States face big challenges in 2011
 
It doesn't take the second coming of Nostradamus to foresee that states are facing yet another year of historic fiscal challenges in 2011. But while next year's crop of lawmakers will undoubtedly spend much of their time doing battle over budgets, many other issues will also be in play. Below is a sampling of some of the policy issues, large and small, lawmakers will consider in the coming year.
 
IMMIGRATION: A collection of over 40 states introduced more than 1,400 immigration-related bills in 2010. Easily the most controversial of those, Arizona's SB 1070, is expected to continue creating waves across the nation in 2011. The bill sparked numerous protests, including several boycotts sponsored by local governments, Latino groups and immigration advocates. The Obama administration quickly launched a legal challenge to the measure, which requires Grand Canyon State police, during a "lawful stop, detention or arrest," to attempt to determine the detainee's immigration status. A federal court in July granted an injunction blocking that key element of the law, but an ensuing decision on that injunction from the full 9th U.S. Circuit Court of Appeals is still pending. Most observers believe the U.S. Supreme Court will ultimately decide the law's fate. 
 
The high court last week began hearing arguments in a challenge to another Arizona immigration law, a 2006 measure that levies sanctions against employers who knowingly hire illegal immigrants. Both measures are being challenged on grounds they violate federal authority over immigration enforcement. 
 
The uncertain nature of the two measures has done nothing to inhibit state lawmakers from crafting similar bills for the upcoming legislative sessions. According to the National Conference of State Legislatures, at least six states introduced SB 1070 copycat measures before the final gavels came down, with dozens more expected to follow suit in 2011. 
 
FEDERAL HEALTH CARE REFORM: The federal health care reform measure adopted last March gives states three options for providing coverage to their citizens: establish their state exchange, get into a regional exchange with surrounding states or let the feds establish an exchange the state will adhere to. But since being signed into law by President Barack Obama, at least 40 states have introduced bills to limit, change or resist the bill's requirements. At least seven adopted laws that resist the federal mandate to purchase health insurance and at least three legal challenges to the suit remain active in federal court. In contrast, over 30 have also introduced bills aimed at establishing the infrastructure for implementing the law. With the big shift in power in favor of Republicans, the effort to contest the new law will likely pick up significant steam. Some state lawmakers have even proposed getting out of the federal-state Medicaid program entirely. Even where such drastic measures are not expected to come into play, lawmakers of all stripes will undoubtedly be looking at a wide spectrum of ways to reduce state health care costs. 
 
PENSION REFORM: Several states addressed pension reform in 2010, and just as many are expected to take up the issue again next year. Most state efforts involve increasing the amount public workers must contribute to their own pension plans or moving those workers from defined-benefit to defined-contribution plans. 
 
REDISTRICTING: The massive GOP gains in statehouses this year could pay dividends for years to come as Republicans now get to draw the district lines in many more states than they ever could have imagined in their dark days of 2008. But some will also have their lines drawn by citizens' commissions, most notably California, the nation's most populous and diverse state. In the recent election, voters not only endorsed staying with the nascent program to draw the state legislative lines, they authorized expanding it to include the formation of Congressional districts. All eyes will definitely be on the Golden State, which has previously allowed lawmakers to draw the lines, a process critics have snidely dubbed the "incumbent protection plan." 
 
ENVIRONMENT: With Congress seemingly content to turn national energy policy into permanent political constipation, expect key environmental issues to move entirely to the states, from renewable energy portfolio standards to measures that impact the growth of solar and wind power. 
 
Again, all eyes will be on California to see how it continues its implementation of AB 32, the state's historic effort to reduce greenhouse gas emissions to 1990 levels by 2020, after voters emphatically rejected a ballot measure that would have killed the law. With a federal cap-and-trade program now likely dead for the foreseeable future, the Golden State is moving forward with its own cap-and-trade plan, the only across-the-board program of its kind in the nation. 
 
EMPLOYMENT: With the economy still lagging and unemployment hovering at almost 10 percent, jobs creation will be a priority for most lawmakers. Expect most states to continue introducing bills aimed at job growth, primarily those that implement tax incentives for small and medium sized businesses to hire new workers and that reduce regulation on businesses of all sizes. 
 
EDUCATION REFORM: Dozens of states crafted ambitious new education policies in 2010 in hope of garnering some of the Obama administration's $4.3 billion in federal "Race to the Top" prize money. Many included new metrics for evaluating teachers based on student performance and a loosening of restrictions on charter schools. In the end, however, only 11 states and the District of Columbia were chosen, leaving scores with little to no money of their own to bring those plans to fruition. Even so, education leaders in states that failed to earn grants, such as Michigan and New Jersey, say they will continue to pursue the Race to the Top-inspired reforms. With budgets still reeling, this could be one of the major issues of the year. 
 
BULLYING: Many states have addressed bullying in recent years — from physical violence in the schoolyard to electronic "cyberbullying" via cell phones and social networking sites like Facebook — and many more will likely do so in 2011. Much of the focus is expected to be on issues of race, ethnicity, religion and sexual orientation. 
 
While most of the attention has been on bullying in schools, at least 17 states also considered bills in 2010 dealing with bullying in the workplace. Observers expect similar legislation in over 20 states next year. 
 
PARED DOWN FILM INCENTIVES: In recent years, states have vigorously competed to lure Hollywood to their neck of the woods, most notably by offering film and television executives lucrative tax breaks on production costs, low-interest loans and other financial perks. Overall, 42 states now offer the tax credits. A recent Tax Foundation report for Bloomberg Businessweek places the tab for all this largesse at approximately $3.5 billion just since 2005. Critics, however, question the job-creation value of these programs. One state report in Michigan, for instance, showed that each job created by the Wolverine State's incentive program in 2010 cost it $193,000 in incentive funding. Several states, including Kansas, New Jersey and Rhode Island, have either ended their subsidy programs, placed hard annual caps on them or plan to let them expire in the near future. With states facing a cumulative 2011 budget gap of at least $72 billion, according to the National Conference of State Legislatures, more states may soon follow suit. 
 
SYNTHETIC POT: The spread of synthetic cannabinoids, chemically engineered substances that give the user a high similar to marijuana, definitely caught lawmakers' attention in 2010. According to NCSL, a half dozen states passed laws barring the sale of the products, which are often marketed under names like K2, Spice and Genie and sold over the Internet and at U.S. retail outlets. Another six states took regulatory action to get the fake pot off the shelves, and four more have pending legislation to ban the products. The federal Drug Enforcement Agency announced in November it was adding five of the most common chemicals used to make synthetic pot to the agency's Schedule 1 list of illegal narcotics — which includes drugs like heroine, cocaine and real marijuana — for one year while it determines if the chemicals warrant being placed there permanently. State lawmakers, however, are likely to continue their own efforts in the mean time. 
 
This is only a small portion of the issues state legislatures will likely take up in 2011. SNCJ columnist Lou Cannon will offer his own perspective in his column on Dec. 20, fresh off his presentation on this topic to the National Conference of State Legislatures Fall Forum.

Vermont still healthiest state
 
For the fourth year in a row, Vermont is the healthiest state in the nation, according to the 2010 edition of America's Health Rankings, published by United Health Foundation, the American Public Health Association and Partnership for Prevention. Vermont's strengths include its high rate of high school graduation, low violent crime rate, low percentage of children in poverty and high level of public health funding. Mississippi, the bottom ranked state for the 10th year running, suffers from, among other things, a high obesity rate, low high school graduation rate, high number of children in poverty, limited availability of primary care doctors and high number of preventable hospitalizations.

RECOVERY MAY NOT SAVE STATE BUDGETS: The national economic recovery may finally be reaching state governments (see SNCJ Spotlight in last week's issue), but many states' fiscal problems are far from over. 
 
At least 15 states have reported new budget holes totaling $26.7 billion for the current fiscal year, according to a new report from the National Conference of State Legislatures. That is on top of the $83.9 billion in combined gaps states already closed earlier this year. 
 
The outlook is even worse for FY 2012, with 35 states projecting budget gaps of $83.2 billion and rising. One big reason for the worsening fiscal picture is the $37.9 billion drop in funds from the American Recovery and Reinvestment Act (ARRA) coming next year, which many state officials have taken to calling the "ARRA cliff effect." 
 
"It's a sort of budget paradox," NCSL's Arturo Perez told the Los Angeles Times, which noted that the expiring federal stimulus made up roughly 5 percent of state budgets last year. "Revenues are stabilizing or even growing for the first time in 18 to 24 months...But they're not growing fast enough to offset that 5 percent across the board." 
 
With years of deep spending cuts already having been made, states will face some tough budget choices. An indication of what may lie ahead is Arizona's recent decision to stop paying for potentially life-saving organ transplants under its Medicaid program. 
 
The states' improving revenue position remains a silver lining, however. Despite the looming budget problems next year, no state officials reported to NCSL that they were pessimistic about their revenue outlook. Officials in 13 states did so last November (NCSL.ORG, STATELINE.ORG) 
 
REPUBLICANS MOVE TO BLOCK FEDERAL PENSION BAILOUT: One of the factors contributing to the Democrats' Congressional losses in November was voter antipathy over the federal bank bailout. The new Republican leadership of the U.S. House has evidently learned from that lesson. 
 
Three prominent House Republicans, Reps. Paul Ryan of Wisconsin, expected to chair the Budget Committee, Darrell Issa of California, the likely chair of the Committee on Oversight and Government Reform, and Devin Nunes, also of California, introduced a bill a couple of weeks ago (U.S. HB 6484) that would bar states from selling tax-exempt bonds — the lifeblood for many — unless they report their pension-fund liabilities to the U.S. Treasury Department. 
 
The congressman say their goal is to get a better handle on the true extent of states' public pension liabilities, which they say states aren't always forthcoming about. 
 
"The point of this is to smoke the rats out of their holes," said Rep. Nunes. "What is the total amount of pension debt? No one really knows." 
 
The ultimate aim of the legislation, however, may be to avoid a federal bailout of state and local pension funds. Congress actually has little authority over the funds. But with pension liabilities placing growing pressure on state and local government finances, the problem could end up in Washington's lap. 
 
The federal government regulates corporate pension funds, and a federal agency, the Pension Benefit Guaranty Corp., was created to bail them out should the need arise. And although there is no such federal backstop for state and local pensions, some believe Washington would be hard pressed not to step in if a pension plan threatened a major government insolvency. 
 
The new bill attempts to sidestep the question of federal authority by using an incentive mechanism — states might say a punishment — to encourage compliance. 
 
"This is a first step in trying to put some pressure on the states and limit the exposure to federal taxpayers before it comes to a bailout," said Joshua Rauh, a professor at Northwestern's Kellogg School of Management. 
 
But rather than using a stick, Rauh suggests that the federal government should use a carrot to spur states toward pension reform. He has proposed expanding tax subsidies to states and local governments that agree to begin replacing defined-benefit pension plans with 401(k)-style plans, for example. And states that make that change for new employees, he said, could be allowed to issue tax-subsidized bonds to fund their legacy pension liabilities (WALL STREET JOURNAL). 
 
BUDGETS IN BRIEF: Legislators and state officials gathered at the National Conference of State Legislatures' Fall Forum in Phoenix last week said one of the big challenges they face as their budget troubles continue is unrealistic public expectations. As PENNSYLVANIA state Rep. Dwight Evans (D) put it, "The problem with the budget is that the people want (what) they're not willing to pay for. It's as simple as that" (DAILY HERALD [PROVO]). • New York City's Off-Track Betting Corporation unexpectedly closed about 50 betting parlors around the city last week after the state Senate failed to pass an Assembly-approved bill designed to save the long-failing horse betting operation. The move is expected to put 1,000 parlor employees out of work and cut off a revenue stream that had channeled tens of millions of dollars each year to breeders, track owners and related businesses (NEW YORK TIMES). • CALIFORNIA Gov. Arnold Schwarzenegger (R) made a last-ditch effort last week to balance his state's books before leaving office, calling a special session and reviving many of the same dire proposals — eliminating state welfare and child care programs, cutting cash grants to the elderly and disabled, and ending vision coverage for children receiving government-subsidized health care — that lawmakers rejected a few months ago. The state faces an estimated $6.1 billion budget shortfall in the current fiscal year and a $25.4 billion deficit over the next year and a half (LOS ANGELES TIMES. • WASHINGTON Gov. Chris Gregoire (D) said last week she will call a special legislative session before Christmas to address a projected $1.1 billion state budget shortfall for the current fiscal year (SEATTLE TIMES). • State economists in FLORIDA are forecasting a $3 billion budget shortfall for next year, due to slumping sales tax collections and a spike in Medicaid costs (MIAMI HERALD).

GOP POISED TO RETAKE NY SENATE: In 2008, Democrats took control of the NEW YORK state Senate for the first time in four decades. But Republicans appeared on the verge of reclaiming the chamber last week after a State Supreme Court justice rejected a hand recount of a pivotal race in the state's Seventh Senate District and declared Republican Jack Martins the winner over incumbent Democratic Sen. Craig M. Johnson by 451 votes. 
 
The GOP had already claimed 31 of the Senate's 62 seats, enough to ensure at least shared control of the chamber, with two close races remaining in limbo, one, in Westchester County, leaning Democratic, and the other, in Nassau County, leaning Republican. 
 
After Justice Ira B. Warshawsky's ruling in the Martins-Johnson race, Senate Republican leader Dean G. Skelos said, "There's important work to be done in Albany, and now that the elections are over, we're eager to get right to it." 
 
The elections aren't over quite yet, however. Senate Democrats said they would appeal the ruling. 
 
"The judge's decision to deny a recount is wrong on the letter and spirit of the law," said Austin Shafran, a spokesman for the Democrats. "In a race where the margin is less than half of 1 percent, the failure to count every vote is a disservice to every voter." (NEW YORK TIMES) 
 
POLITICS IN BRIEF: A federal appeals panel in CALIFORNIA heard arguments last week in the legal battle over Proposition 8, constitutionally banning same-sex marriage in the state. A ruling by the randomly chosen panel — consisting of a staunch liberal, Judge Stephen Reinhardt, a moderate Democrat, Michael Hawkins, and a generally conservative Republican, N. Randy Smith — could potentially make such bans unenforceable not only in CALIFORNIA but also in eight other Western states. But the judges seemed inclined to confine their decision, expected in the next few months, to CALIFORNIA, with an appeal to the U.S. Supreme Court likely (ABC7.COM, SAN FRANCISCO CHRONICLE).

DAYTON TAKES MN GOV RACE: The highly anticipated recount to determine the Minnesota governor's race came to an abrupt halt last week when Republican Tom Emmer conceded to Democrat Mark Dayton as the re-tally was nearing completion. Emmer called off the rest of the recount when it became clear he would not win. He also ruled out filing a lawsuit to challenge the findings, which showed Dayton with a lead of just over 8,700 votes. 
 
"Minnesotans made their choice, by however thin a margin, and we respect that choice," he said. 
 
Emmer's concession made Dayton the Gopher State's first Democratic governor since Rudy Perpich served two terms from 1983-1991. The gov.-elect almost immediately reached out to Republicans set to lead the Legislature, saying they must join together to tame a massive budget deficit. He also quickly held a Capitol press conference that urged lawmakers from both parties to work together to solve the state's anticipated $6.2 billion budget shortfall.  
 
"If we simply disregard and defeat each other's proposals and try to make each other look bad in the process, we will only cause unwanted gridlock and deadlock," he said.  
 
But incoming House Majority Leader Matt Dean (R) made it clear his side will not be inclined to go along with Dayton's campaign plan to tax the state's wealthiest residents to help close the budget gap.  
 
"With fewer Democrats in both bodies, it's clear there is a firm bipartisan majority in the Legislature that will again reject job-killing tax increases," he said. (ASSOCIATED PRESS) 
 
WALKER WILL CHALLENGE UNIONS: Wisconsin Gov.-elect Scott Walker (R) has signaled his eagerness to challenge state public employee unions. In an address to the Milwaukee Press Club, Walker said he is considering a number of possible tacks for weakening the unions, including eliminating their ability to negotiate with the state.  
 
"The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers and the people who care about services," he said.  
 
The stance drew a harsh response from union representatives, who say Walker is looking to scapegoat them for the state's budget troubles.  
 
"In Scott Walker's world, CEOs never make enough money, and there isn't a working person who deserves what he earns," said Rich Abelson, president of the AFSCME Council 48, which represents 4,000 public workers.  
 
Walker denied his plan is a personal attack on union employees.  
 
"You are not going to hear me degrade state and local employees in the public sector," Walker said. "But we can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots."  
 
Walker also noted his intention to replace the Department of Commerce with a partly private agency that would be focused solely on economic development. He said the public-private partnership would help meet his campaign pledge of creating 250,000 new jobs during his first term. (MILWAUKEE JOURNAL-SENTINEL) 
 
GOVERNORS IN BRIEF: Negotiations to remove Northern Rockies wolves from protection under the federal Endangered Species Act collapsed last week after the governors of WYOMING and IDAHO refused to go along with an Interior Department proposal on the issue. MONTANA Gov. Brian Schweitzer (D) said the impasse makes it unlikely Congress will complete any further action on the issue this year (BILLINGS GAZETTE). • ILLINOIS Gov. Pat Quinn (D) said he will sign SB 1716, legislation that allows same-sex couples to enter into civil unions that grant them the same legal rights as married couples. Quinn said he will sign the bill next year (STATE JOURNAL-REGISTER [SPRINGFIELD]). • MARYLAND Gov. Martin O'Malley (D) offered state workers a $15,000 buyout to quit by the end of January. O'Malley said the offer is an effort to help reduce possible layoffs as the state tries to close a $1.6 billion budget gap (BALTIMORE SUN). • Outgoing FLORIDA Gov. Charlie Crist (I) secured enough votes from the Sunshine State's Board of Executive Clemency to approve a posthumous pardon for Doors frontman Jim Morrison. The late rock singer was convicted of indecent exposure for his actions during a Miami concert in 1969. He appealed the verdict but died in Paris in 1971 before the case could be completed (ORLANDO SENTINEL).

BUSINESS: A federal appeals court rules that the federal Food and Drug Administration must regulate electronic cigarettes as a tobacco product rather than a drug-delivery device like nicotine gum and patches. The FDA wanted to regulate e-cigarettes as drug-delivery devices, which requires clinically proving that they are safe and effective as a stop-smoking aid. The FDA is considering an appeal (BLOOMBERG BUSINESSWEEK). • TEXAS insurance regulators approve new rules that take away the ability of health, life and disability insurers to have blanket authority to decide what their policies do and don't cover. The rules will be fully in force by next July (DALLAS MORNING NEWS).  
 
CRIME & PUNISHMENT: The ILLINOIS House and Senate give final approval to SB 2843, a bill that calls for the formation of a state task force to make recommendations to the governor and lawmakers by Jan. 1, 2012 on ways to reduce child sexual abuse. The measure, which also allows schools to set up programs to teach young children about the dangers of sexual abuse, is now with Gov. Pat Quinn (D), who is expected to sign it (BLOOMINGTON PANTAGRAPH). • OHIO lawmakers give final approval to SB 235, legislation that makes the Buckeye State the 44th to classify human trafficking as a stand-alone first degree felony. It moves to Gov. Ted Strickland (D), who says he will sign it into law (COLUMBUS DISPATCH).  
 
EDUCATION: A federal judge upholds a CALIFORNIA law that bans affirmative action in public university admissions. The voter-approved measure, Proposition 209, bars the consideration of race and ethnicity in public education, employment and contracting. Opponents of the law say they will appeal the ruling (SAN FRANCISCO CHRONICLE). • NEW JERSEY Gov. Chris Christie (R) signs AB 2743, legislation that requires Garden State education officials to develop a concussion awareness program for student athletes and coaches. The bill also requires that student-athletes suspected of having sustained a concussion be immediately removed from participation and not allowed to return to athletic activity until he or she is evaluated by a concussion specialist (STAR-LEDGER [NEWARK]). 
 
ENVIRONMENT: Wildlife officials in NEVADA authorize the first black bear hunt in Silver State history. Details on when the hunt will be held and the quota of bears it will allow to be taken will be released next year (NEVADA APPEAL [CARSON CITY]). • The ARKANSAS Oil and Gas Commission issues rules that require companies drilling for natural gas in the Razorback State to tell the public what kinds of chemicals they're using in their removal process. The rules apply only to new wells (KUAR.ORG). • The U.S. Supreme Court agrees to hear arguments on whether plaintiffs can sue coal-burning utilities on the grounds that the emissions are a "public nuisance." The case is an appeal of a 2009 decision by the United States Court of Appeals for the Second Circuit, in NEW YORK, allowing a suit filed against the utilities by eight states, New York City and three land trusts to proceed. A lower court had dismissed the suit, calling the regulation of emissions a political matter (NEW YORK TIMES). 
 
HEALTH & SCIENCE: CALIFORNIA regulators adopt rules that require Golden State employers in the food flavoring and manufacturing industry to protect workers if products they handle contain at least 1 percent diacetyl, a chemical primarily used to flavor microwave popcorn. Diacetyl has been linked to lung disease. Required measures include marking areas where workers may encounter the chemical, and limiting and monitoring airborne exposure (CALIFORNIAWATCH.ORG [SACRAMENTO]). 
 
POTPOURRI: The MICHIGAN legislature approves HB 4493, a bill that would limit new drivers to no more than one passenger under age 21 except for family members or when driving to or from school. Those drivers would also not be allowed on the road between 10 p.m. and 5 a.m. unless they are accompanied by an adult or on the way to or from work. It moves to Gov. Jennifer Granholm (D) for review (LANSING STATE JOURNAL).

A BIRD ON THE WAY OUT: It's likely that no governor has faced as much downright grief from lawmakers — even those in his own party — as New York Gov. David Paterson. But the outgoing gov, who was not so subtly pushed out of a re-election bid by Gov.-elect Andrew Cuomo, may have the last laugh. Just days after asking lawmakers to help him "clear my conscience" by cutting spending to help resolve a $315 million budget shortfall, Paterson handed out over $16 million in grants to pet projects from a state fund he controls. As the Albany Times Union reports, the grants went to pay for the likes of chess tournaments in New York City, foreign trade offices in Chile and Australia, and promoting an effort to bring the Super Bowl to New Jersey. That last one left an exasperated policy advocate to huff, "it isn't like the world doesn't know about the New York City area." 
 
FIRE AWAY, OFFICIALLY: If we can have an official state bird or insect, then why not a state firearm? So asks Rep. Carl Wimmer, a former police officer who sees no reason not to take a shot at just such a designation for his favorite shooting iron, the Browning model 1911 .45-caliber pistol. As the Salt Lake Tribune reports, Wimmer wants to honor the lethal legacy of Utah native son John Moses Browning on the 100th anniversary of the gun's introduction to the world. It is believed no other state has an official firearm. A similar effort was shot down in Pennsylvania earlier this year when lawmakers killed a request to honor the Pennsylvania long rifle. Wimmer predicts a bullseye with his bill, saying "this is not controversial." 
 
HE'S A MAN OF VISION: California's outgoing Insurance Commissioner and erstwhile gubernatorial candidate Steve Poizner thinks he did one heck of a job. If you don't believe it, just ask him! As the Sacramento Bee reports, Poizner's office released a 26-page report last week - humbly dubbed "Visionary Leadership: Innovative Results" — that details more than two dozen of his wondrous accomplishments as the commish, from fighting terrorism and protecting consumers to saving the environment and pumping up the economy. Not surprisingly, it doesn't mention the $30 million of his own money the ambitious Poizner spent in losing the California gubernatorial primary in June. Alas, this time taxpayers footed the bill for his self promotion, which will undoubtedly be referenced many, many times the next time the ambitious Poizner seeks the governor's office. 
 
A REAL BUDGET BATTLE: Violent analogies are so commonplace in American vernacular that most of us think nothing of references to the "budget battles" we media types usually use to describe the back and forth of our political system. But in some places, brawling amongst lawmakers is oh so very real. Take South Korea, for instance, where Reuters reports a melee recently broke out between members of the opposition Democratic Party and the ruling Grand National Party as lawmakers put the final touches to the 2011 budget. The deal got done in spite of the fisticuffs, with only one injury of note: a GNP lawmaker was sent to the hospital after being knocked upside the noggin with a gavel. Wow, and we think things get rough in Albany.