The Crystal Ball: State Legislator's Top 9 Issues for 2009

With 2009 just around the corner, who doesn't enjoy a little prognostication? The National Conference of State Legislatures has proposed its top 9 issues of 2009. My read on how they will play out in Iowa are below each issue.

Issue #1 - State Budgets Gaps
Money will be the No. 1 issue for states in 2009. It is the starting and stopping point for virtually every state program and service. That's why the current fiscal crisis is so alarming. Shrinking state revenues will squeeze every area of state government. More bad economic news is reported almost daily, so, short of a dramatic and unexpected turnaround, state fiscal conditions are expected to continue their downward slide. New programs in a majority of states are likely to be shelved as lawmakers focus on essential state services. Even high-priority programs could get pinched. In this dire fiscal climate, flat funding may be considered a victory. The bottom line: States are battening down the hatches and bracing for the worst fiscal storm in decades.

What this means in Iowa: As we have already heard, the Governor wants to make a 1.5% across-the-board cut to the state budget, as we have about a $450 million gap between the income we expect and the services the state provides. We have also heard that a committee is considering a move to allow municipalities more leeway to put a local income tax in place. This will be tough to resist for cities who are starving for cash, but will likely bring odd bedfellows together on the taxpayer's side. Couple this with the aftermath of last year's floods and it will be tough to pass big ticket legislation.

Issue #2 - Transportation and Infrastructure
The continuing gap between transportation needs and available funds is the key transportation issue for 2009. Revenues for transportation at all levels of government continue to flatten or diminish. Maintaining crumbling infrastructure, fighting congestion and meeting burgeoning demand for public transportation is straining transportation budgets. Gas tax receipts, the mainstay of transportation for the last 50 years, no longer meet the nation's growing needs due to inflation, less driving and more fuel-efficient vehicles. To keep pace, at least 15 states will consider raising the state gas tax and/or motor vehicle fees. Others are looking at tolls and public-private partnerships, though tight credit has slowed consideration of these approaches. With an eye to the future, a number of states including Oregon, Idaho and Minnesota are studying the per mile vehicle fee to eventually replace the gas tax and pay for infrastructure maintenance and new transportation facilities.

What this means in Iowa: If gas prices stay down, it is possible that the state will remove the gas tax subsidy for blended-ethanol gas products, as taxpayers have been saving 2 cents per gallon over non-blended gasoline. The two cents per gallon could make a big difference for road projects and alternative energy which mean jobs to Iowans.

Issue #3 - Higher Education Affordability
In today's world, where a college degree is necessary for most jobs, should states ensure the opportunity for everyone to attend post-secondary education? If the answer is "yes," states will need to make sure in 2009 that funding for higher education is adequate enough so all students, not just the wealthy ones, can afford college. Higher education is often one of the first areas to be cut during tough fiscal times. In response, state universities and colleges typically tend to raise tuition to make up for these lost revenues, which is an additional financial burden on families. During 2007 and 2008 most states were able to increase their budget appropriations for higher education but this is not likely to be the case in 2009 with bleak economic conditions.

What this means in Iowa: With yet another increase in tuition in 2008, Iowa will likely not make any headway in making higher education more affordable. Iowa currently rates an F and won't likely change this year, particularly for Pell grant funding for lower-income students.

Issue #4 - Health Costs and Reform
Health costs keep rising at the same time that state budgets are in trouble. An immediate challenge for states in 2009 will be to maintain and retool current health programs, especially Medicaid and diverse programs aimed at covering the uninsured. As the numbers of unemployed increase, Medicaid rolls will grow. State legislatures will face competing demands such as helping those without health insurance coverage, investing in prevention and wellness, and adopting health information technology such as exchangeable electronic medical records and “e” prescribing. States already striving to provide near-universal health care coverage, Massachusetts and Vermont, worry that shrinking state revenues will become a real obstacle. At the same time others with future health reform proposals, including California, Pennsylvania and New Mexico, may have to defer action due to budget constraints. Meanwhile renewed federal funds for children’s health (SCHIP) and “stimulus” funds for Medicaid are important to states, while they also seek a strong voice in the national discussion of comprehensive reform.

What this means in Iowa: More poor kids and the elderly are likely to be affected by an across the board cut to state programs including healthcare that the Governor has proposed. Whether the the legislators will summon the will to challenge Culver is anybody's guess with his re-election bid around the corner.

Issue #5 - Clean Energy and Alternatives
Developing and using alternative energy will be a top issue for legislatures across the country. State legislatures will be looking for solutions to a host of energy challenges in the coming year, and integrating renewable energy (generated by wind, solar, geothermal and biomass) with existing energy resources will be at the top of their agenda. Roughly 30 states have now enacted some sort of standard for renewable electricity. Some state leaders see renewable energy as having many benefits, such as encouraging local job growth and economic development; reducing the volatility of energy prices; and meeting new growing energy needs without increasing greenhouse gas emissions. In 2008, nine states passed new or strengthened existing standards. Continued activity is expected during 2009. Policymakers will also be exploring how new technologies can generate clean energy from America's vast coal resources and how they can assist the development of these technologies.

What this means in Iowa: As my environmentall-friendly friend Mike Carberry says, "Green is the new black" and the state is likely to legislate to invest in those companies that will develop renewable, greener energy and will create new jobs.

Issue #6 - Sentencing and Corrections
Without change to current corrections and sentencing policies, by 2011, state prison populations are projected to grow by nearly 200,000 inmates at a cost to states of $27.5 billion. Bipartisan efforts in a growing number of state legislatures seek to alter this destiny with actions aimed at safely supervising certain offenders in the community and reducing crime with mental health, substance abuse and other rehabilitative programs. Strained state budgets make cost-effective corrections options and policies an even greater priority in state legislatures in 2009. Ten states indicated they are considering cuts to corrections in NCSL's State Budget Update. Four states exempted corrections in their budgets. States such as Texas and Washington are expanding capacity for offender treatment and community supervision; and similarly Connecticut, Kansas, Pennsylvania and others are improving probation and parole supervision, including use of evidence-based practices.

What this means in Iowa: Don't count on the legislator's to be pushing for more places to incarcerate folks, but localities to put up bond issues to address their local needs. Could be a tough sell in 2009.

Issue #7 - Homeownership
More states are looking at ways to help residents afford to purchase a home during these tough financial times. States are also helping halt foreclosures by creating emergency assistance programs and changing foreclosure processes and procedures. California, Delaware, Hawaii, Idaho, Maine, Maryland, Minnesota, Nebraska, New Hampshire, Oregon, Virginia and Washington have regulated foreclosure consultants so they cannot take advantage of desperate homeowners. With the high number of foreclosures across the country, several states have established protections for tenants who are renting homes facing foreclosure.

What this means in Iowa: With 1 out of every 2,256 homes in foreclosure (a national ranking of 39 out of 50), the state should be concerned about public policy in this area, but it is will likely be left to FEMA and local banks to sort out rather than any meaningful legislation.

Issue #8 - Working Families
One-third of families in this country has no net worth, or is in debt; and the looming recession is about to make things worse. In this climate, state legislatures have an opportunity to think long term and encourage families to build up their own financial foundations, which have become fragile. Today, 20 percent of Americans are asset poor, meaning they lack the resources to live above the federal poverty level for more than three months after losing their income. Already strapped, working families are increasingly worried about daily expenses and apprehensive about long-term goals, such as college tuition and retirement. Hamstrung by tight budgets, states have a chance to create incentives for families to invest in the key components of a strong financial future -- savings, education and, when the time is right, homeownership -- assets that pay dividends over time.

What this means in Iowa: Iowa has been somewhat resilient compared to the national trends. However, when services are not available, the working poor seek greener pastures. Human service agencies and Non-profits will likely be challenged in 2009, particularly as their budgets are trimmed.

Issue #9 - Unemployment
Unemployment rates are on the rise and state unemployment compensation funds are experiencing shortfalls due to an increase in claims for unemployment benefits and a decrease in revenue from payroll taxes. Indiana, Michigan, California, New York and Ohio have less than three months of reserves on hand to pay unemployment benefits. Eight other states have reserves of less than six months and it's recommended that states have at least a year of reserves on hand to see themselves through a recessionary period. Close to 4 million unemployed workers are currently receiving unemployment benefits, a level not seen since 1983. State governments levy payroll taxes on employers to pay for unemployment insurance benefits. Many states are going to have to address shortfalls in their unemployment accounts.

What this means in Iowa: Iowa's unemployment rate in november rose .5% compared to the national average of 2%. To maintain the tax-base, keeping Iowans working will be a goal for the legislature. Building trades should be kept busy with the replacement or repair of homes and businesses that were destroyed by floods and tornadoes last year, but this will mean that insurance dollars and FEMA/SBA monies are getting to those home and business owners.

One issue that won't likely see much sunlight:
- VOICE: Voter Owned Iowa Clean Elections, the Democratic House and Senate leadership sees it as a dog that doesn't hunt.