November’s elections saw the biggest shift in political control in the states in nearly a decade. When state legislatures gavel in their new legislative sessions in early 2019, most states will be bluer than they’ve been in a long time, which gives progressive lawmakers an opportunity to move legislation that’s built up over their long draught in legislative control.
We see 2019 as largely a continuation of many trends building over previous years such as employer mandates (minimum wage increases, paid leave, etc.), Medicaid expansion, criminal justice, transportation funding, reactions to federal tax issues, and marijuana legalization, as well as a breakthrough in emerging issues like autonomous vehicle testing, privacy issues, and sports betting. Below we explore each of these issues that we see as major trends for the upcoming 2019 legislative sessions.
Autonomous Vehicle Testing and Deployment
By Bill Kramer
Autonomous vehicles (AVs) are the latest technology poised to disrupt the transportation industry and create ripple effects through mass transit, city planning, parking and real estate in urban environments, insurance, and the auto industry itself. But despite recent developments like Waymo launching an autonomous taxi service in Arizona this month (albeit with a safety driver behind the wheel) and Uber’s fatal accident in March, regulation of AVs is still largely the Wild West.
The U.S. Department of Transportation has issued guidance on AVs, but legislation has stalled in Congress, which has left the states in charge of testing and deploying this new technology on their roads. California and Arizona are leading the way as testing sites and charting potential courses for other states’ regulations. California, home to many of the tech companies pioneering this early technology, has passed several laws and hundreds of pages of regulations setting out standards and permits required to test different levels of autonomous driving on state roads. Arizona, on the other hand, has advertised itself as a lightly regulated testing ground for AVs, which has attracted several major players in the space, including California-based Waymo.
Other states have fallen somewhere in between these two approaches. By our count, 20 states and the District of Columbia have some sort of testing or deployment regime in place for AVs either through legislation, executive order, or regulation. A handful of additional states are formally studying the issue with reports of recommended action due to lawmakers. Considering the lack of federal action, 2019 could be a banner year for states to address the oversight and safety of testing or deploying AVs on public roads.
Most states require testing with a safety driver behind the while, but the latest trends from California, Arizona, Florida, and Michigan include regulations to allow truly driverless vehicles on public roads, as well as formal regulations in California, Michigan, Nebraska, and Nevada addressing on-demand networks like the one Waymo is rolling out this month in Arizona.
Criminal Justice Reform
By Billy Culleton
Criminal justice reform has been a rising issue for both federal and state lawmakers. Over the past 40 years, the prison population in the United States has increased over 500 percent to reach 2.2 million people, according to data provided by the Sentencing Project. States have focused legislation on both the front end of the prison system — through changes in mandatory minimum sentencing and requirements for felony convictions — and on the back end, with states introducing bills to promote education and job-training services to offenders upon release.
This year, several states addressed criminal justice reform via the ballot box. In Florida, voters approved Amendment 4, automatically restoring voting rights to individuals with prior felony convictions while excluding those convicted of a violent crime. A ballot measure approved in Louisiana now requires a unanimous jury verdict for all felony convictions. Until 2018, Louisiana was the only state where a jury did not have to be in unanimous agreement to convict a person accused of a violent crime.
In 2019, criminal justice reform could take center stage in states such as Kentucky, Missouri, New Mexico, and Wyoming. Both Kentucky and Wyoming have expressed interest in pursuing policies that would help reduce their state’s incarceration rate. Kentucky Justice and Public Safety Cabinet Secretary John Tilley said he would like to see lesser penalties for some drug possession charges. The Wyoming Joint Judiciary Committee has sponsored four bills to address the state’s high rates of recidivism. New Mexico lawmakers could introduce a number of criminal reform bills next year due to Governor Susana Martinez (R) vetoing many in years past. With Governor-elect Democrat Michelle Lujan Grisham (D) completing a Democratic trifecta in 2019, New Mexico could move on legislation that would adjust probation and parole standards and changing punishments for non-violent crimes.
Data Breach Notification and Privacy Laws
By Max Rieper
A number of high-profile security breaches this year are sure to prompt state lawmakers to seek greater protection of consumer information in 2019. Many of the newer laws have focused on notice given to consumers and state agencies in the wake of a breach, but there are now calls for “data minimization,” which would require companies to purge themselves of consumer information they no longer need.
The European Union General Data Protection Regulation went into effect in 2018, which has inspired more proposed laws in America requiring consent on how consumer information is used. California led the way when it passed the landmark California Consumer Privacy Act of 2018, which will require companies to disclose what information they are collecting from consumers and allow them to opt out of having their data sold. The California law, which was partly a response to a proposed ballot measure that would have included even more sweeping provisions, is set to go into effect in 2020. However, we expect heavy lobbying from interest groups to amend the law before the 2020 effective date. While all eyes will be on California this year, expect other states to take California’s law as a model to begin their own debate on privacy laws in 2019.
The California bill also requires manufacturers of connected devices to develop comprehensive security plans. With more household devices connected to the internet, there will be greater scrutiny over the security of the “Internet of Things.” The New York Times recently highlighted privacy concerns over location tracking, which could prompt legislation requiring more notice be given to consumers being tracked.
By Lauren Doroghazi
States will take action on a wide variety of employer mandates in 2019, in many instances continuing legislative work begun in 2018 that was vetoed by Republican governors who have been replaced by Democrats, or that otherwise stalled in the legislature. In 2019, expect state lawmakers across the country to debate and likely enact bills to increase the minimum wage to $15 per hour, mandate paid family leave, and bar employers from inquiring into an employee’s salary history.
In New Jersey, Governor Phil Murphy (D) has vowed to work with the legislature to fulfill one of his campaign promises to increase the minimum wage to $15 per hour. Murphy is currently negotiating with the legislature over the current proposal to phase in the increase to $15 per hour by 2024. Murphy is hoping to shorten the timeframe for the increase and would like the legislature to act before the end of the year on the issue. Minimum wage increases were vetoed in 2018 in Vermont and 2017 in Illinois, where Governor Bruce Rauner (R) will be replaced by J.B. Pritzker (D), who has promised to raise the wage to $15 per hour. This issue will remain active at the state level until Congress enacts a nationwide minimum wage increase.
In 2018, lawmakers in 21 states introduced paid family leave legislation, which was enacted in Massachusetts. In Hawaii, lawmakers passed a study bill to conduct an analysis of the impacts of paid family leave and the best framework for establishing the legislation by September 2019. Governors in Maine and Vermont vetoed paid leave bills, while bills in Colorado and New Hampshire passed their chambers of origin but failed to pass the full legislature. In Minnesota, Governor-elect Tim Walz (D) and incoming Minnesota House Speaker Melissa Hortman (D) have stated that paid leave will be a priority in 2019. Expect this issue to be debated seriously in a small number of states next year.
Lawmakers will continue to introduce equal pay legislation around the country in 2019. This year, salary history inquiry bans were signed into law in Connecticut, Hawaii, and Vermont, and equal pay bills passed their chambers of origin in seven states but otherwise stalled. Additionally, Republican governors in Illinois and Maine who vetoed salary history inquiry ban legislation in 2017 will be replaced in 2019 by Democratic governors who should be more receptive to these proposals.
Health: Medicaid Expansion, ACA’s Legal Peril, and Drug Pricing
By Billy Culleton and Amber Thyson
This year, voters in three deep red states approved ballot measures to expand their state’s Medicaid program under the Affordable Care Act (ACA). Measures in Idaho, Nebraska, and Utah all received comfortable margins of approval, while voters in Montana rejected a proposal to fund the state’s expanded Medicaid program with new revenue from taxing tobacco products. In March, Virginia expanded its program after years of resistance from the Republican-controlled General Assembly.
In 2019, Maine’s Governor-elect Janet Mills (D) has vowed to implement Medicaid expansion as soon as she takes office in January after Governor Paul LePage’s administration stubbornly delayed implementation following a voter-approved ballot initiative in 2017. Kansas Governor-elect Laura Kelly (D) also included Medicaid expansion as a top priority of her new administration. Last year, the Republican-controlled legislature passed legislation to expand Kansas’ Medicaid program, but then-Governor Sam Brownback (R) vetoed the bill. Despite voters’ rejection of Montana’s ballot measure, the Republican-controlled legislature agrees with Democrats on prioritizing the funding of the state’s Medicaid expansion, though lawmakers have not indicated how they would resolve the funding issue.
In addition to coverage expansion, state governments will continue to wrestle with health insurance market reform, particularly after a Texas judge struck down the entire ACA late last week on the grounds that the individual mandate is unconstitutional and ACA’s remaining provisions cannot stand without it. Although this ruling does not have an immediate effect and is expected to be appealed, it leaves state legislators to debate protections for individuals with pre-existing medical conditions, the increase in child coverage to age 26, and employer mandates, among other market issues.
Drug pricing legislation is also expected to be a hot issue in the states in 2019 following President Donald Trump’s “Blueprint to Lower Prices and Reduce Out-of-Pocket Costs,” which his administration released in May, as well as several major state initiatives that passed this year in Oregon, Connecticut, and Illinois.
Net Neutrality Responses
By Max Rieper
Almost immediately after the Federal Communications Commission (FCC) issued its decision in December 2017 to repeal net neutrality rules, states began to take action. Montana became the first state to act when Governor Steve Bullock (D) signed an executive order requiring internet service providers (ISPs) with state contracts to adhere to net neutrality. Governors in Hawaii, New Jersey, New York, Rhode Island, and Vermont followed suit. Bills related to net neutrality were proposed in at least 33 states this year, with California, Oregon, Vermont, and Washington passing legislation. Additionally, a lawsuit involving 23 states was filed to challenge the FCC’s repeal, arguing the rules were “arbitrary and capricious.”
California’s law would make it unlawful for an ISP to block lawful content, impair internet traffic, require consideration in exchange for manipulating traffic, engaging in paid prioritization, or zero-rating content. The Trump administration has filed suit challenging California’s net neutrality law, seeking a preliminary injunction to prevent the law from taking effect in 2019. At issue in the case is whether the FCC has the authority to issue net neutrality regulations and whether states also have a role in regulating the internet. As the issue intensifies and the lawsuits move through the judicial system, expect more states to try and take action on net neutrality. Democrats could also take up federal legislation on net neutrality when they assume control of the U.S. House of Representatives next session.
By Morgan Scarboro
More than 60 percent of Americans now support the legalization of marijuana, more than 30 states have some form of legalized marijuana, and the trend shows no signs of slowing down. On the 2018 ballot, Michigan voters approved the legalization of recreational marijuana, and voters in Missouri, Oklahoma, and Utah approved the legalization of medical marijuana.
Legalizing marijuana comes with far-reaching policy implications, such as taxing the product and setting up a new regulatory scheme, fielding employer concerns over liability and drug screening, monitoring for driving under the influence, and addressing the inability of marijuana producers, distributors, and retailers to use federally insured banks.
Due to the lingering policy questions that ballot measures cannot answer, supplemental legislation will likely follow in newly-legalized states like Michigan, Missouri, and Oklahoma. Shortly after the November elections, Utah passed new medical marijuana legislation to replace the system voters approved at the ballot. New York Governor Andrew Cuomo (D) plans to call for legalization in 2019, while Governor-elect Pritzker (D) wants Illinois to be the first state in the Midwest to legalize marijuana for recreational use. Chicago Mayor Rahm Emanuel has also called to legalize recreational marijuana and direct the revenue toward the city’s ailing pension fund.
It’s possible the federal government will act in the coming year, too. With the Trump Administration interested in criminal justice reform and the departure of stringent legalization opponent Attorney General Jeff Sessions, it’s possible that we’ll see congressional action. Still, much of the traction on this issue will likely remain at the state and local levels in the coming year.
Reactions to Federal Tax Activity (Wayfair and Tax Cuts and Jobs Act)
By Ryan Maness
Over the last 12 months, the federal government has been busy changing many of the parameters of taxation, first with President Trump’s signature enacting the Tax Cuts and Jobs Act (TCJA) last December and then with the U.S. Supreme Court ruling in June that states can collect sales taxes on internet purchases. States have already begun adjusting their own laws to reflect these new fiscal realities and those efforts will extend into 2019.
Because every state uses the Internal Revenue Code as the baseline for its own tax systems, TCJA’s passage has significant downstream effects for states. Whether it is expanding the corporate income tax base to include global intangible low-taxed income or creating new interest expense limitations, states have had to decide whether they want to conform their own tax codes with all of the new provisions. While some states made progress, only 21 states to date had enacted conformity legislation. Leaving these conformity issues unresolved can cause headaches for personal and business tax filers, so some states (like Arizona and Virginia) are already discussing the actions they need to take early in 2019.
As with federal tax conformity, most states have set up remote sales tax collection systems in line with Justice Anthony Kennedy’s June decision in South Dakota v. Wayfair, but more work will be necessary next year. Lured by billions in potential revenue, states lawmakers and revenue departments have been eager to pass laws and regulatory rules that put them on the right side of the Court’s decision. For some states, however, questions remain. California recently announced that it would use the same sales thresholds originally designed for South Dakota, despite being more than 40 times larger. Colorado and Louisiana could also run into trouble, as their notoriously complicated local tax systems could delay their efforts to collect the new sales tax revenue.
Sports Betting Legalization
By Geoff Hawkins
The U.S. Supreme Court’s decision overturning the Professional and Amateur Sports Protection Act (PASPA) last May opened up sports wagering to states outside of Nevada. Some states, like Mississippi, Pennsylvania, and West Virginia, anticipated the Court’s decision and passed legislation to legalize sports betting under the condition that PASPA was overturned. Other states, such as New Jersey and Rhode Island, moved quickly following the Court ruling to legalize sports betting. Delaware, which had been grandfathered into PASPA, saw its lottery issue regulations that authorize sports betting. Arkansas voters passed a voter initiative that authorizes four casinos and sports betting. In New Mexico, a Native American tribe opened a sports book based on its tribal compact with the state.
As many as 30 states could consider sports betting legislation in 2019. Bills have already been pre-filed in Kentucky, Missouri, Montana, Tennessee, and Virginia, and legislators in numerous other states have already discussed filing bills in the new year. In Connecticut and New York, lawmakers passed bills in prior years allowing sports betting, but regulations were never issued authorizing it. Both states will likely pass new legislation, providing regulators with clarity on how sports betting should be operated. Other states eager to consider sports betting legislation include Colorado, Indiana, Kansas, and Oklahoma.
By Bill Kramer
Election years are generally a bad time for state lawmakers to raise revenues for transportation infrastructure projects, especially if that revenue raiser is a gas tax increase. However, once lawmakers get through an election cycle, they typically take vital, if unpopular, issues like transportation funding more seriously.
Despite frequent but unreliable promises from federal officials for a much-needed injection of infrastructure investment, states have taken a leadership position on the issue. Twenty-four states have raised their own fuel taxes since 2012. Next year, policymakers in Colorado and Missouri will need to find transportation revenue solutions after voters rejected ballot measures to raise gas taxes in November. Senate leadership in Alabama says lawmakers are considering raising and indexing the state’s gas tax in 2019. Governor Rick Snyder (R) in Michigan has proposed using a portion of new sales tax revenue applied to online purchases, thanks to the Wayfair decision, to help fund roads. Governor Matt Bevin (R) of Kentucky is calling on his state’s legislature to raise gas taxes and fees to fund roads, and might call a special session to get it done.
In 2017 — the most recent non-election year — seven states passed major gas tax increases. Additionally, a popular trend to monitor is for lawmakers to add fees aimed at hybrid or electric vehicles, which are currently a minor part of the overall vehicle fleet on state roads, but growing in popularity.