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State Budgets Continue to Grow, But Less Than Expected

The long budget season in state legislatures is finally over, with Massachusetts and North Carolina rounding out the pack as the last states to enact a budget for fiscal year 2015, which for 46 states began on July 1. While the process is arduous, it serves as an effective measure how well states, and the nation as a whole, are doing economically. According to a recent nationwide summary of state finances by the National Association of State Budget Officers, or NASBO, while growth has been slow in most states, overall they are doing well. Expenditures in all 50 states are expected to increase by 2.9 percent over fiscal year 2014, marking the fifth straight year of growth following two straight years of decline following the great recession. While positive, this level of growth is considered sluggish compared to the 5 percent increase projected earlier in the year.

The continued growth in state budgets has been a direct result of overall increases in state revenues, with most states meeting or exceeding their budget forecasts for the year. According to NCSL, nine states including California were expected to exceed their budget forecast for the year; thirty-six other states were expected to meet their forecasts while seven were doubtful to do so. Twenty-two states will go over their expected budget for FY 2014.

A result of this continued positive growth in both state budgets and state revenue collection has led to a trend towards cutting taxes and fees, with those states making such cuts claiming them a way to further spur economic growth and pass some of this prosperity along to the citizenry. Overall, states have enacted $2.5 billion in tax and fee cuts across the board. This, however, has not always led to the anticipated results.

North Carolina, as a result of recently enacted tax cuts, was unable to meet its revenue forecast. Kansas is anticipating a major budget shortfall due to a now deeply unpopular tax cut package spearheaded by Republican Gov. Sam Brownback. These cuts, which Governor Brownback was elected campaigning on, may now see him ousted from office during the upcoming November elections in protest of these policies which have ravaged the state’s finances and economic outlook. The state is expected to have a $238 million budget shortfall by 2016, with deep cuts expected across the board. Kansas may well serve as a warning to other states that may be contemplating tax cut packages ahead of the 2015 legislative session.

NASBO has warned that while the outlook for states currently remains stable, this may not hold true long-term, as continued sluggish growth will likely create difficult budgetary choices in fiscal 2015 and beyond, since the current level of revenue growth may not be sufficient to cover continually increased spending in areas such as health care and higher education. With the 2015 legislative season only a few months away, all 50 states will once again need to begin the difficult budgetary process, and would be wise to keep the long-term view in mind, while heeding the lessons learned from Kansas.

Airbnb’s Success Confounds Regulators

Alongside many other high profile tech industry battles shaping up around the country, one of the biggest and most well-known revolves around Airbnb, an online service that allows users to rent out their home or certain rooms to travelers as a hotel-type service. The benefits of Airbnb are obvious, according to its proponents – it’s a cheaper, easier, perhaps faster way to access temporary lodging. Going further, Forbes’ Adam Ozimek argues that Airbnb’s success despite getting around safety regulations communicates the idea that those laws may not be necessary. Because Airbnb is so popular and functions well, it is possible that the additional requirements such as fire safety regulations and zoning standards are unnecessarily hindering the market. It’s not the illegal service that’s the problem; it’s the law. State and local officials however have not taken to this argument so keenly, claiming that the service operates illegally in the face of laws meant to regulate the hotel industry.

One of the most high profile spats has been between the ‘sharing economy’ service provider and the Attorney General of New York, who has demanded that Airbnb turn over all customer records over to the state as part of an investigation. Under state law, the way the company operates is thought to be illegal by the AGs office. Airbnb seems to have pulled out a win for the time being in this battle, as according to The New York Times a state judge has ruled that for the time being the company does not need to turn over customer records as part of the AG’s investigation, however this is unlikely to be the last chapter in this ongoing saga between the state and Airbnb.

Airbnb however has also been seeing many high profile successes, as it recently came to an agreement with the city of Portland, Oregon, allowing it to legally operate – the first agreement of its kind. Under the agreement, Airbnb will provide the city with one payment without providing the names and addresses of users out of concerns for privacy. It is possible that Airbnb would provide some information, such as anonymous ID numbers, during a tax division audit which the city carries out on most hotels every three years. The agreement was released Friday July 18 via public records request. A similar agreement is being worked on with the city of San Francisco, California, which has recently seen major opposition to their continued operation in the city, with residents claiming that it is a major force in driving up the cost of renting in the city.

While the issue has been brewing mainly at the municipal level at this point and has largely stayed out of state legislatures, the start of a new biennium in 2015 means a flood of new legislation in most states – undoubtedly some of this will be focused on reining in, taxing and regulating the innovative house-sharing service.

Special Session to Redraw the State’s Congressional District Map

On Monday, House Speaker Will Weatherford and Senate President Don Gaetz, called a special session to redraw the state’s congressional district map. The session will begin at noon on Thursday, August 7.

In a ruling issued last Friday,  Leon County Circuit Judge Terry Lewis, declared the state’s current congressional map to be illegal. Lewis ruled the Legislature has until Aug. 15 to fix the map. Legislators will meet to draw a new map that fixes two districts that the judge declared invalid. One district stretches from Jacksonville to Orlando, while the other is in central Florida.

Ridesharing Debate Heating Up

A revolution in personal transportation is underway in many major cities across the US, led by technology companies such as Uber, Lyft and Sidecar– collectively referred to as Transportation Network Companies, or TNCs. All of the major TNCs follow a similar model: a person uses an app on his or her smartphone to request a car. The driver receives notification of the ride request through the app, picks up the passenger in the driver’s personally owned vehicle, and takes the passenger to the desired destination. The passenger pays through the app using saved credit card information, and may then rate the driver and service.

The services have been described by users as simple, efficient, cheap and pleasurable – a stark difference from how many would describe the experience of trying to hail a taxi in any large metropolis. However, states, cities, regulators, lawmakers and insurance companies are trying to determine whether a person that works part- or full-time as a driver for a TNC is performing professional activities or personal activities with the vehicle. Proponents for TNC services refer to it as “ride-sharing”, while the growing opposition maintains that TNC services are nothing more than unregulated cab driving.

According to Robert Callahan California’s executive director of The Internet Association, via The Sacramento Bee, “The sharing economy and those who are disrupting established business models are definitely drawing the ire of traditional special interest groups, in this case in the transportation sector,” Callahan’s group represents a number of these TNC’s as they work their way through the legal and political fights that have popped up against them around the nation.

In addition to the many perceived quality-of-life benefits these companies provide, the Washington Post is reporting that the industry may have had a hand in reducing the number of DUIs in the Philadelphia area – a city which coincidently has banned these companies from operating. Such evidence has also been seen in Seattle, Washington, and San Francisco, California. Opposition groups, however, have referred to the services as both unsafe and unregulated; an argument echoed by many taxi companies who bemoan that the regulations they must adhere to do not apply to TNCs. As a result, regulators have been increasingly setting their sights on these new companies.

Over the past year oppositional attempts to regulate TNCs have begun to snowball – Arizona, California, Colorado, the District of Columbia, Florida, Georgia, Illinois, Maryland, New Jersey, Oklahoma, Pennsylvania and West Virginia all saw bills relating to these services during the 2013-2014 biennium. In Virginia, Uber and Lyft, the two largest TNCs received cease and desist notices from the state’s Attorney General, while Maryland’s Public Service Commission has proposed to regulate these businesses as a taxicab company, a move that would surely stifle their growth and innovation. With many of the large municipalities that TNC’s operate in also taking regulatory steps, it may be in their best interest to push for more lenient state-level regulation rather than a patchwork of municipal ordinances.

 

Arkansas Special Session

Arkansas Governor Mike Beebe called for a special session of the Arkansas General Assembly to discuss jail overcrowding and public school employee health insurance.  This session will begin on Monday June 30 at 4:00 p.m.
The proposed pieces of legislation include changes such as providing revenue to open 600 additional beds in Department of Correction facilities and the Pulaski County Jail and eliminating part-time employees from the Public School Employee Life and Health Insurance Program.