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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,”

Elections Bring Power Changes in State Legislative Control

The Republican takeover of the U.S. Senate and the GOP’s retention of many governors’ seats was mirrored on the state legislative level following November’s elections. The results of the elections show that in many legislative chambers considered “tossups” or “battlegrounds” prior to the elections, Republicans were consistently far safer than initially projected.

The Arizona Senate was considered a close race to watch for a Democratic takeover. Despite the concerns, Republicans maintain their control of the upper chamber with a 16-11 seat lead over the Democrats, with just three seats still undecided at the time of reporting. The Arkansas legislature, which up until 2012 had been considered strongly Democratic, saw a major uptick in Republican seats. Their narrow 51-49 lead in the House has been expanded to 64-36. GOP gains in California could derail Democratic Gov. Jerry Brown’s plans for a high-speed rail line, and the GOP took a two-thirds supermajority over the Georgia House. In the Kansas House, where Republicans were predicted to lose seats, the GOP picked up at least two seats.

Prior to Election Day, Republicans controlled 59 of the 98 partisan legislative chambers. According to the current polling data reported by NCSL, the Republicans flipped both chambers in Nevada and West Virginia, the Senate chambers in Colorado and Maine and the House chambers in Minnesota, New Hampshire, and New Mexico. This gives the party a net gain of six chambers for a total of 68. The numbers also signify Republican control in 24 states, where they hold both chambers of the legislature as well as the governor’s office. This number includes Nebraska, which is technically nonpartisan, though in practice Republicans control the chamber by a wide margin, the Washington Post reports.

With the U.S. Congress and President Obama in an ongoing deadlock, state legislatures will play a more crucial role in addressing key policy issues. If history is any indicator, the GOP’s strong showing on Tuesday is likely to portend the introduction of more laws governing taxes, voting and abortion heading into the 2015 legislative sessions.

Direction of State Policy on the Line in Gubernatorial Elections

This year 36 states have scheduled gubernatorial elections to determine who will hold their state’s highest executive office, a significant increase over 2012 when only 11 governors’ races were contested across the nation.

Republicans currently hold a numerical edge with 29 seats to the Democrats 21. This landscape should shift slightly however, with incumbent and retiring Republicans vulnerable in some states where Democrats have fielded strong candidates. When the dust settles next Wednesday, Republicans will still control more governors’ offices but we believe Democrats will have narrowed the gap.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Wisconsin and Wyoming all have scheduled gubernatorial elections this year.

While most of these races are not expected to be competitive, a number are not only extremely close but hold important policymaking implications. Even the looming threat of the governor’s veto power is enough to sway policy towards the center in states where one party does not control a supermajority. Below we’ve outlined some of the closest governors’ races where the direction of state policy in the upcoming years is on the line:

  • In Alaska, incumbent Republican Gov. Sean Parnell is facing an uphill battle against a unique coalition between a former Republican and a Democrat who are running as an Independent union. The outcome remains murky, as Alaska is a heavily Republican state, but Walker has shown a slight edge in some of the most recent polls. A win here would give the opposition coveted veto power over the state’s Republican dominated legislature.
  • Arkansas Democratic Gov. Mike Beebe ineligible to run for office due to term limits, and Republican candidate Asa Hutchinson has been polling ahead of Democratic challenger Mike Ross. A win for the GOP here would give them total control of state government.
  • Colorado’s incumbent Democratic Gov. John Hickenlooper is polling neck-and-neck with Republican challenger Bob Beauprez, in a race that appears to be among the tightest in the nation, in a state that is increasingly leaning more and more to the right after several years of Democratic control.
  • Deep-blue Connecticut may also see its highest executive office go red following Novembers election. Incumbent Democratic Gov. Dannel Malloy is polling almost identically with GOP challenger Tom Foley, who he defeated by a razor-thin margin in 2010. This would be a big win for the GOP in a state where the legislature is dominated by Democrats.
  • Florida’s Republican Gov. Rick Scott is seeking a second term in office and is seen as having one of the most vulnerable seats in the 2014 election. Governor Scott will face former governor and Republican-turned-Democrat Charlie Crist, who served as governor from 2007 to 2011. Crist is currently seen as a narrow frontrunner to retake his old seat, but Scott has pumped $41 million into the race to hold onto his seat which has become one of the most expensive races in the country.
  • Georgia Republican incumbent Gov. Nathan Deal is running for a second term against Democratic state Sen. Jason Carter, grandson of former President Jimmy Carter. Libertarian candidate Andrew Hunt is also on the ballot. The race has been neck and neck so far, with the most recent polls showing Governor Deal narrowly ahead.
  • Illinois Democratic incumbent Gov. Pat Quinn faces an uphill climb in his effort to be reelected. His opponent, businessman Bruce Rauner, has shown a slight lead in the polls as backlash towards some of Quinn’s unfavorable policies. A win for Rauner would give the GOP significant power in the overwhelmingly democratic state.
  • The governor’s race in Kansas has exploded into one of the most hotly contested in the country during this election cycle. Incumbent Republican Gov. Sam Brownback is facing an uphill battle against state House Minority Leader Paul Davis, in a race that has become a referendum on the incumbent governor’s policies that have pushed the state into severe economic decline. This decline has resulted in numerous sitting and former Republican officials endorsing the Democrat.
  • Maine’s incumbent Republican Gov. Paul LePage is seen as one of the most vulnerable gubernatorial incumbents facing reelection. The race features former Democratic Rep. Mike Michaud and Independent candidate Eliot Cutler, who also ran in 2010 and received over 36 percent of votes, narrowly losing to LePage. Independents are largely seen as the deciding factor in the race. LePage has recently taken a commanding lead in the polls, where a win would continue to frustrate the overwhelmingly Democratic state legislature.
  • Massachusetts Democratic Gov. Deval Patrick is eligible to run for reelection, but chose not to seek a third term. The race pits Democratic Attorney General Martha Coakley against Republican venture capitalist Charles Baker. Recent polls have shown Baker to have a slight edge against Coakley in the race. While traditionally one of the most Democratic states, Massachusetts has a history of electing Republican governors.
  • Michigan Republican incumbent Gov. Rick Snyder is running for reelection to a second term this November against former Democratic U.S. Rep. Mark Schauer. Governor Snyder has lost a lot of momentum in the state through passing controversial initiatives such as “right-to-work” and his tax reform plan of 2011. A win for Schauer would be a major victory for Democrats looking to break up the Republican stronghold in the state.
  • Wisconsin Republican incumbent Gov. Scott Walker is running for reelection to a second term against Democrat Mary Burke. Despite a statewide vote overturning legislation that Walker signed limiting the power of public-sector unions, he has continued to support right-to-work measures during his campaign. Recent polls have shown Walker holding a narrow lead within the margin of error.

Nevada Special Session Paves Way for Gigafactory

Nevada is one of the few states whose legislature typically meets once every two years, in contrast to the vast majority, which hold a legislative session once per year. While they are generally not scheduled to meet in even-numbered years, earlier in September Nevada legislators were suddenly called to work in a special session by Republican Gov. Brian Sandoval. The issue? To pass a massive tax incentive deal for Tesla Motors as a reward for choosing the state at the site of a massive new lithium-ion battery producing gigafactory.

After months of speculation and jockeying by southwestern states to curry favor and self-promote, it was announced on September 3 that the state would be the site of Tesla Motors new gigafactory, a massive $5 billion manufacturing facility that the all-electric motor vehicle manufacturer will use to create batteries for its popular and industry-leading electric-powered motor vehicles. While the automaker had previously hinted that they would like to have 10 percent, or $500,000 of the bill to construct the facility footed by the state, Nevada went above and beyond to cater to Tesla during the special session, pledging an estimated $1.25 billion in numerous tax incentives and breaks in order to win the nod of approval. As part of the deal, the state has reportedly agreed to waive property taxes on the factory through 2024 and all sales taxes levied on the factory through 2034, provide tax credits for each full time job created in the state and offer transferrable tax credits on further investment in the state by the Manufacturer. The fact that Nevada does not currently levy a corporate sales tax also undoubtedly played a role in the company’s decision making process.

The project itself has been described as one of the biggest economic development and manufacturing wins for an area in U.S. history and the largest project in the state since the Hoover Dam. The factory is expected to create up to 6,500 jobs in the state and at its peak supply batteries for 500,000 electric motor vehicles per year by 2020. “This factory is very important for the future of Tesla, because without it we can’t do the mass market car,” said Tesla Motors CEO Elon Musk.

The last important detail of the package included an agreement to lift the ban on direct manufacturer-consumer motor vehicle sales in Nevada, an issue which has been a thorn in Tesla’s side for years. Many states currently require vehicles to be sold through a franchised dealer rather than directly by the manufacturer; effectively outlawing Tesla from doing business in many states. Tesla has been intent on bucking that trend and selling vehicles directly to interested consumers and has seen legislative success in many states, such as New Hampshire which lifted the ban in 2013. While this legislative victory paves the way to more modern, mainstream success in the American motor vehicle market, the company still has many policy-driven hurdles to overcome before they become commonplace on U.S. roads.