6 state policy trends to watch

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IN THIS ARTICLE

Maintaining and expanding state infrastructure

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Driving legislation for Medicaid funding

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Retaining state workforce

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Reducing state corrections spend

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Addressing education employment shortage and pandemic-related learning loss

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Promoting elections accuracy and bolstering voter roll maintenance and cybersecurity

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“Money is [usually] the driver, whatever the topic,” Underhill said, while participating in a state government affairs virtual event sponsored by Bloomberg Government and the State Government Affairs Council, an Alexandria, Va.-based national association for state government professionals. “If you’re talking policy, and you don’t have money to go with it, then it’s more for show than reality.”

Leading a discussion of “State Policy Priorities for 2023,” Underhill outlined key drivers that will inform state legislative agendas in the year ahead, amid larger projections of continued gridlock in Congress, a flip in the House if current presidential poll numbers continue to dip lower, and a possible recession on the horizon. Despite this forecast, state budgets offer a silver lining.

“State revenues are in good shape,” Underhill said, noting rainy-day funds are full and local budgets generally lag national economic trends. “Even if there is a recession in 2023, we won’t see that with state budgets [until perhaps] 2024.” In the interim, though, Underhill cautions against assuming state funds will be ripe for “pet projects.” Here are six drivers of state legislative activity to watch.

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Maintaining and expanding state infrastructure

Spurred by the $1.2 trillion Infrastructure Investment and Jobs Act, which Biden signed into law last fall, states will focus on internal modernization efforts. In parallel, states will prioritize wages to deliver on these projects.

However, states cannot rely on federal dollars alone for wide-sweeping infrastructure upgrades. In some cases, states must match funds, as with the $65 billion broadband package, which requires a 25% state match. Also, while infrastructure tops the list of state activity, it is a one-time infusion, spread over several years, Underhill said.

“It doesn’t change the fundamental challenges that states face on how to maintain or expand infrastructure – whether it’s transportation, energy, water, disaster mitigation, or broadband,” Underhill said.

Even before the pandemic, for example, more than 20 million Americans lacked high-speed internet access. When the pandemic accelerated the shift to digital life, those without adequate internet access faced even greater roadblocks to employment, education, and health care, notes the National Conference of State Legislatures.

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Driving legislation for Medicaid funding

On the health front, while vaccines and vaccine mandates have dominated headlines, the heart of state legislative activity will focus on other health care-related topics like affordable health care and prescription drug costs, and the future of telehealth in post-pandemic delivery of care. Then there is the ever-present funding consideration, along with other health care imperatives that accelerated during the pandemic.

“Again, money is a huge issue,” Underhill said. Drivers for legislation will be Medicaid funding, which on average accounts for 30% of state spending, and behavioral health, including expected major initiatives to address the opioid epidemic. As noted by Underhill’s colleagues at the National Conference of State Legislatures, disruptions from the pandemic created further barriers to treatment for substance use disorders. This health care emergency may spark an uncharacteristic break from gridlock among lawmakers, however.

“That [opioid epidemic] is an area where it’s possible Democrats and Republicans might find common ground,” Underhill said.

Retaining state workforce

While headlines shift from the “Great Resignation” to the “Great Return,” the reality is more muted. With 11.5 million job openings, and only half as many job seekers, the worker shortage continues to impact almost every industry, contributing to higher prices, supply chain woes, and production slowdowns. The adoption of labor-saving technology will fill immediate needs but introduce new challenges.

During the pandemic, unemployment insurance was stretched to capacity. UI systems will continue to struggle to rebound, as states grapple with job openings and worker disconnect, as well as recruitment and retention challenges.

Meanwhile, beyond infrastructure funding, significant state dollars will continue to go toward employee raises, as states double down on workforce retention in a strong employee job market. State legislators will continue to prioritize wages in funding considerations.

“Being able to retain workers is important to businesses, and that’s true for governments as well,” Underhill said.

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Reducing state corrections spend

On the criminal justice front, while headlines focus on gun safety, states are wrestling with a criminal justice system strained beyond capacity. Economic and efficiency concerns top the list. While major budget areas such as higher education and Medicaid receive significant federal funds, corrections rely almost exclusively on state general funds, as noted by the National Conference of State Legislatures.

Meanwhile, of the state budget pie, roughly 5% goes toward corrections. Yet the criminal justice system continues an alarming upward tick. Between 2018 and 2019 alone, for example, states spent just over $45 billion on corrections, compared to $43.5 billion in the prior fiscal year, according to NCSL data analysis.

Looking to reduce this spend, state legislative activity will also focus on countermeasures such as criminal justice data collection (including the ability to analyze offenders who go through the state criminal justice system) and front-end justice reform, Underhill said. In the latter case, states will continue to take various measures to reduce prison stays, while holding offenders accountable and maintaining public safety.

“This is largely driven by both what’s [appropriate] for people in the prison system and by the finances of it,” Underhill said. Expect this tricky balancing act to continue into 2023 and beyond.

Addressing education employment shortage and pandemic-related learning loss

While discussion of parental demands for greater control over school curriculum and youth sports occupied education-related headlines, state legislative activity on the school front has largely focused elsewhere, Underhill said.

As with the larger economy, schools continue to face deep, unprecedented personnel shortages. Even before the pandemic, high-quality teachers, tutors, and mental health professionals were in short supply, as noted by the National Conference of State Legislatures. With heightened urgency, state legislators have now had to assess even more aggressive steps to attract and retain not only teachers but other essential personnel such as cafeteria workers and bus drivers.

Similarly, social-emotional mental health concerns also score high on the state legislative radar “for both students and teachers,” Underhill said. In parallel, state legislatures face the great imperative to close the gap on pandemic-related learning loss. Among initiatives, states such as Illinois have allocated funds for afterschool and summer programs to support student growth across social, emotional, and academic needs. Similar efforts include literacy-based professional development for school personnel providing summer programs to students.

With reports suggesting it may take anywhere from three to five years for students to catch up from learning loss, education will continue to rank high among state legislative priorities.

Promoting elections accuracy and bolstering voter roll maintenance and cybersecurity

Among state legislative activity, election issues are distinguished for their absence of money as the main driver, Underhill said.

“Yes, there is an element of [questioning if] the federal government [should] provide more money to states and localities, but mostly, elections are run by local election officials, with local dollars, with some support from states,” Underhill said.

Within elections, state legislators will focus on measures that demonstrate the long-held accuracy and transparency of voting systems. As standard best practice, states will continue to focus on voter roll maintenance. This includes ensuring voter identification accuracy through timely updates such as voter address changes; as well as the ongoing maintenance of clean voter lists through measures such as removing voters for lack of voting-related activity.

Similarly, states will continue to bolster cybersecurity measures. In recent years, states have doubled down on measures relating to election cybersecurity. For example, Washington state exempted sensitive election infrastructure and cybersecurity data from public records requests in 2021, as did Louisiana the year prior. Among other efforts, states have also enacted cyber navigator programs, where an individual or team at the state level helps local election officials implement cybersecurity protocols. These election security safeguards will continue, Underhill said.

[For more insights into state policy, get up-to-the-minute state legislation tracking and expert news at Bloomberg Government.]