Politics

Issues to Watch 2007

Much of the Democrats' success in state elections last year was due to dissatisfaction with the way things were going in Washington, D.C. Voters...
by | December 31, 2006

Much of the Democrats' success in state elections last year was due to dissatisfaction with the way things were going in Washington, D.C. Voters felt Congress was stymied by partisan bickering and the federal government had failed to address some of the nation's most pressing issues.

That's a feeling shared by many state officials, regardless of party. And much of the legislative action in state capitols this year will be fueled by lawmakers' frustration with inaction by the feds. Statehouse Democratic wins will certainly bolster issues such as climate change, minimum wage increases and universal health insurance coverage. But even on more conventionally Republican issues, such as immigration reform and business taxes, states will be leading the way.

Although much of the focus in the states will be on subjects that have fallen victim to Washington gridlock, legislators will also be tackling some of the perennial state-level issues. Relatively healthy budgets will allow states to consider plans to expand early education programs and deal with backlogs of highway maintenance needs.

It's possible that new leadership in the U.S. House and Senate will result in congressional action on some of these issues. And states, of course, will be watching. But they won't be waiting.

ILLEGAL IMMIGRATION

Georgia threw down the gauntlet on illegal immigration last year, enacting one of the nation's toughest laws against undocumented residents. The measure requires people seeking state social welfare benefits to prove they are legal residents, and police officers to check the legal status of anyone they arrest and report any violations to federal officials. It also imposes sanctions on employers who hire undocumented workers, requires companies that do business with the state to run background checks on their employees and withholds a portion of state income tax for individuals who fail to provide proper documentation.

Expect more of the same this year. In fact, legislators in Texas could be considering a bevy of bills that would make Georgia's statutes look relatively permissive. Before their session even started, Texas lawmakers had filed several tough anti-illegal-immigration proposals. One would prohibit the children of undocumented immigrants from receiving state employment, professional licenses or public assistance. Others would impose a hefty fee on money that's wired to Central or South America and empower Texas to sue the feds to recover money the state has spent on illegal immigration.

In Arizona, debate on immigration reforms stymied last year's session, and legislative leaders have promised to make immigration measures a prominent feature of the 2007 docket. House Speaker Jim Weiers has called illegal immigration "the most important issue in Arizona."

It's not just border states that will tackle illegal immigration. An Oklahoma lawmaker has vowed to refile a bill to punish employers that hire illegal laborers, a measure he says will be "the toughest bill in the nation." And South Carolina legislators will debate a bill that most likely will be modeled after Georgia's.

UNIVERSAL HEALTH COVERAGE

Since Massachusetts passed a sweeping plan last year requiring everyone in the state to have health insurance -- and offering help to those who can't afford it -- the issue of universal coverage has risen to the top of the policy agenda in many other states.

Following his reelection in November, Governor Tim Pawlenty announced a plan to move Minnesota toward universal coverage, with an initial focus on children. Democratic leaders in the state legislature are on board. California Governor Arnold Schwarzenegger has said that health care reform is his top priority and that his goal is to cover all of his state's uninsured residents. His administration has said that all options are on the table -- including mandates that employers cover the costs for their workers.

In Maryland, a state health panel recently outlined a plan for universal health insurance. The draft plan, released in November by the Maryland Health Care Commission, would require residents to have coverage. It also would create an insurance exchange where individuals could choose a plan regardless of their employer. Similarly, a legislative task force in Illinois last month endorsed a plan that would require every resident in the state to obtain insurance. And New Jersey lawmakers are working on universal insurance legislation.

Other states may not be looking at universal coverage, but the Massachusetts plan will serve as an impetus to examine other health care reforms, notes Alan Weil, executive director for the National Academy for State Health Policy. "We can expect health insurance to be a major issue in states this year," he says. "States are realizing they can't just copy Massachusetts' program. It's still early to see what angle they're going to take on it and adapt for themselves." But Weil expects universal health insurance for children to be discussed in more than a dozen states.

MINIMUM WAGE

Few state issues have more momentum this year than increasing the minimum wage. The federal wage standard has not been raised in a decade, and states are no longer waiting for Congress to act. Twenty-nine states now have a minimum wage higher than the federal hourly standard of $5.15, and 11 states have set wages in excess of $7 an hour.

Last year marked a watershed for the issue, with 12 states voting to raise wages. More than half of those increases were approved by voter initiatives that tied future wage rates to inflation. In a special legislative session last month, Illinois became the latest state to hike wages. That state's new minimum hourly pay rate of $7.50, which takes effect in July, will be among the highest in the country.

Lawmakers in New Mexico plan to take up the issue this year, after failing to agree on a wage proposal in 2006. Governor Bill Richardson has pledged to increase the minimum pay in his state, and one bill would raise hourly wages to $7.50 over two years. Legislators in Kentucky and Texas also plan to debate minimum wage increases this year.

In Iowa, lawmakers stalemated over minimum wage last year, with political parties split evenly in both houses. But the November elections brought Democratic control to both chambers and the governor's seat for the first time in four decades. Incoming House Speaker Pat Murphy has made a minimum wage increase a top priority, promising action early in the legislative session.

Some of these state actions could be eclipsed at the national level if Congress approves an increase to the federal minimum wage. Incoming Democratic leaders have pledged to raise the wage during the first few weeks of the new congressional session this month. That action would likely set a new national wage floor at $7.25 an hour (see Potomac Chronicle, page 20).

CLIMATE CHANGE

Frustrated by inaction on environmental issues at the federal level, states have increasingly taken the helm on the issue of climate change. Thus far, 22 states have adopted policies to require or encourage utilities to increase their use of alternative energy sources, such as wind or solar power, in an effort to curb the greenhouse gases that contribute to global warming.

Voters in Washington State approved an initiative in November requiring that 15 percent of the state's electricity come from renewable sources by 2020. Earlier last fall, California became the first state in the nation to enact a cap on greenhouse-gas emissions, with a plan to reduce emissions to 1990 levels by 2020.

More states could follow suit this year. New Mexico Governor Bill Richardson last month endorsed an ambitious new plan released by a state climate-advisory group, which lays out nearly 70 recommendations for cutting New Mexico's greenhouse-gas emissions, including increased mileage standards, greater use of renewable energy sources and stricter building codes.

Similar measures could be on the table this year in New Jersey, where Governor Jon Corzine has identified global warming as a top priority, and in Colorado, where incoming Governor Bill Ritter stressed alternative energy in his election-night acceptance speech. In Alaska, a climate-change study panel appointed by the legislature last year will present its preliminary findings in March.

States also have been trying to encourage federal caps on greenhouse gases. Last month, a coalition of a dozen states, led by Massachusetts and California, argued before the U.S. Supreme Court that the federal government has the right and responsibility to regulate carbon dioxide, a leading greenhouse gas, under the Clean Air Act. If the court rules that the feds don't have the right to regulate CO2, it could stymie state efforts to do so. The court could also determine, however, that while the Clean Air Act does empower the U.S. EPA to regulate carbon dioxide, it doesn't require such regulation. Under those circumstances, states would be freer to pass greenhouse-gas regulations on their own.

REAL ID

While states are leading the way in many policy areas because of gridlock at the federal level, there's one major issue facing states that's been driven by Congress: The REAL ID Act, passed in 2005, sets strict new standards for state identification cards, such as driver's licenses.

The act doesn't actually require states to make changes, but residents of states that don't comply with the standards won't be able to use their driver's licenses as a valid form of ID to board planes, enter federal buildings or receive federal services such as Social Security. Thus, many states are viewing REAL ID as an unfunded mandate. And with a looming May 2008 deadline and a staggering price tag -- some have estimated states' costs at more than $11 billion -- this is an issue that demands legislators' attention.

The act will require individuals to provide a host of documentation -- a photo ID as well as proof of date of birth, Social Security number, address and citizenship -- in order to get a driver's license. States will then be required to authenticate that data, make digital copies of the documents, archive them in a database and then make that database available -- securely -- to other states.

It's no small order, and it requires resources beyond the means of most states' current DMVs. But the most frustrating aspect for many states is that they have been waiting more than a year for the Homeland Security Department to release detailed requirements of the act's provisions.

The anticipated magnitude of these requirements and the relatively short deadline has led many experts to assume the federal government will ultimately have to push back the deadline or scrap certain aspects of the act. But that doesn't mean REAL ID won't be an important issue for states this year.

Governor Phil Bredesen recently told reporters he wants to set aside money so Tennessee can become compliant with the new regulations. "This is going to be one of those things where half of the states are never going to comply remotely with some schedule, and they're going to end up pushing it back," he said. "But I'd like not to be one of those causing that pushing it back."

EARLY EDUCATION

Several states will be focusing on early childhood education initiatives this year. Twenty states don't have comprehensive full-day kindergarten, but lawmakers in many of those places will be exploring that option. Nevada, New Jersey, Oregon and Washington will debate expanding their kindergarten programs to include every public school in the state.

Many states start by offering full-day kindergarten programs at at-risk schools. Last month, Indiana Governor Mitch Daniels announced a plan to start a full-day kindergarten program for the state's neediest children. If legislators approve his proposal, every Indiana child who qualifies for free or reduced-priced lunches could begin attending all-day kindergarten this August.

Lawmakers in other states will be discussing even earlier education opportunities. Pre-kindergarten programs have become increasingly popular in recent years. Forty states now have some form of publicly funded Pre-K program, and that number is likely to increase this year, according to Libby Doggett, executive director of Pre-K Now, an advocacy group. State-level spending on Pre-K has increased by $1 billion in the past two years alone, with states in the South providing the most funding and access. Most of the 10 states without Pre-K programs are in the Upper Midwest.

Existing programs are likely to be expanded. Leaders in Illinois, Kansas, Massachusetts, Oregon and Tennessee have identified early education as a priority. Last year was the first time in at least five years that no state decreased funding for its Pre-K program. The vast majority increased funding. That dedication represents a turning point, advocates say: States are increasingly viewing Pre-K as a part of the mainstream education system.

ROADS AND BRIDGES

Infrastructure maintenance is a perennial issue for states, but this year could mark a redoubled effort to improve their roads and bridges. With hefty budget surpluses in many places, states will be working to chip away at their backlog of maintenance needs. "Because of budgetary shortfalls, particularly during the recession in the early part of this decade, there was a certain amount of raiding of highway trust funds," says Jennifer Gavin, of the American Association of State Highway and Transportation Officials. "Now, though, with more cash on hand, states are returning to their maintenance needs."

In many states, those maintenance needs are daunting. Colorado's proposed transportation spending next year, for example, falls $1.5 billion short of what it estimates is required to maintain and improve its roads and bridges. The state's outgoing transportation director, Tom Norton, met with legislative budget leaders last month and told them they must begin to consider new ways to increase the amount of money available for transportation.

Massachusetts faces an equally serious maintenance backlog, according to one budget analyst, who says the state's focus on Boston's Big Dig project has led to deferred maintenance issues elsewhere in the state. Louisiana, still grappling with post-Hurrican Katrina repairs and a labor shortage, has a staggering $13 billion backlog of maintenance needs. Governor Kathleen Blanco has asked the legislature for $400 million to begin addressing the backlog, most of which predates Katrina.

In Pennsylvania, the amount needed to fix the state's transportation infrastructure exceeds $1.6 billion, according to a state transportation commission report released in November. It recommended new revenue from increases in the state gasoline tax and motor vehicle registration fees. But the commonwealth may turn to a more novel approach: privatization. Illinois and Indiana made headlines last year by leasing toll roads to private companies (see "Unloading Assets," page 36). Last month, Pennsylvania Governor Ed Rendell announced interest in a similar solution for the Pennsylvania Turnpike. "The first job on roads, bridges and highways is to repair and properly maintain what we have," Rendell said. "That's not being done."

BUSINESS TAX REFORM

Some states will be debating whether to restructure the way they tax corporations. In Michigan, though, the question won't be whether, but how. Lawmakers there voted last August to repeal the Single Business Tax, which they criticized as too complex and inequitable -- one-third of the tax was paid by just .02 percent of businesses in the state. But the tax provided the state with $1.9 billion per year. The legislature scrapped it without a plan for filling that revenue gap, so replacing the lost funding will be a top priority this year. Governor Jennifer Granholm submitted a replacement tax plan in late November, but legislators said they would wait until the new session to discuss their options.

"They're definitely going to be spending a lot of time on this in Michigan," says Joseph Crosby, legislative director of the Council On State Taxation. Other states won't be focusing on the issue quite as specifically, he predicts. "But we'll see business taxes being a larger or smaller component of tax reform discussions in general, depending on the state."

In North Carolina, a newly formed State and Local Fiscal Modernization Study Commission will be examining ways to completely restructure the state's revenue system, including business taxes. A similar panel was created in Georgia last year. Kansas, Kentucky and Louisiana are likely to look at modest changes aimed at business-tax relief. Ohio and Texas, which both passed sweeping changes to their tax structures in the past two years, will probably be "tweaking" their plans this year, Crosby says.

Pennsylvania lawmakers could take up the issue, especially if Governor Ed Rendell reintroduces a business-tax reform plan he pushed unsuccessfully in 2005. In Oregon, there's been talk of altering the state's corporate-income tax Kicker Law, which returns unanticipated business-tax revenue, and instead keeping it for the state's rainy-day fund.

GAY RIGHTS

Gay marriage is not a live issue this year in most states: Forty-five of them have taken legislative action to prevent same-sex marriage. And 27 of those have passed constitutional amendments limiting marriage to one man and one woman -- seven of them in the most recent elections. Court challenges against gay-marriage bans failed last year in several places, including more liberal states such as Washington and New York.

Instead, legislative wrangling will revolve around other rights and benefits for same-sex couples. A New Jersey Supreme Court ruling last fall gave legislators six months to determine how exactly to define gay spousal benefits. That decision mandated equal rights for gay and straight couples but charged the legislature with delineating the specifics. In other states this year, legislators may find themselves forced to act on similar court orders. Legal challenges are pending in California, Connecticut, Iowa, Maryland and Oklahoma.

Alaska legislators have so far defied a court order to establish health benefits for same-sex partners of state employees -- despite meeting in a special session in November to discuss the issue. The deadline for implementing the benefits was January 1, so this will certainly be a hot-button issue for legislators this year. Elsewhere, states may consider bans on adoption by gay couples. At least 16 states discussed constitutional amendments to ban such adoptions last year, but none made it to the ballot. In Arkansas, incoming Governor Mike Beebe has called for reinstating the state's ban on same-sex adoptions, which was struck down by a federal court in 2004.

HOME FORECLOSURES

There's one issue that might not yet be on legislators' radar but that they may soon find themselves forced to confront. Home foreclosure rates across the country have skyrocketed over the past year, as housing markets have cooled and buyers who only barely qualified for mortgages have defaulted on home loans.

Nevada's foreclosure rate in last year's third quarter jumped nearly 240 percent from the year before. Minnesota's rate increased 212 percent; California and Kansas each saw jumps of about 170 percent. In Colorado, which has the nation's highest rate, the state reported one new foreclosure for every 127 households. Nationally, foreclosure rates are up over 40 percent.

Predatory lending practices are partially to blame. About half the states have passed laws targeting the practice, in which lenders impose unfair or abusive loan terms on borrowers. More states will be looking at these laws this year. Minnesota's incoming attorney general, for example, has said that targeting lending abuses will be her No. 1 priority.

Much of the current rash of foreclosures, however, can be attributed to the booming popularity of so-called "exotic" or nontraditional mortgages. These include no-money-down loans, interest-only loans and adjustable-rate mortgages.

To combat foreclosure rates, then, consumer-protection advocates will be pushing for broader laws that incorporate the concept of "suitability" or "fiduciary duty." These types of laws hold lenders responsible for providing a loan that's in a borrower's best interest. States will be looking to Rhode Island and Ohio, where lending laws that just took effect this month include provisions that approach suitability standards. Ohio's new law, for example, prohibits state-licensed mortgage brokers from issuing "unfair" or "unconscionable" loans.

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