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States Look to Fill Pot Holes and Budget Holes

States are facing three major hurdles to filling their transportation and infrastructure coffers in 2015: continued fallout from the recession, crumbling infrastructure and an increase in the utilization of alternative transportation fuels. Much of the current funding for state infrastructure needs comes from two sources – federal funding and state gas taxes. Pressure has been on both federal and state lawmakers to raise their respective gas taxes in order to shore up infrastructure maintenance, but the move remains unpopular among the public despite plummeting gas prices.

In addition to the gas tax, many states are looking at alternative proposals in order to fill gaps in their maintenance funds, including a tax or fee on “miles traveled” as well as raising excise or sales taxes on traditional fuels. Below we look at numerous state efforts to do so.

In Connecticut, Democratic Gov. Dannel Malloy made transportation investment a priority for his second term, but did not offer specifics about potential projects. On December 3, Governor Malloy told the CT Mirror, “I’m going to be talking about transportation…so people can make decisions. That will be ongoing throughout the next four years. Certainly, we will begin in earnest shortly.” The state will open a new busway in March 2015 and begin a major expansion for its commuter rail system in 2016.

Delaware Transportation Secretary Shailen Bhatt directly criticized the troubled federal transportation budget process, claiming that states “should not have to engage in creative financing to solve a federal budget problem,” according to the Delaware News Journal. When adjusted for regional inflation, the state’s Transportation Trust Fund has lost 34 percent of its buying power, and it has been forced to shelve a number of much-needed infrastructure improvements.

Republican legislators in Georgia will be challenged to find as much as $1.5 billion in new money to address the state’s aging and insufficient infrastructure, according to the Atlanta Journal Constitution. These lawmakers could face a vote on a gas tax hike or an increase in the state sales tax, both of which are distasteful for a Republican majority with a healthy number of Tea Party supporters. Keith Golden, the state Department of Transportation commissioner, tried to appeal to a state’s rights position before a gathering of lawmakers in early December. “We are much too dependent…on the federal government and that gas tax program,” he said. Republican Gov. Nathan Deal has declined to propose a solution at this time, stating that he prefers that a House or Senate committee make the first move.

A transportation task force appointed by Idaho Republican Gov. Butch Otter estimates that the state would need an additional $260 million per year to maintain its transportation infrastructure. Policy proposals for fixing this shortfall include increasing vehicle registration fees, utilizing the current sales tax on automotive parts for transportation funding, increasing fuel taxes and charging a purchase fee for new or used vehicles, according to the Capital Press.

Iowa Republican Gov. Terry Branstad indicated that the time is right to raise the state’s fuel tax in an effort to fund much needed road and bridge improvements. According to the Des Moines Register, this emphasis on a politically controversial issue marks a shift from his campaign, which addressed mostly small and unproblematic policy proposals. The problem of highway funding has dogged the legislature for years, and neither Democrats nor Republicans have previously been willing to support tax increases to improve those conditions. However, legislators are likely to be in a more cooperative mood in 2015, since Governor Branstad was reelected and the parties will share power in the House and Senate.

Republican Gov. Rick Snyder and legislative leaders will put a ballot proposal before Michigan voters in May 2015 to increase the state’s sales tax from six percent to seven percent, while eliminating the sales tax on motor fuels. This is one piece of a larger plan to generate $1.2 billion a year in new revenue for transportation maintenance, according to MLive.com. A package of bills recently passed by the House and Senate stand to take effect if the ballot proposal is approved. These bills would, in part, change the calculation of existing fuel taxes, as well as eliminate certain registration discounts and increase fees for heavy trucks.

The Minnesota Department of Transportation commissioner Charles Zelle told Minnesota Public Radio that he does not see room in the state’s $1 billion budget surplus to fix its roads and bridges. He would prefer that the state establish a steady stream of revenue, like a road-usage fee, rather than rely on one-time funding. Democratic Gov. Mark Dayton proposed a wholesale gas tax in 2014, but Republicans found the proposal unacceptable.

Legislators on both sides of the aisle in New Jersey have expressed reluctant support for a gas tax hike in an effort to address the looming collapse of the state’s Transportation Trust Fund, according to the Asbury Park Press. Although many acknowledge that the state must address this problem with some kind of tax increase, Assembly members are particularly loath to approve a tax hike because they will face reelection in 2015.

In light of a $5 billion windfall from bank settlements, many in New York are calling for Democratic Gov. Andrew Cuomo to use the funds to improve infrastructure and transportation systems, according to cityandstateny.com. Sen. Joseph Robach, R-Greece, chair of the Senate Transportation Committee, plans to negotiate more reliable transportation funding with the federal government for the future, and would like to shift away from a fuel tax toward something independent of fossil fuel consumption. Governor Cuomo has supported the idea of using these funds to bolster aging infrastructure and would like to do so through a new infrastructure bank, but other legislators caution against treating these one-time funds like an ongoing source of revenue.

Wisconsin also faces a difficult choice in addressing its transportation budget shortfalls, according to the Wisconsin State-Journal. The Transportation Finance and Policy Commission has recommended a number of solutions, including increasing its gas tax by five cents per gallon, increasing annual commercial vehicle registration fees by 73 percent and increasing driver’s license fees. It also proposed to eliminate the sales tax exemption for a vehicle’s trade-in value and adopting a mileage-based fee system for passenger vehicles and light trucks. Many state lawmakers have joined Republican Gov. Scott Walker in decrying a gas tax increase, as well as the possibility of instituting toll roads.

Education Funding, Testing Questions Face State Lawmakers

As the 2015 sessions continue to roll along, lawmakers are continuing to examine crucial education policy issues, underscored by the nationally divisive debates around education funding and testing requirements: both of which will be framed and complicated by the ongoing, overarching debate on the Common Core state standards.

Education funding will remain a salient issue this year as states continue to face tight budgets, a growing list of education priorities and seemingly limitless number of federal mandates. In an effort to confront new budget challenges, states including Georgia, Nevada and Vermont have prioritized reforming school funding formulas in the upcoming year. The goal of raising teacher salaries, which produced a protracted debate in North Carolina during its 2014 legislative session, is likely to remain prominent as other states, including Idaho and New Mexico, seek to enact similar reforms.

Standardized testing, another key issue in education debates each year, is likely to become even more prevalent in the national and statewide education debates in 2015, when 11.5 million students will begin taking Common Core-aligned assessments for English and math. Following opt-out movements in Colorado, Florida, Illinois and New York, other states and the U.S. Congress are looking at how to test students appropriately and how best to mine the resulting data from these tests.

According to a report from the Center for American Progress, a group supportive of the Common Core-aligned tests for their “higher quality” over district-implemented tests, 49 percent of parents think students take too many standardized tests. According to The Associated Press-NORC Center for Public Affairs and Research, 61 percent of parents think their children are given the right amount of standardized tests and 75 percent of parents think standardized tests are an accurate measure of students’ abilities.

Standardize Testing

This conflicting data underscores the difficulty in wading through bias for a clear snapshot of the American mood toward standardized testing, water muddied further by parents’ general lack of understanding of the Common Core state standards. The AP report says 52 percent of parents “have heard little or nothing about the academic benchmarks” and one third of parents surveyed are unsure if their state has implemented the standards. Despite the uncertainty in how students are tested and the quality and origins of those tests, parents and legislators are poised to continue pushing back against the sheer volume of testing that has become routine in school districts nationwide.

Much of the testing backlash stems from concerns over the Common Core state standards that were originally adopted by 46 states and the District of Columbia. The standards continue to come under increasing scrutiny from both sides of the aisle, and according to a PDK/Gallup Poll, 60 percent of Americans oppose the standards. While some critics of the standards argue that the testing is too rigorous and doesn’t fairly assess student and teacher performance, others, mostly on the right, rage against what they perceive as a nationwide takeover of schools by the federal government.

Medicaid Expansion Again Takes Center Stage

As in years past, Medicaid expansion is quickly shaping up to be the top health policy issue in many of the states this year and the one that state legislators will undoubtedly spend the most time debating. One of the key provisions of the ACA, or Obamacare, was an expansion of the federal government’s Medicaid program to cover all those under 65 who make less than 138 percent of the federal poverty level (FPL) on an annual basis. As a result of the 2012 Supreme Court case National Federation of Independent Business v. Sebelius, states were granted the right to choose whether or not they would participate in this expansion. Most blue states chose to do so, while most red states have been vehemently opposed.

The notion of expanding Medicaid has long been toxic to many state-level GOP lawmakers who want to see the President’s signature healthcare law repealed and replaced. However, these legislators must also grapple with the prospect of potentially leaving billions of dollars in guaranteed federal funding on the table. This money has caused numerous Republican governors and legislators to take a harder look at the option and could provide their budgets and economies with a much needed cash infusion. Arizona, Ohio and Pennsylvania, all states with both Republican governors and legislatures at the time, chose to expand the program last year. Proposals in Indiana, Tennessee, Utah and Wyoming are being considered as well.

The proposals in these red states are uniquely negotiated and avoid using the term ‘Medicaid’ at all, even though they fulfill the same goal in closing the so-called ‘coverage gap’ for those making between 100 percent and 138 percent FPL. This group qualifies for neither Medicaid nor subsidies to buy health insurance on a state or the federal exchange.

Medicaid States

To date, 27 states and the District of Columbia have gone forward with this expansion. However, 23 states, nearly all of them GOP bastions, have so far refused to expand the program, though many are set to relent and consider proposals. Below are some of the states most likely to consider expanding the program in 2015:

  • Alabama has expressed that he may support the seeking of a block grant from the federal government for the purpose of expanding Medicaid, which is in stark contrast to his campaign platform opposing Medicaid expansion. Governor Bentley is seeking an alternative expansion plan similar to those brokered in other GOP strongholds.
  • Alaska newly-elected Independent Gov. Bill Walker campaigned on the promise that he would expand Medicaid as one of his first tasks as governor. He will face strong opposition from the Republican legislature.
  • Florida may have the potential to expand its Medicaid program in 2015, an effort that would provide health coverage to nearly 700,000 people. A plan known as A Healthy Florida Works has been gaining traction with GOP legislators and may offer a viable way to fill both the coverage gap and looming budgetary gap.
  • Indiana Republican Gov. Mike Pence says he will not expand the state’s regular Medicaid program because it is “broken,” but he intends to implement an improved version of the Healthy Indiana Plan pilot program that was first implemented in 2008.
  • In February 2014, the Missouri Senate defeated an effort to expand Medicaid. Democratic Gov. Jay Nixon favors the expansion, and Sen. Ryan Silvey, R-Kansas City, says he has support for an expansion proposal in 2015.
  • Montana legislators are reportedly gearing up for another fight over the expansion of Medicaid, as they fell one vote short of doing so in 2013. Democratic Gov. Steve Bullock has thrown his support behind a plan known as the “Healthy Montana Plan” in the upcoming legislative session.
  • Tennessee Republican Gov. Bill Haslam, incoming chair of the Republican Governor’s Association, unveiled a program in December known as “Insure Tennessee,” the state’s own personalized take on expanding Medicaid. The plan is likely to face pushback from conservative lawmakers, though the governor and his staff are hopeful that they will be able to pass a plan this year.
  • Texas Republican Governor-elect and current state Attorney General Greg Abbott surprised many conservatives in his own party when he asked for more information about a compromise recently struck by the federal government and Utah’s Republican Gov. Gary Herbert. The state currently has the largest number of uninsured residents that would potentially be covered under an expansion of Medicaid.
  • Utah Republican Gov. Gary Herbert recently proposed his own alternative proposal to Medicaid expansion, known as “Health Utah.” However, it will face an uphill battle with conservative members of the legislature after its Health Care Reform Task Force chose not to recommend the plan be heard before the full body, according to The Salt Lake Tribune.
  • Virginia will once again take up the issue of Medicaid expansion after last year’s dramatic failure that saw members of the Senate allegedly bribed by both conservative Republicans and the governor’s own Chief of Staff. The issue was narrowly defeated as the balance of power in the Senate shifted to Republicans, who have vowed to continue to fight any expansion in the state.
  • Wyoming Republican Gov. Matt Mead is urging the Republican-controlled legislature to approve a new plan set forth by the state Department of Health, one year after rejecting federal funds to expand Medicaid. According to the governor, the state must be “realistic” in accepting Medicaid expansion as the law of the land. Wyoming has negotiated with the federal Department of Health and Human Services to come up with their own version of Medicaid expansion, the Strategy for Health, Access, Responsibility and Employment (SHARE) plan.

Legislative Dockets Across the Nation Packed for 2015 Sessions

Bolstered by their overwhelming success in the 2014 elections, Republicans have charged into 2015 prepared to harness their strength for significant reform across diverse policy platforms. Republicans now hold total control in 24 states, 31 total governorships and 68 of the 98 partisan legislative chambers, up from their control of 59 chambers last year. Democrats hold total control in just seven states, down from last year’s claim on 13 states.

Because of this new dynamic, state laws will undoubtedly play an oversized role in the GOP’s strategy to limit the power of the federal government. Along with their attempts to pick apart the Affordable Care Act, including the state-by-state expansion of Medicaid, the GOP is likely to renew their fights over the Common Core state standards, which the party sees as a federal takeover of local schools. Balancing budgets is expected to be even more contentious this year, as are disputes over emissions, privacy and labor issues.

Yearly growth since the Great Recession has allowed states to increase spending while reducing taxes and fees and closing budget gaps. Most states have exceeded pre-recession revenue spending levels. However, slow revenue growth combined with rising spending indicates fiscal challenges will continue. According to the National Association of State Budget Officers’ (NASBO) Fiscal Survey of the States, “Overall, states are in a better position than they were a few years ago; most have surpassed pre-recession revenue and spending levels, a key milestone in resuming long-term budget growth. However, it has taken states many years to recover, and with annual increases in revenue and spending still below historical averages, difficult decisions regarding budgetary tradeoffs are likely to remain for states.”

Lawmakers on both sides of the aisle will continue to grapple with the privacy concerns created by technological advancements. This issue will permeate diverse fields including education, specifically with regard to student privacy, as well as law enforcement surveillance, drone use and social media. Notification requirements for data security breaches were propelled into the national headlines with the cyber attack on Sony Pictures late last year, and legislators will certainly take this opportunity to shore up cyber security laws.

Other issues to keep an eye on this year include transportation funding, as continued fallout from the recession, crumbling infrastructure and an increase in the use of alternative transportation fuels will provide greater hurdles; genetically modified organisms, especially in light of labeling laws already passed in three states; emissions – another target for Republicans seeking to scale back the Clean Power Plan, a significant timeline for carbon reduction released by the Environmental Protection Agency last year; and right-to-work laws, which at least nine states are seeking to weaken in 2015.

Net Neutrality Proposals Will Impact State Regulators

For years now, a debate has been raging throughout the nation over how access to the Internet should – or should not – be regulated. Commonly referred to as ‘Net Neutrality’, this debate focuses on Internet traffic, and whether or not Internet service providers (ISPs) should be permitted to prioritize traffic based off where it is coming, and where it is going. Naturally, most website operators are opposed to any rules that would allow an ISP to have control over their traffic, as they fear it may prohibit or hinder access to their domains. ISPs, on the other hand, believe that they should be able to control and prioritize traffic that is carried over their equipment. Earlier this year, we got a sign that this debate may be coming to an end.

On May 15, the Federal Communications Commission (FCC) announced that it is weighing two regulatory proposals relating to Net Neutrality. The first, favored by ISPs, would allow them to create ‘fast’ and ‘slow’ broadband lanes, or otherwise prioritize Internet traffic based off its source and its destination. This route is widely opposed by most Internet domains as it would effectively end ‘Net Neutrality’, or the practice of treating all Internet traffic equally, as it currently exists. Though there are currently no clear rules against prioritizing traffic, it is not considered widespread. Netflix claimed earlier this year that it was being throttled by major ISPs and was forced to pay them directly for its users to have prioritized access to its services.

The other approach, favored by major Internet domains as well as President Obama, would reclassify broadband Internet as a telecommunications service and thus bring it under the same regulatory oversight that telephone service providers fall under. This approach would effectively allow broadband Internet to be regulated as a public utility. Not only would this allow the FCC to preserve Net Neutrality, it would open the door to numerous other federal and state-level regulations that do not apply to broadband providers.

As of right now, states legislators and regulators are at a standstill while they eagerly await a decision from the FCC on how it will act on these rules; under the Communications Act of 1996, the FCC has the authority to preempt state-level restrictions, making them hesitant to take up any proposals that could potentially be thrown out by federal regulators in the coming months. Should the FCC choose to decide in favor of regulating broadband Internet as a telecommunications service, the entire framework in which both state and federal regulators operate would be turned on its head, and states would be forced to react to this new regime.

The earliest the FCC could make a decision would be at their first meeting of 2015, on January 29, though there is currently no indication as to whether they will be prepared to. Before a final proposal can be voted on by the five Commissioners tasked with policymaking, it also must be presented to all of them at least three weeks prior to any meeting, meaning the final proposed rule would need to be circulated by January 8 to be eligible for consideration on the 29th. FCC Chairman Tom Wheeler has personally stated that he would like the agency to take its time and create sustainable rules that can live up to a court challenge, “The big dogs are going to sue regardless of what comes out,”