State Government Affairs
What to Expect in State Legislatures Next Year (Top Policy Issues in 2023)
September 16, 2022 | MultiState
December 10, 2020 | MultiState
There’s a lot to think about when it comes to planning your government affairs strategy for next year, but MultiState is here to help. Our 2021 Session Prep Toolkit will help you plan your 2021 (following the checklist here) and each week we’ll delve into a different aspect of state government affairs strategic planning. If you’re just tuning in, get up to speed on the first two installments:
In March and April, top economists predicted that states could see their revenues drop by up to 50 percent, but due to a variety of factors current projections are less apocalyptic. We will have a more complete picture of what state budgets pictures will be looking like in a couple of weeks, but while some states like Illinois and New York are facing multi-billion-dollar shortfalls, many other states are facing more manageable budget challenges.
Despite this good news, we still expect to see many states experimenting with business tax policy in 2021. But how can we forecast which states may experiment with tax policy given that a variety of overlapping political and economic factors impact what policies a state may consider? To answer this question, we condensed these factors into an easy-to-understand state risk score, incorporating metrics such as state partisan makeup, state budget and revenue outlook, health of rainy day fund, and past activity and attitude towards business tax increases.
States with the highest scores are considered more likely to increase business taxes in 2021 — California, Colorado, Connecticut, New York, and Oregon. Additionally, we found that there were eleven other states where we may also see activity, though risk factors are not as extreme. Read the full report for additional details.
It goes without saying that COVID-19-related legislation will dominate state policymakers’ time and attention in 2021. We expect to see activity related to COVID-19 liability, hazard pay, vaccination, and workplace safety rules. MultiState offers full monitoring of state and local activity related to pandemic response — explore it here.
This year, lawmakers in 36 states introduced over 200 bills addressing limited liability during the pandemic. A federal effort in Congress has failed so far to enact broad liability protection, so state lawmakers have taken up the effort. Lawmakers in 21 states have enacted 40 bills relating to COVID-19 liability protection into law. Additionally, the governors in Arkansas and Connecticut have issued executive orders providing limited liability protections.
About half of the enacted state laws will provide limited liability protection generally to all businesses within the state assuming they follow industry guidelines and absent gross negligence. Other laws target specific industries for liability protection. The most prevalent targeted liability protections are for medical fields including hospitals, testing facilities, nursing homes, and personal protective equipment manufacturers. Finally, the remaining laws target businesses deemed “essential,” government employees, those providing disaster relief/recovery operations, restaurants, higher education, public schools, and outdoor swimming pools.
If Congress fails to enact a nationwide law limiting liability for private businesses nationwide in response to the pandemic, then we expect states to continue to introduce and enact this type of legislation as states try to balance safety with keeping their economies afloat.
COVID-19 Hazard Pay
We expect to see a variety of policy proposals in 2021 that focus specifically on essential workers, particularly proposals that would either require employers to pay essential workers hazard pay in addition to regular wages or set up Hazard Pay Grant Programs open to essential employers and employees. In 2020, nine states and New York City introduced legislation related to hazard pay.
Thus far, no states have enacted a hazard pay mandate, but Pennsylvania and Vermont have enacted hazard pay grant programs. In 2021, these grant programs will likely be a popular policy option with legislators as states determine how to spend funds received from the federal government. Additionally, reframing the focus of labor and employment legislation on essential workers amid their key role during the pandemic will be a popular option for state lawmakers.
Starting in late December, the United States is expected to begin the largest scale vaccination distribution effort in its history. Each state will need to determine who will receive COVID-19 vaccinations and in what order. There’s a consensus that front-line health care workers and the vulnerable and elderly should be at the front of the line, but there are still many questions yet to be answered as the vaccine becomes available. State vaccine plans will become a vital resource in this process. Additionally, several states and D.C. have established vaccine review committees that plan to review vaccine safety after the FDA approves a vaccine, adding additional scrutiny for safety but also additional time to the process.
COVID-19 Workplace Safety Rules
In July, Virginia became the first state to enact comprehensive workplace safety standards to control, prevent, and mitigate the spread of COVID-19 in the workplace in the absence of stringent federal requirements. Since that time, California, Massachusetts, Michigan, and Oregon have also finalized COVID-19 workplace safety regulations and other states, like New Jersey, have enacted executive orders aimed at workplace safety.
A federal Occupational Safety and Health Administration (OSHA) mandate could mitigate some state activity on the issue, but we expect states to continue to introduce and enact legislation, regulations, and executive orders aimed at keeping workers safe into 2021.
In addition to legislation addressing the effects of the COVID-19 pandemic, there are several other policy areas where we expect to see activity and discussion. MultiState can help you track mission-critical issues — read more about our Issue Management solutions here.
Following the death of George Floyd at the end of May, state legislators across the country introduced hundreds of bills intended to reduce incidents of excessive use-of-force by law enforcement officers. Given the volume of legislation on this issue in a year when many legislative sessions were cut short by the pandemic, the 2021 sessions will likely be even busier.
Six states have already prefiled bills relating to police reform for next year’s session (Alabama, Georgia, Missouri, Montana, New Hampshire, and Texas). These bills address a variety of specific reforms, including widespread implementation of body cameras, revision of qualified immunity doctrine, and the imposition of a duty to intervene when one officer sees another using excessive force.
Federal Tax Conformity
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress made a number of tax changes that are important to the business community, such as allowing net operating loss carrybacks and raising the limitation on the deductibility of interest (163(j)). These federal changes came after most state legislatures had adjourned or curtailed their sessions due to the pandemic.
Thus, conformity to the federal tax code will be a bigger issue in 2021 than it would otherwise have been, and state efforts to decouple from specific provisions of the Internal Revenue Code will have a retroactive effect for many business taxpayers. There are, of course, multiple personal income tax provisions in the CARES Act that state legislatures will also have to address. Finally, in recent months there has been a new push among a few tax experts for states to include some foreign income in their income tax base by conforming to federal GILTI provisions. This would be a novel and significant policy change for states, who typically have only taxed domestic activity, but early rumblings suggest that some more progressive states could explore this idea moving forward.
Digital Advertising Taxes
As we've written about previously, state legislatures spent much of 2020 looking at novel taxes on the digital economy and we expect that trend to continue into the new year. Lawmakers have been grappling for years over the taxation of the digital economy and the significant legal hurdles associated with these policies, but now some legislators — driven by the need (or desire) for new revenue as well as an interest in exerting greater control over tech giants — have increasingly pushed forward to introduce and vote on legislation. Following a New York Times op-ed about the need to tax social media companies the District of Columbia, Maryland, Nebraska, and New York all introduced legislation to tax digital advertising services. While none of those bills have become law yet (Maryland’s proposal is eligible for a veto override vote), other blue states are already planning to push forward with this agenda next session.
Wealth Taxes and Taxes on High-Income Individuals
After years of debate, New Jersey lawmakers enacted a tax on high-income individuals this year and the politics that pushed that bill over the finish line are likely to inspire similar efforts around the country next year. New York, for example, is planning to revisit their perennial debates about a "pied-à-terre tax" or targeting upper earners with higher personal income taxes. California has floated an aggressive new proposal to tax wealth that could follow individuals even if they left the state. We expect to see several more states give these kinds of ideas consideration.
After California’s comprehensive privacy law took effect this year, other states may look to follow their lead and respond to consumers’ demand for more control over personal data. Oregon and Washington have bill drafts ready for the upcoming session, and a Virginia joint commission met this fall to consider new data privacy and security legislation. Congress made promising bipartisan progress on a federal privacy bill in 2019 before the pandemic derailed those efforts. With a new Congress in January, those efforts could be revisited. If an agreement is finally reached after multiple efforts over the past several cycles, that could quell state efforts to pass comprehensive privacy legislation.
In November, California voters approved a new privacy ballot measure that would, among other things, create a new California Privacy Protection Agency to enforce privacy laws, expand what entities are covered by existing privacy laws and what personal information is covered, grant a right to correct inaccurate personal information, and amend disclosure and opt-out laws. Those provisions could be tweaked in the upcoming session, although the ballot measure limits how much of the law the legislature can change.
Other issues that are likely to gain traction in state legislatures next year include greater transparency in algorithms and artificial intelligence, regulation of facial recognition technology, and regulating how smart devices record and store information.
The reliance on internet access during the pandemic to teach students, connect workers, and even allow health professionals to diagnose and treat patients has showcased the disparity in the quality of broadband service in different communities. Policymakers in rural areas have been particularly vocal about their low-density populations and topography challenges that can make it difficult to install broadband infrastructure. Many states have proposed mapping studies to determine what areas are underserved. Some states, such as Colorado and Pennsylvania, have created or expanded grant programs, a trend that is likely to continue in 2021. Other proposals would allow local governments greater flexibility in facilitating broadband infrastructure, streamline land use and lease permitting processes, or allow the formation of nonprofit electric cooperatives to provide broadband service.
The 2020 elections will be particularly consequential for the upcoming once-a-decade redistricting process. In the next two years, state legislatures will use census data to redraw congressional and state legislative district lines. Of particular note in this process are the 39 states with political “trifectas” — where a single political party controls both state legislative chambers as well as the governor’s office — which will largely have free rein to redraw districts without input from the minority party. In 2021, Republicans will hold 24 state trifectas and Democrats will hold 15 trifectas. A handful of states have also outsourced the redistricting function to independent commissions with varying degrees of procedures to shield the process from political influence. Redistricting will have long-term political effects for each state, so expect this issue to receive a lot of attention. Explore MultiState’s resource on 2021 trifectas and additional analysis about redistricting.
Since California enacted AB 5 codifying the “ABC Test” to determine whether or not workers are considered employees or independent contractors, there has been a renewed interest in worker classification in states across the country which will continue into 2021. A variety of proposals have emerged and will be introduced across the states in the upcoming legislative sessions, including bills to enact “ABC Tests” in additional states; codify various other tests to determine whether workers are employees or independent contractors; and address worker misclassification across various industries.
In our fourth and final installment of the toolkit next week, we’ll consider logistics, such as session dates, travel restrictions, and limitations on access to legislative and other buildings that could prevent you from meeting face-to-face with lawmakers. Additionally, one of the most important logistical pieces in our business is compliance — we’ll go over how to think through lobbying compliance in the new normal. Visit our 2021 Session Prep Toolkit for the full checklist.
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