toward major changes in their tax codes. Ten governors last year floated income tax cuts, most with the rationale that these would help their states remain economically competitive. Three of the proposals would have eliminated the income tax entirely. While none of the states joined the existing seven that don’t tax income, some reductions were implemented, and budget watchers expect those themes to carry over into 2014 as a number of governors have again set goals of lowering the income tax rate.
Louisiana, Nebraska and North Carolina all failed to eliminate their income tax, though they made some headway. Nebraska established a commission to study the issue, and North Carolina Republicans successfully shifted to a lower, flat income tax. The North Carolina actions were watched by GOP legislators across the country, so look for more efforts along similar lines this legislative year.
The pressures of a constrained economy and tepid growth have also increased interstate competition, says Dan Crippen, executive director of the National Governors Association. “There’s a reluctance to have state tax rates higher than their neighbors,” he says, “and an interest in lowering rates when they can.”

Minimum Wage Laws

President Obama’s effort to raise the federal minimum wage to $9 per hour is going nowhere, but this could increase the pressure on states and localities to take action. Spurred by federal stalemate, economic trends and public sentiment, several states will consider increases in 2014. And they’re not all the usual suspects, either. In addition to reliably blue states such as Illinois, Maryland, Massachusetts and Minnesota, lawmakers in Alaska, Idaho and South Dakota are making the push. Advocates say they’ll also wage campaigns in Michigan, Pennsylvania and Wisconsin, possibly combining a ballot measure with a legislative effort to apply pressure to lawmakers. That method has worked in Michigan in the past.
In recent years, California, Connecticut, New Jersey, New York and Rhode Island have all passed hikes that raised the minimum wage above the federal $7.25-per-hour floor. Some cities are inclined to go further. Major cities with high costs of living could join San Francisco in setting much higher wages for service and other industries. “I think we’ll see a bunch of states coalescing around the $10 figure and then higher-cost cities like Seattle, Washington, D.C., New York, possibly Chicago, and some more of the California cities, will be pushing for higher levels,” says Paul Sonn of the National Employment Law Project, an advocacy group.

Public Pensions

Courts and voters will play key roles in answering the next big question facing public pensions: Are current retirees immune to cuts? Many court watchers expect bankruptcies in Detroit and San Bernardino, Calif., to set precedent in this area, as both cities have taken the unusual move of including their pension debt in their filings. The judge presiding over Detroit’s bankruptcy recently ruled that the state’s protection of pension promises does not apply at the federal bankruptcy court level—city employee unions are appealing the decision. San Bernardino’s judge has not issued an opinion.
Frank Shafroth, director of the George Mason University Center for State and Local Government Leadership (and a Governing contributing columnist), believes the question will ultimately be decided in the U.S. Supreme Court as the issue comes up in more states: “I think we’re going to have a lot more courts opine on this in the next few years,” he says.
Meanwhile, in California, an effort is under way that could have major consequences for CalPERS, the state’s huge public employee pension fund. Mayors of five California cities facing large pension costs are seeking to get an initiative on the 2014 ballot that would give governments authority to negotiate changes to existing employee pensions. Retiree health benefits would be affected as well.

Immigration

In 2013, the U.S. Senate passed a comprehensive bill that linked enhanced border security with a pathway to citizenship for the country’s estimated 11 million undocumented immigrants. So far the proposal has languished in the House. But whether or not a new immigration law is enacted by Congress this year, the issue will remain a top priority in state capitals.
States’ experiments with immigration legislation largely involve bills to increase access to higher education. Last year, Colorado, Hawaii, Minnesota and Oregon joined 13 other states where undocumented immigrants who graduate from local high schools can receive in-state tuition at public universities and colleges. In places that already grant in-state tuition to undocumented immigrants, financial aid may become the next battleground topic. Washington state considered a bill in 2013 that would have granted state financial aid to low-income, undocumented immigrant college students. The proposal passed the state House but died in the Senate. With another year left in the state’s current two-year legislative session, the issue could again resurface.
Lawmakers are also warming to the idea that states should issue driver’s licenses to noncitizens in the interest of public safety. Last year at least 10 states and the District of Columbia decided to grant driver’s licenses to undocumented immigrants, with the eligibility criteria varying by state. The move was largely a response to a new legal status proffered on some immigrants by President Obama’s 2012 executive order known as the Deferred Action for Childhood Arrivals (DACA) program. The federal order protects young undocumented immigrants from deportation, so long as they meet certain qualifications related to age, education, noncriminal status and military service. Since DACA went into effect, at least 25 states have considered proposals to extend driver’s licenses to this population.

Safety Net

Some 46.7 million Americans lived below the federal poverty line in 2012, about 10 million more than the year before the recession. State and local governments are grappling with how to care for their neediest residents amid diminished federal aid. “We can’t pass the buck on to anybody else,” says Uma Ahluwalia, director of human services in Montgomery County, Md. “We still have to take care of them.”
The overall unemployment rate has fallen significantly over the past two years, but the economic recovery is leaving behind those at the bottom. Congress’ effort to reduce annual deficits in recent years has meant the lowest level of funding for discretionary domestic programs in decades, much of it impacting public assistance for the poor. The sequester that went into effect last March included a cut of $854 million to the Section 8 voucher program that helps low-income families pay their rent. Up to 65,000 fewer households were using rental vouchers by the end of 2013, according to an analysis by the Center on Budget and Policy Priorities. If the sequester cuts are not reversed this year, the center estimated, the number of affected families could ballon to 185,000 by the end of 2014.
Meanwhile food stamps, officially known as the Supplemental Nutrition Assistance Program, experienced a $5 billion reduction in November when Congress allowed a recession-era boost to expire. The next farm bill could mean further cuts of at least $4 billion over 10 years, out of a current program that totaled almost $75 billion in benefits in 2012.

Higher Education

When state revenues plummeted in the aftermath of the recession, colleges and universities incurred some of the steepest cuts in state budgets. At the same time, enrollment jumped nationwide as mid-career workers returned to school and students put off entering the job market. Now the picture is slowly changing. A preliminary survey by the American Association of State Colleges and Universities (AASCU) found 37 states increased fiscal 2014 operating support for public four-year universities.
But along with the restoration of funding has come more scrutiny of how it’s spent. “No one really cared to open the black box, look inside and see how things worked,” says Barmak Nassirian, AASCU’s director of federal relations. Now, he says, nearly all stakeholders agree the money needs to be spent more efficiently, though lawmakers disagree about how to do that.
President Obama has proposed tying funding to a ratings system that assesses the value schools provide students. Meanwhile, more than a dozen states have enacted performance-based funding for public colleges and universities, allocating funds based on graduation rates or other metrics (though most only tie a portion of funding to those measurements).
Given still-tight budgets, states may further examine ways to increase efficiency and help students graduate sooner, such as pushing universities to accept more transfer credits from community colleges. With rising student debt, financial aid changes should also loom large this year. In particular, talks could focus on finding a balance between merit and need-based student aid. “There’s definitely a shift in thinking in terms of whether merit aid is the best way to invest scarce state resources,” says the National Conference of State Legislatures’ Julie Bell.

Employee Compensation

States that enacted extended pay freezes and benefit cuts in recent years might soon have an opportunity to reduce the pinch on state workers as revenues rebound.
Already this past fall, most Florida state employees saw their first across-the-board pay increase in seven years, while those in Virginia received their first permanent base pay raise since 2007. Missouri and Kentucky state employees are among those that have recently pushed legislatures for sustained compensation increases.
Along with anticipating potential pay raises, Leslie Scott, executive director of the National Association of State Personnel Executives, says more of her members are looking at some of the underlying concerns with compensation systems. One of the more prominent issues is finding the right mix of pay and benefits. Although most states still offer competitive benefits, their cash compensation often lags so far behind the private sector that it’s difficult to attract and retain talent. In November, for example, the Oklahoma House appropriations committee held hearings to discuss how the state’s compensation system was “out of whack.”

Transportation Funding

For all the talk about the importance of investment in infrastructure, the feds have kept transportation funding at stagnant levels. So in 2013, many states decided to take matters into their own hands. Though the details vary, Maryland, Massachusetts, Pennsylvania, Vermont, Virginia and Wyoming all enacted policies in 2013 that will mean billions of dollars of new funding for transportation infrastructure. More action could be in store this year, with Alaska, Iowa, New Mexico, Rhode Island and Wisconsin all examining the issue. Meanwhile, voters in Texas will go to the polls in November to decide whether to pump money from the state rainy day fund into transportation projects, and there’s a petition effort in Missouri to hold a vote on a one-cent sales tax increase for infrastructure projects.
The issue will become all the more important in 2014 because while states are wrestling with how to pay for infrastructure, so is Washington. This fall, MAP-21—the federal legislation that decides how much the country will spend on transportation and where the money will come from—is set to expire. It’s happening at a time when the federal gas tax has remained unchanged for more than 20 years and federal budget forecasters continue to warn that, without action, the gas tax accounts that reimburse states and localities for transportation projects could soon run dry.
Buzz about the future of federal transportation decisions could help the issue gain traction at the state and local level. “The backlog of projects in these states is certainly not getting any smaller,” says Sean Slone, a senior transportation analyst with the Council of State Governments. “If it becomes clear Congress isn’t going to do anything, it may light a fire under some of these states.”

Drones

As it stands, the use of drones is allowed by the Federal Aviation Administration (FAA) on a case-by-case basis, largely for public and research use by law enforcement agencies and universities. But last year the FAA published a road map that outlines plans to allow more widespread use of drones for commercial or private uses by 2015. That means 2014 could see a great deal of drone legislation, as states try to draw up new laws to balance the security opportunities and privacy concerns that come with heightened drone use.
They’ve gotten an early start. In 2013, Florida, Idaho, Illinois, Montana, Oregon and Tennessee passed similar laws clarifying that police needed a warrant to use information gathered via drones, except during emergencies. And lawmakers might start to consider more complex aspects of the issue, such as how long authorities should hold on to data collected via drones, and what, exactly, they can do with it. There’s also the question of what cops should do if they’re using drones for one purpose and spot unrelated illegal activity in the process.

Trending: 6 More Issues That Could Be Big

Abortion
Last year state legislatures passed a slew of bills designed to curtail the provision of abortion services. North Dakota banned abortion, in some cases, as early as the sixth week of pregnancy, while Arkansas enacted a ban on abortions after 12 weeks. Alabama, Mississippi, Texas and Wisconsin passed laws requiring doctors at abortion clinics to have admitting privileges at local hospitals, largely as a way to shut down many abortion clinics. All of these laws are being challenged in court. This November, Tennessee voters will decide whether to amend the state’s constitution to specifically state that the document doesn’t protect the right to abortion.
Fracking
Last November three towns in Colorado and one in Ohio approved bans or moratoriums on fracking, the practice of extracting oil and gas from shale rock. It was the latest salvo by fracking opponents who cite concerns over contaminated drinking water and degraded air quality, even as many governors hail the industry as an economic driver. Already more than 100 municipalities across the country have approved bans or moratoriums on fracking, according to FracTracker, a nonprofit organization that compiles data on the oil and gas industry. The state with the most bans and moratoriums by far is New York, which has a statewide moratorium on the process as it conducts a health review of fracking’s impact.
GMOs
Advocates of requiring labels on foods with genetically modified ingredients have suffered defeats at the ballot box in two states—California and Washington—that were considered fertile ground for their cause. Still, advocates are hopeful. They argue that labeling foods containing genetically modified organisms offers much-needed transparency, and they point to bills sitting in nearly half of the statehouses across the country as evidence that their movement isn’t going away. The opposing side, led by companies such as Monsanto, is pressing Congress for a federal law that would effectively preempt state efforts.
Privacy
Scores of bills were introduced last year addressing privacy. Those included measures that would have required warrants for law enforcement to access old emails or track a person’s location via cellphone; limits on data collection from license-plate readers; and stronger privacy rules regarding social media accounts. Many of those bills were offered prior to revelations about the extent of data collection by the National Security Agency. Those revelations will only underscore the urgency among states that are increasingly fed up with federal inaction on the subject.
Social Impact Bonds
Also called “pay for success” contracts, social impact bonds have become increasingly popular in the public and nonprofit sectors in recent years. They are a public-private partnership targeted toward a specific social outcome. The government pays only when results or money-saving goals are met. The bonds are considered experimental, but they’re gaining steam. In 2012, Goldman Sachs loaned $9.6 million to Rikers Island jail in New York with the goal of reducing recidivism among teens, and the firm launched a second $4.6 million project last year aimed at helping children from low-income families in Utah prepare for kindergarten.
Autonomous Vehicles
Automakers have suggested that self-driving vehicles will be available to consumers by the end of the decade. While the feds will regulate many of the technical standards that come with these autonomous vehicles, the states will have to decide how traffic safety laws, as well as license and registration standards, will need to be tweaked to account for the revolutionary technology. California, Florida, Nevada and Washington, D.C., have all passed laws in recent years that allow self-driving vehicles to operate on public roads. But those laws mainly relate to the testing of vehicles. Eventually, states will have to decide who’s held liable for an autonomous vehicle accident—the driver, the manufacturer or someone else.