On Monday, Massachusetts Gov. Maura Healey announced cuts of more than $600 million to health and social service programs to address a $1 billion shortfall. Arizona enjoyed a record surplus last year, but now it faces a shortfall of roughly $1 billion. And California went from a $100 billion surplus to a $68 billion shortfall in just a few months. About half the nation's population lives in states that face at least a near-term shortfall.
With hundreds of billions in extra federal funding from the pandemic just about having run its course, now is a good time for states to take a pause, suggests Jonathan Williams, chief economist for the conservative American Legislative Exchange Council. Over the past couple of years, lawmakers were able to enjoy nothing but good times — cutting taxes while also raising spending. But “overall, from a fiscally responsible standpoint, it’s probably a healthy thing that states are going to need to do some belt-tightening,” Williams says.
It won’t all be austerity. Despite the fiscal pressures in some states, most begin the year in good shape, having built up their rainy-day funds to record levels. “The states are in a strong fiscal position,” says Tim Storey, CEO of the National Conference of State Legislatures. “There are a few warning signs, a few lights beeping on the dashboard, but overall states are in a very good position to weather whatever the economy throws at us.”
Storey says it’s not looking like a year when social issues are likely to dominate legislative debates as much as they have in the recent past. Although at least two dozen bills restricting transgender rights have been introduced in Missouri alone, state Senate President Caleb Rowden says he does not plan to devote floor time to them this year. When it comes to abortion, most states have decided by this point whether to preserve rights, or restrict or ban the procedure.
Still, abortion will remain a live issue in states such as Florida where abortion rights measures are expected to appear on the ballot. And red states from Utah to Kentucky are eager to ban DEI, or diversity, equity and inclusion programs, at least from universities.
Have we mentioned it’s an election year? Partially for that reason, legislators will introduce bills to crack down on crime, with a particular emphasis on addressing the fentanyl epidemic. Finding ways to tighten the border and address the flow of migrants is now not just a concern for Republicans but increasingly for Democrats as well.
Legislators will cover a broad range of perennial topics, such as energy and climate, while also tackling tech issues including AI, privacy and cryptocurrency. They’ll also be delving into some areas that have traditionally not been much of a concern for states, including international issues from China to Gaza that were traditionally left to the feds.
While housing is primarily a local concern, state lawmakers view it as a near-universal problem that demands their attention. “It’s almost like you can’t build fast enough,” says Bob Duff, majority leader of the Connecticut Senate. “Every community needs to be a part of the housing solution, especially affordable housing.”
As the 2024 legislative sessions get underway, here are some of the top issues lawmakers will be facing:
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AI
Artificial intelligence has been around since the 1950s, but its sudden emergence as a consumer product and its potential to disrupt nearly every activity and industry has state lawmakers scrambling to address it. A dozen states have already enacted laws demanding agency research of AI and its use and consequences, while half the states have introduced bills to address its application both in government and the broader economy.
AI has incredible potential for handling data, automating repetitive tasks and generally making many functions easier for humans to handle. But lawmakers at this point are rushing to get ahead of possible downside risks. President Joe Biden issued an executive order laying out guidelines for “safe, secure and trustworthy use” of AI in October, while the European Union reached agreement on a sweeping set of policies last month.
In September, California Gov. Gavin Newsom directed state agencies to develop guidelines for state use of generative AI. This month, state Sen. Bill Dodd introduced a bill that would require state agencies to alert users when they are interacting with AI, while encouraging the state to invest in AI education and build capacity for its usage in the workforce.
Many of the conversations center on AI’s impact on everyday people — such as the case of teens facing exploitation from generated images. Expect to see further legislation like last year’s bill in New York banning explicit deepfakes of people. But the push for regulation is expanding into the political sphere. States including Florida, New Hampshire and South Carolina are considering legislation to limit or bar use of manipulated videos known as deepfakes around elections. “I think AI will be used in presidential election campaigning,” says Michael Ahn, a public policy professor at the University of Massachusetts Boston. “There will be active collection and usage of voters’ information for more effective political campaigning. However, that will come with potential privacy violations.”
The question of who owns the data used in AI has made for a lively set of legal challenges. Elected officials will be concerned with putting limits on public information. But tech experts say they should not rush to hamper tools that are still being developed. “There is likely an equal, if not greater risk of unintended consequences from poorly conceived legislation than there is from poorly conceived technology,” Daniel Castro of the Information Technology and Innovation Foundation said in response to the EU package. “And, unfortunately, fixing technology is usually much easier than fixing bad laws.”
—Zina Hutton
Budgets
The flood of federal funds that brought double-digit growth and record surpluses to state budgets in recent years is receding, but fiscal 2024 state budgets generally reflected a return to business as usual with modest growth in spending.
States have long been aware that federal aid would have an end date, says Kathryn White, director of budget process studies for the National Association of State Budget Officers (NASBO). They have largely used fiscal recovery funds for one-time investments, or investments that could strengthen their fiscal resiliency. Even so, the combination of reduced federal aid and decreased tax revenue could create challenges.
NASBO expects rainy-day fund balances to be higher at the end of fiscal 2023 than the year before, but for total balances (rainy-day funds plus general fund ending balances) to decline in 2023 and 2024. State tax revenue is anticipated to decline by 0.3 percent in fiscal 2023 and 0.7 percent in fiscal 2024, but a Pew analysis found that in most states revenues remain higher than they were pre-pandemic.
Meanwhile, there are continuing pressures on spending. The volatility of the insurance market is a big concern, says Shayne Kavanaugh, senior research manager for the Government Finance Officers Association (GFOA). Protection against cyber attacks — or natural disasters such as extreme heat events, wildfires, floods and hurricanes — could become unaffordable, if not unobtainable, for some jurisdictions. Inflating medical costs are another wild card.
Pressure is growing for bigger investments in affordable housing, support services for immigrants and technology upgrades. Salary increases may be necessary to rebuild a depleted workforce. Local governments will need to adjust as federal funds for schools and child care wind down.
The budget process depends on building productive conversations around conflicting interests, says GFOA’s Kavanaugh. Political conflict at the national level has already changed the tenor of conversations in state and local governments, and he’s concerned that this will only get worse as political battles intensify in this election year. “That’s not going to bode well, he says, “for wise or savvy decisions about budgets or in public finance generally.”
—Carl Smith
Crime
Taking a tough-on-crime stance, whether on the campaign trail or filing legislation, has become common again in state legislatures. A bill just filed in Kentucky, for example, would increase penalties for violent crimes, including the revival of an idea from the late 20th century: The bill’s three-strikes provision would require life sentences without parole for individuals convicted of three separate violent felonies.
After gaining great currency in the wake of the 2020 murder of George Floyd, the idea of restricting or penalizing police behavior is now just about moribund. Eliminating cash bail — not requiring defendants to post bail to get out of jail before trial — is another idea that’s become a non-starter. Last year, Illinois became the first state to eliminate cash bail, but advocates of that approach admit it’s a tough sell elsewhere. “For reformers, there’s going to be a lot of defense rather than offense,” says Adam Gelb, president of the Council on Criminal Justice.
This might be a surprise at a time when homicides are down, in most places, from their spike during the pandemic. Last year, homicides plummeted by 12 percent, according to AH Datalytics. Despite the drop, however, homicides remain higher than they were prior to the pandemic. And although anger about crime has historically been driven by homicide and other violent crimes, now people are also mad about property crimes — particularly auto and retail theft.
The scope of retail theft has sometimes been overblown — the actual data is fairly mixed — but media coverage has been heavy and many lawmakers are anxious to address it. Last year, a half-dozen states passed laws increasing penalties for organized retail crime. This year, many bills will seek to lower felony theft thresholds. Previously, several states had raised the dollar amount in value thieves had to take before facing felony charges, but the momentum now has swung the other way.
Raising felony theft thresholds was an important component of the broader criminal justice reform movement, which seeks to reduce levels of incarceration. But sensational media coverage about shoplifting and other retail crimes — along with the reality of sharply elevated numbers of auto thefts — will make property crime more of a focus than it’s been for many years, Gelb predicts. “These theft events have the potential to derail two decades of criminal justice reform,” he says.
In 2023, several states adopted compassionate release policies or clean slate laws, giving former offenders the chance to apply for jobs and housing without noting their criminal records. But reformers recognize that it’s going to be harder this year than it’s been for some time to overcome the desire among lawmakers to crack down on murderers, thieves and drug dealers.
—Alan Greenblatt
(David Kidd/Governing)
Education
In 2024, several education issues will carry over from 2023, including school choice debates and parental rights arguments around book banning and preferred names/pronouns — as well as increased potential for lawsuits around these topics. For school administrators, workforce shortages remain a key concern. Legislators are not only worried about having enough adults working in schools, but figuring out ways to get kids to come back at a time when chronic absenteeism has become a serious problem.
At the end of 2023, public schools reported difficulty hiring qualified teacher’s candidates, with retention suffering as well, partially due to salaries. Teachers went on strike last year in Los Angeles and Clark County, Nev., among other jurisdictions, with more strikes likely in 2024. “In the United States of America, teacher pay has just barely kept up with inflation, so their buying power isn’t growing,” says Sylvia A. Allegretto, senior economist at the left-leaning Center for Economic and Policy Research, who has published research on the “teacher pay penalty.” “Teachers will leave because there are opportunities that may have better pay in the private sector.”
Classrooms have become a major battleground in the culture wars. Ten states now require schools to alert parents when a student uses a different name or pronoun. Republican lawmakers are pushing for increased parental rights when it comes to curriculum, as well as putting limits on the way history gets taught, due to their concerns about longstanding liberal “indoctrination” in schools. Last year, Democratic Govs. Gavin Newsom of California and J.B. Pritzker of Illinois signed bills banning book bans, but these continue to proliferate in schools and libraries across the country.
Publishers themselves are pushing back against book bans. Last month, Penguin Random House, the nation’s largest publisher, filed a federal lawsuit challenging an Iowa law that bans books with depictions or descriptions of sex acts, claiming it’s too broad. In South Carolina, the National Association for the Advancement of Colored People (NAACP) filed suit against a ban against an anti-racism book in Pickens County.
In other words, passing legislation may only be the beginning of legal battles. “We need to follow court cases, the lawsuits around controversial policies,” says Julie Marsh, an education professor at the University of Southern California. “The intent for some folks (is) that these cases could ultimately reach the Supreme Court.”
—Zina Hutton
(David Kidd/Governing)
Energy and Climate
Last year was the hottest on record, 1.4 degrees Celsius above pre-industrial levels and uncomfortably close to the 1.5 degree threshold scientists have warned us not to cross. There were more billion-dollar climate and weather disasters in the U.S. in 2023 than in any previous year. COP28, the December meeting of parties to the Paris Agreement, was largely seen as a failure — but states and localities still have opportunities to lead.
The $369 billion devoted to clean energy in the 2022 Inflation Reduction Act (IRA) was the biggest commitment America has ever made to climate mitigation. In October, the Department of Energy (DOE) announced the selection of 16 states that will receive $7 billion over the next eight to 12 years to create seven regional hydrogen hubs. The IRA includes as much as $100 billion in tax credits for hydrogen production, but there are unresolved disagreements about how “green” the hydrogen must be to receive the biggest credits.
Other IRA opportunities include $7 billion in grants to help low-income communities access solar power. DOE has $8.5 billion for home energy rebate programs and $400 million to help states implement building codes that improve resilience and efficiency. Climate pollution reduction grants have already gone to several jurisdictions, and $4.6 billion more is available, as is $2 billion for environmental justice. Large awards have been made to projects in the Colorado River Basin from the $4 billion in the IRA’s drought mitigation program.
States are also benefiting from private-sector reaction to the IRA. A tracker from the nonprofit Energy Innovation shows state-by-state distribution of more than $100 billion in private manufacturing investments in response to its tax credits and other incentives. These encompass more than 130 projects and 81,000 new jobs.
Support for sustainable energy sources is not universal. The Pew Research Center reports that 87 percent of 10 Republican-leaning respondents think the U.S. should use a mix of fossil fuel and renewable energy sources. Fifty-seven percent of Republicans believe the U.S. should never stop using oil, coal, and natural gas. In 2023, U.S. oil production hit an all-time high of 13.2 million barrels of crude a day, millions more than Saudi Arabia or Russia.
Meanwhile, the nuclear industry is in flux. California’s two nuclear power plants have been granted five more years of operation. A $7 billion cost overrun for a new reactor in Georgia angered consumers and underscored the industry’s dependence on subsidies. Some in the industry are pushing for nuclear power to be eligible for tax incentives designed for hydrogen production.
Climate impacts that are already here — extreme heat events, floods, drought, stronger hurricanes and wildfires — have made adaptation and resilience major concerns throughout the country. These include responses ranging from stricter zoning for flood-prone areas, updating building codes in fire-prone areas, reimagining stormwater systems and deconstructing urban heat islands.
—Carl Smith
(Mel Melcon / Los Angeles Times)
Fentanyl
Prior to the pandemic, annual deaths from drug overdoses in the U.S. were already a dreadful 65,000 per year. By 2023, that number had nearly doubled, to more than 110,000. Roughly 70 percent of those deaths are due to fentanyl, the powerful synthetic opioid. Fentanyl is now the leading cause of death for Americans between the ages of 18 and 45.
Although everyone can agree the death toll is horrific, there is no consensus about how to address it. For Republicans, the right approach to fentanyl is a combination of stricter law enforcement, tougher sentencing laws and tighter border security. Many lawmakers want to stiffen penalties for possession of even small amounts of the drug, in a reverse of the recent trend toward lowering sentences for simple possession. Individuals selling or trafficking fentanyl would face substantially longer sentences.
Many Democrats have accepted the need to stiffen penalties, due not only to the scourge of fentanyl but the apparently endless emergence of ever-more-potent drugs. Fatalities from a sedative called xylazine have increased dramatically across the country, but particularly in the South. A class of opioids known as nitazenes can be as much as 40 times as powerful as fentanyl.
The fact that synthetic opioids are so readily available means that a supply-side approach is doomed to failure, some Democrats and public health officials believe. Even if it were possible to cut off supply from China and Mexico, there would be plenty of domestic production. Last year, law enforcement seized more than 360 million doses of fentanyl across the country. Still, the drug remained plentiful.
Rather than relying entirely on law enforcement, what’s needed is treatment, including both medication and therapy, says Jill Rosenthal, director of public health policy at the Center for American Progress, a progressive think tank. “Just like we would approach heart disease by identifying who’s at risk and who needs treatment, we need to do the same thing with opioids, because it’s a health issue,” she says.
There seems to be one area where both conservatives who want harsher penalties and progressives who favor a public health approach can agree: fentanyl test strips. Fentanyl is often mixed with other drugs — including counterfeit prescription pills — but the test strips allow users and others to detect its presence and reduce their risk of overdose. On Jan. 1, new laws took effect in Illinois that allow trained overdose responders to use fentanyl strips and pharmacists and retailers to sell them over the counter.
Last month, Pennsylvania’s Legislature passed a bill requiring acute care hospitals to test for fentanyl and xylazine when administering emergency room drug screenings. “Testing for fentanyl can mean the difference between life and death for someone who has unknowingly been poisoned with it,” said GOP state Sen. Doug Mastriano, who sponsored the bill.
—Alan Greenblatt
Health
States face health challenges on many fronts. A shortage of health-care and public health workers serves to undercut all their efforts. Some states are exploring how they can have more authority over health-care markets and temper the influence of consolidation and private equity on costs. And states are still dealing with the “unwinding” of expanded Medicaid coverage enacted during the pandemic.
Total Medicaid enrollment is slowing down since its pandemic peaks. Fewer patients mean slowing rates of total spending growth in the enormous program. But it is still growing — projected to grow 3.4 percent in the current fiscal year, down from nearly 10 percent in fiscal 2022. However, due to the end of the increased federal match, state spending on Medicaid will continue to grow. State spending will increase by 17 percent in the current fiscal year, according to the Kaiser Family Foundation.
The pandemic drove home the life-and-death importance of modernizing public health data systems. Estimates of what state and local governments need to bring this infrastructure up to speed range from almost $8 billion over the next five years to almost $37 billion over the next 10, including $11 billion to make systems interoperable. State efforts to move this forward are beginning to include attention to data points that reflect social determinants of health.
Prescription drug pricing is a continuing concern. State policymakers at both the legislative and agency levels are honing in on the practices of prescription drug managers, including spread pricing — which means charging a policyholder or plan more for a medication than they’ve paid for it.
Even putting aside abortion, reproductive issues are likely to receive increased attention. Maternal mortality rates in the U.S. are far higher than in any other industrial country — and rising. They are three times greater for Black women. Beginning in 2024, states will be required to report data regarding the quality of maternal care provided to those enrolled in Medicaid and the Children’s Health Insurance Program. A need to do more to screen for and prevent sexually transmitted diseases came into focus in 2023. There’s also increased attention on contraception, perhaps because of the abortion wars.
States will explore how Medicaid allowances for health-related social needs can be blended with other programs to address housing shortages. A number are seeking approval to allow incarcerated people to enroll in Medicaid, to avoid lapses in coverage when they are released.
—Carl Smith
(David Kidd/Governing)
Housing
Long considered a local concern, especially for big cities, housing is now a growing priority for state lawmakers. No state has enough affordable rentals for the lowest-income renters. Meanwhile, potential homebuyers are feeling priced out due to higher interest rates, increased construction costs and simply being priced out. Last year, state legislators introduced well over 2,000 bills related to housing and homelessness, according to the National Conference of State Legislatures – nearly double the number in 2022. “We know that the ultimate goal is to build more housing,” says Bob Duff, majority leader of the Connecticut Senate. “We’re about 95,000 units shy of where we need to be on our housing stock.”
Last year, several states adopted broad-based policy measures aimed at making housing more affordable, more accessible and easier to build. Most of the state-level efforts focus on supply-side constraints — things like zoning regulations, limits on density and permitting rules — which don’t fall neatly into the typical red-blue political divide. States with major packages of reforms include liberal stalwarts such as Washington, which passed a series of bills allowing duplexes and fourplexes in many areas currently restricted to single-family housing, as well as allowing accessory dwelling units on many lots. But they also include the so-called Montana Miracle, with the GOP-dominated Legislature passing legislation similar to Washington’s.
Such policy achievements are partly the outgrowth of years of advocacy by the YIMBY movement (short for Yes In My Back Yard), which positions itself as a countervailing force to local homeowners who often oppose new construction in their neighborhoods. The movement is built on the theory that high housing costs are tied directly to onerous building regulations. As more pro-construction laws are adopted, a growing body of research will put that theory to the test. Even as many states make progress on housing reform, other states, both red and blue, have struggled to get legislation passed, given the complicated but well-organized coalitions that oppose state overrides of traditionally local decision-making.
At the local level, leaders continue to experiment with ideas such as easing parking mandates to reduce building costs. Many of the boldest initiatives of the pandemic era, including eviction moratoriums and direct cash assistance to low-income renters, have expired. But renters continue to organize for stronger protections, including rent control, bans on discrimination against holders of housing vouchers and rules requiring landlords to offer “just cause” for evictions. In some cities, organized tenants are a growing political force in their own right.
—Jared Brey
(David Kidd/Governing)
Immigration
Federal policies and systems determine the growth of the immigrant population and the pace at which cases are resolved. Congress is currently debating both security measures and spending, but this may end up being a year when campaigning on immigration issues takes precedence over real action. That means states will be working hard to fill policy and service gaps.
Encounters between Border Patrol agents and migrants at the U.S./Mexico border — which include both apprehensions and expulsions — have reached record highs. Authoritative data regarding the outcome of these encounters isn’t available past 2021, but changes in federal policy have greatly increased the number of people entering the country with uncertain, temporary status. More are crossing the border who have been observed by agents (or technology) but not apprehended.
The Migration Policy Institute estimates there are more than 12 million unauthorized immigrants in the U.S. Past studies have found that more than 6 in 10 didn’t cross a border illegally, but overstayed their visas. Migration from South America and the Caribbean is increasing, including greater numbers from countries that don’t have a long history of mass immigration to the U.S., such as Nicaragua, Ecuador and Venezuela.
Chicago’s Office of New Americans offers services including legal assistance, language access and help for undocumented students. It’s an example of a trend in other cities. But states and cities are struggling to meet the costs of providing services and housing to migrants, especially jurisdictions known for pro-sanctuary policies.
States have long held that the federal government should do more to reimburse the costs resulting from its policies. Relief funds that have helped meet housing emergencies are disappearing, and some cities are using their own facilities to provide shelter. Mayors of cities including Chicago, Houston and New York complain they’re overwhelmed by newcomers and have called on the Biden administration for more support. "This is a national problem that should not fall on the backs of local cities," New York Mayor Eric Adams said last month.
Arizona Gov. Katie Hobbs, a Democrat, ordered the National Guard to border communities in December. “Yet again, the federal government is refusing to do its job to secure our border and keep our communities safe,” Hobbs said. “With this executive order, I am taking action where the federal government won’t.”
The complaint about federal inaction, of course, has been louder and more persistent from Republican governors who are concerned not just about the number of individuals crossing but the lethal drugs some of them carry. Last year, Florida enacted a sweeping law imposing penalties on companies that hire undocumented workers; blocked local governments from issuing identification cards to them; increased penalties for human smuggling; and required hospitals to collect data on costs for caring for undocumented immigrants.
A Texas law scheduled to take effect in March would make it a state crime for people to enter the state illegally from other countries. The Justice Department has sued to block the law.
Progressives aren’t happy about the tougher stance some Democrats are taking, or the administration’s willingness to negotiate on some GOP demands. “We shouldn’t be scapegoating immigrant lives,” Delia Ramirez, a Democratic congresswoman from Illinois, complained last month. Pro-immigrant groups note that migrants help address workforce shortages and point out that mistreatment of undocumented migrants remains a problem, from substandard wages and dangerous working conditions to violation of child labor laws.
More people are working across borders because they fear they could die if they stay where they are, from starvation, war, murder or natural disasters, suggests Theresa Cardinal Brown, senior adviser for immigration and border policy at the Bipartisan Policy Center. Many bills that made it through state legislatures in 2023 were intended to foster inclusion of immigrant populations, from extending tuition programs to expanding access to driver’s licenses, regardless of status.
Still, the political momentum on this issue appears to be swinging the other way. Because the Biden administration has “refused to secure the border,” Texas GOP Gov. Greg Abbott said on Jan. 6, “Texas has, and we will continue, to erect barriers, repel migrants, [and] bus and fly migrants to New York, Chicago, and other places like that."
—Carl Smith
International Affairs
Laura Capps gets asked all the time about the war in Gaza. This is surprising to her because she’s not a federal official, but rather a county supervisor in Santa Barbara County, Calif. “The last time I checked, our county doesn’t have a State Department, but I’m getting asked about it everywhere I go,” she says.
In a strange way, the nationalization of American politics means state and even local politicians are being asked to react to international events — or are eagerly rushing to do so. Numerous liberal cities have adopted resolutions calling for a cease-fire in Gaza, while the conservative American Legislative Exchange Council (ALEC) has crafted a model resolution for states to issue in support of Israel.
The war in Gaza is not the only international issue state lawmakers are taking on. Last year, several states passed resolutions expressing support for Taiwan. But when it comes to China, some state lawmakers don’t think resolutions are enough. In November, a federal court blocked a Montana law that banned the use of TikTok in the state, due to its Chinese ownership, but a solid majority of states have barred TikTok from government devices.
Last year, Montana and several other states also enacted laws restricting Chinese nationals from buying property. A law in Florida, for example, bars them from owning property within 10 miles of military bases or critical infrastructure such as airports. “We’re going to see more of these bills going forward,” says Jonathan Williams, executive vice president of ALEC. “On China-related items, this is going to be one of the most active sessions in recent memory.”
The old saw that partisanship stops at the water edge was barely ever true, but it formerly was the case that state and local officials rarely felt the need to weigh in on international questions. To the extent that they had a foreign policy, it was all about promoting trade. China’s money used to be green enough for any state, but not anymore. Especially for politicians with national ambitions.
On the presidential campaign trail, Florida Gov. Ron DeSantis and former South Carolina Gov. Nikki Haley, both Republicans, have been trading barbs about which of the two of them used to be friendlier to China. “There is not another governor in this race that hasn’t worked to recruit Chinese companies,” Haley said in November. “Every governor has done the same thing, just like every one of you has Chinese products in your home.”
—Alan Greenblatt
Mental Health
The COVID-19 pandemic helped peel back the lid on a nationwide mental health crisis that had been building for years. While mental health is an urgent priority, it also intersects with many other key policy concerns, from homelessness to public health, policing and public safety, workforce policy and gun violence. Voters in California will decide whether to approve a $6 billion bond issue to fund behavioral health housing and treatment settings on the March ballot.
Mental health challenges have grown across the board, but particularly among young people. According to a widely cited report from the federal Centers for Disease Control and Prevention earlier this year, 57 percent of teen girls said they felt “persistently sad or hopeless,” with 30 percent saying they’d seriously contemplated suicide. Advocates are now pushing states, cities and counties to provide more school-based mental health services. Twenty states have added mental health education to their curricula since 2016, according to the National Alliance on Mental Illness (NAMI).
A major step forward at the federal level was the passage in 2020 of the National Suicide Hotline Designation Act, which established 988 as a universal hotline number for suicide and mental health crises. Congress left much of the work of implementation up to states, notes Stephanie Pasternak, NAMI’s director of state affairs, including the establishment of emergency call centers and response teams. In setting those up – and fielding millions of calls – states have run into serious workforce challenges, as has been the case with other areas of service. NAMI is now pushing states to pass a monthly fee on phone lines to pay for crisis response, similar to the ones that fund 911 emergency services. Eight states have passed such fees thus far.
In terms of response, more and more lawmakers have come around to the belief that law enforcement agencies aren’t the best equipped to address mental health challenges, says Debbie Plotnick, a state advocacy leader at Mental Health America. New telehealth regulations are making it easier for people to access mental health treatment as well. But there’s been regression in some areas in Plotnick’s view, including crackdowns on street homelessness in some places. That’s an issue that should be addressed with housing policy, she says.
“What is difficult is building out the infrastructure to make sure that mental health needs are attended to before people reach the crisis stage,” Plotnick says. “Most policymakers are looking at crisis as the point where they need to do intervention.”
—Jared Brey
(David Kidd/Governing)
Pensions
Pensions remain a trillion-dollar problem. States have improved the health of their pension plans over the past decade, but many remain badly underfunded. Last year, pensions enjoyed an average return on their investments of 7.5 percent. Partly as a result, average funding ratio for state and local pensions is projected to increase to 78.1 percent, up from 74.9 percent, according to the Equable Institute. Although the funding shortfall went down last year, it still stands at $1.44 trillion.
At this point, no state is deep in the danger zone — meaning none are unable to meet their current obligations. (Several were at risk of this just a few years ago.) But even though states have increased their pension contributions collectively by 7 percent a year since 2008, 21 states are still not making contributions large enough to keep their funding gaps from growing, according to the Pew Charitable Trusts.
The share of state and local government spending devoted to pensions now exceeds 5 percent, which is markedly higher than it was at the dawn of the 21st century. “Ultimately, pension funds are on a better trajectory than they were before the global financial crisis” of 2008, says Jean-Pierre Aubry, Associate Director of State and Local Research at Boston College’s Center for Retirement Research.
That being said, states still need to prepare for future periods of instability, making plans that take into account economic downturns. “A very promising practice that now half the states are doing is stress testing, asking what will pension plans look like if investments do worse than expected,” says David Draine, Pew’s principal investigator for public sector retirement systems. “Now states are able to plan for what a bad [financial] time might result in, and make policy changes to avoid excessive risks – or realize that the test is showing you that your current policies are sustainable, and that you're in great shape.”
States have been moving new hires into defined-contribution plans, along the lines of 401(k)s, leaving fewer employees left in the old defined-benefit pension programs. Although intended as a cost saving measure, there are now challenges for states that have few active employees left to pay into the old system. As states wrestle with workforce shortages, this is an area where at least some policymakers are exploring a restoration. Last summer, Kentucky Democratic Gov. Andy Beshear called for a defined-benefit plan for state troopers. “There was a mass exodus of troopers and officers when the defined benefits were taken away, understandably,” Beshear said. “A pension is a promise that I will always keep.”
Kentucky pensions have long been among the nation’s worst-funded. Discussing the upcoming budget, state House Speaker David Osborne said it would be “appropriate to assume that there will be significant additional contributions into the pension system.”
— Zina Hutton
(David Kidd/Governing)
Poverty
Childhood poverty dropped dramatically during the pandemic, thanks to an expansion of the federal child tax credit. Families spend the lion’s share of their additional cash on essentials such as food, housing, clothes and transportation. The federal increase, which eliminated complicated eligibility requirements, expired in 2021, but its impact has inspired a rash of state interest in adopting their own credits over the last two years.
More states are expected to follow suit in 2024. At least 14 states now have their own versions of a child tax credit, and 10 more are considering new proposals. As they take effect, new evidence will inform an ongoing debate among researchers around the impact of expanded tax credits on employment rates. “All of a sudden, you have half the states with a child tax credit or an active proposal,” says Megan Curran, policy director at the Columbia University Center on Poverty and Social Policy. “That, in the course of a year, is an amazing policy shift.”
Separately, more states are requiring employers to provide paid sick leave to workers. Nebraska voters may get a chance to vote on the policy at the ballot in 2024, after state lawmakers rejected a proposal in 2021. Missouri voters could weigh in on a similar policy, along with a proposal to increase the state minimum wage to $15 per hour. Some states, including Colorado, Maryland and Maine, are working to implement new family and medical leave policies, offering extended benefits for childbirth or caring for elderly relatives. Others are starting to offer family leave specifically for educators. The National Conference of State Legislatures is also watching an increase in state legislation related to expanding food benefits for children and families and reducing food insecurity. Meanwhile, at the local level, dozens of cities are experimenting with guaranteed cash assistance programs, often targeted at families with young children.
—Jared Brey
Taxes
Both red and blue states have cut tax rates in recent years. The trend of cutting both personal and corporate income tax rates slowed but didn’t stop in 2023. “It’s a trend that stands out in recent history,” says Jared Walczak, vice president of state projects at the Tax Foundation. “We’ve never had a period with that many [state tax cuts] in such a short time and no other issue has caught fire quite like that.”
Many states were flush with surpluses thanks in large part to federal COVID-19 relief payments, and lawmakers sought to return some of that cash to taxpayers. The effects of their choices will start to become clear over the next few years. With revenues starting to decline, it’s possible the pendulum of state tax policy could swing the other direction. One exception could be property tax rates. With home values spiking, some states could seek to adjust rates to give homeowners a break. But in terms of income, some Democratic lawmakers are still pushing to increase taxes on the wealthiest citizens. This year, Massachusetts will enact its first state budget that includes proceeds from a tax on millionaires that voters approved in 2022.
In Minnesota, the Democratic-Farmer-Labor majority came close last year to adopting a so-called worldwide combined reporting rule, a complex change that would allow the state to collect corporate taxes based on companies’ overall global profits. It’s a hotly debated concept, with potential drawbacks as well as benefits for states. Minnesota would have been the only state in the U.S. to fully adopt it, but other states, including New Hampshire and Vermont, are considering similar rule changes in 2024. It’s an obscure tax policy that could either gain steam or fizzle out, depending on economic and political conditions.
—Jared Brey
(David Kidd/Governing)
Workforce
The United States continues to experience workforce shortages. If every unemployed person found a job, there would still be 3 million unfilled openings, according to the U.S. Chamber of Commerce. This ongoing labor shortage, which certainly extends to the public sector, is being driven by several factors, including pandemic-related burnout, an ongoing wave of baby boomer retirements in the public sector and a decline in the number of adults overall who are participating in the workforce.
Total public-sector employment remains below the level it had reached at the beginning of 2020, just before the pandemic. Cities, counties and states are struggling to compete with private-sector employers who are also actively recruiting and often able to offer salaries that the public sector can’t match. Earlier this year, the Police Executive Research Forum found that resignations were running 50 percent higher than before the pandemic. Nearly 90 percent of school districts struggled to hire enough teachers for the current school year. There hardly seems to be a job category without challenges. In December, the Board of Corrections in Arkansas asked Gov. Sarah Huckabee Sanders to activate the National Guard to help fill vacancies among prison guards.
Public-sector agencies are now seeking new strategies to broaden the applicant pool. Aside from raises, bonuses and flexible scheduling to retain current workers, 2024 will see an increase in skills-based hiring in the public sector, as opposed to demanding college degrees or other educational credentials, as employers re-evaluate hurdles blocking applicants from marginalized and underutilized groups, including young people and racial and ethnic minorities. A particular area of focus will be bringing in people with transferrable skills and experience from the private sector or other roles, making sure they get hired at the appropriate levels, rather than facing a career ladder reset.
Hawaii passed legislation last July to allow military spouses who follow active-duty personnel to the state to make it easier to use professional licenses from other states. That idea may well spread to other states this year, as public-sector agencies seek to better utilize the 13 percent of military spouses who are unemployed.
“One goal should be looking at nontraditional pools of people, maybe veterans, the Reserves, the National Guard, military spouses,” says Cara Woodson Welch, chief executive officer of the Public Sector HR Association. “It can be really hard for any of those groups as they're coming into the workforce. And the public-sector workforce is one of the premier places that really could use their services because they're already connected to a sense of mission and purpose.”
—Zina Hutton
