Balancing state budgets

A recent report from the National Conference of State Legislatures (NCSL) indicates that 2011 will be another year in which the sluggish economy is going to control the legislative agenda for most states.

The NCSL’s “Top 11 of 2011” is an annual list that examines the most important items state legislative agendas.

State budgets top the list for a fourth year in a row, followed by pensions, business development, implementing and interpreting health reform, and higher education. Legislatures also have their work cut out for them dealing with redistricting, foreclosures, release of prisoners, and K2 synthetic marijuana, noted the report.

"Money is the starting and stopping point for virtually every state program and service. Based on our latest ‘State Budget Report,’ we are expecting that budget cuts will again be deep, controversial and painful," William Pound, NCSL executive director, said in the statement.

TOP 11 FOR 2011
Issue #1 – Balancing Budgets
The worst may be yet to come for state budgets. Although the Great Recession officially ended in June 2009, state budgets are far from reaching sound fiscal footing. Through Nov. 15, states have reported new FY 2011 budget gaps totaling at least $26.7 billion. This is on top of the $83.9 billion gap already resolved this fiscal year. More gaps loom as state policymakers prepare to craft their FY 2012 budgets. Although state revenue performance appears to be improving, the expected growth won’t be enough to replace federal stimulus funds that helped balance current budgets.

Issue #2 – Reforming State Pensions
Many states fall short of having adequate funding for the future benefits promised for pensions and retiree health care. How they address those issues has implications for state personnel management and delivery of state services, as well as for the budget. Many states addressed these issues, at least in part, in 2010; many more are studying them in preparation for legislation in 2011.

Issue #3 – Jobs for American Workers
The economic downturn has compromised the financial security of millions of working families. Economists agree job creation is the key component to a sustained economic recovery. Lawmakers are looking for more efficient and innovative ways to create jobs and encourage business development, by offering incentives, providing tax credits, training workers and encouraging small business growth through public-private partnerships.

Issue #4 – Interpreting and Implementing Health Reform
The federal Affordable Care Act changes how large segments of the American health system will work. States pioneered most of the provisions included in the 900+ page law that aims to expand coverage to 32 million more Americans. State budget shortfalls, changes in leadership, worries about affordable coverage, and a lengthy list of policy options and decisions facing states guarantee a busy legislative health agenda in 2011. Eight states, so far, are using state law to avoid enforcing mandatory features of the law while others are considering a retreat from costly Medicaid features.

Issue #5 – Redesigning Higher Education
A major shift in political philosophy toward higher education may be on the horizon. After several years of cutbacks to help balance the budget, the state contribution to higher education is at such a low point that a new relationship between the state and public higher education is on the horizon. Institutions want more flexibility; states want to link funding to results such as graduation rates. There will be some discussions over "privatizing" public higher education, given diminished state support, but raising tuition and cutting support for low-income and minority students are other possible policy options. State institutions are looking for alternative revenue sources, including tax increases, to prevent drastic cuts.

Issue #6 – Redrawing Districts
At the start of each decade, districts are redrawn for state legislatures and Congress. Redistricting is very complex, and can take a lot of energy from state legislators already focused on traditional policy areas. Once states receive census data in February and March, all but two states will draw new district boundaries before holding legislative and congressional elections in 2011 and 2012.  The success in 2010 November elections by Republicans at the state level now gives them a decided advantage in this redistricting cycle.

Issue #7 – Lowering Unemployment and Funding Benefits

While the national unemployment rate has remained around 9 percent all year, a dozen states have been battling double-digit rates. States are dealing with unprecedented claims for unemployment benefits. Thirty-one states have had to borrow from the Federal Unemployment Trust Fund, and now must deal with paying back their loans, along with steep interest payments. States have responded to the crisis by increasing their payroll taxes and the upping the taxable wage base. Finding a solution to unemployment and shoring up the state-federal partnership in funding benefits is a key issue for 2011.

Issue #8 – Improving Public Safety

Addressing safety concerns for American citizens in 2011 will focus on sentencing, corrections and offender reentry policies. All of these issues come with a price tag, so lawmakers will be looking to control costs by using safe, yet cost-effective, approaches. Providing better supervision and services as offenders reenter the community have been a focus of recent state sentencing and corrections policies. At least 15 states, D.C. and Puerto Rico addressed barriers to successful reentry, such as finding employment and receiving public benefits.Task forces or study commissions in at least 23 states are expected to look at suitable sentencing, offender supervision and use of corrections resources.

Issue #9 – Improving Student Achievement and Dropout Rates

To address high dropout rates and boost student achievement, state legislators are focusing on two policy objectives: Iimproving high school success and recruiting, preparing and supporting effective teachers and principals. With better ways to track graduation rates, state lawmakers are increasing the dialogue and urgency around the issue. They are considering evaluating teachers and principals based on their students’ achievement, and dramatically revamping teacher and principal preparation, licensure, professional development, compensation and tenure.

Issue #10 – Addressing Immigration

While the federal government remains gridlocked over immigration reform, state legislatures continue to address this complex and challenging issue. State legislatures enacted a record number of laws and resolutions addressing both legal and illegal immigration issues in 2010, with every state in regular session enacting legislation. Arizona’s two immigration enforcement laws on worksite enforcement (2007) and law enforcement (2010) have been challenged, and are under review by the U.S. Supreme Court and the 9th Circuit Court of Appeals, respectively. In light of budget constraints and the potential for litigation, states may delay enacting new immigration enforcement laws until the fate of Arizona’s worksite and law enforcement laws are decided by the courts.

Issue #11 – Maintaining Transportation and Infrastructure

State are now seeing the end of federal stimulus money for state transportation projects. This could spell trouble for road projects, coupled with the fact that a continuing decline in income from the gas tax leaves a widening gap between available revenue and actual money needed for infrastructure maintenance and new transportation projects. With little appetite for raising transportation fees and taxes, lawmakers will be forced to cut their transportation budgets or consider legislation to establish public-private partnerships and other innovative funding approaches. States continue to await a sweeping new federal transportation reauthorization that could supply new money and potentially change the way federal funds are distributed.