State Government Affairs
What Will Legislatures Focus on in 2023?
March 2, 2023 | Katherine Tschopp, Bill Kramer
September 16, 2022 | MultiState
State legislators were busy in 2022, despite the fact that upcoming elections shortened sessions in most states, leaving many issues on the table at sine die. And while it is still early in the year to anticipate every issue that may be considered in 2023, we are confident that the issues listed below will be addressed by a majority of states next year. The direction of many of these proposals will likely become more clear after the elections in November when we see if political power is swinging from one side to another or farther to the left or right. One thing is certain for 2023, there is a lot to be discussed and decided.
On June 24, the U.S. Supreme Court issued its opinion in Dobbs v. Jackson Women’s Health Organization overruling Roe v. Wade and holding that the U.S. Constitution does not confer a right to an abortion. Before the Dobbs decision, 24 states either had abortion restrictions already on the books (although unenforceable while Roe was in effect) or had enacted “trigger laws” designed to automatically restrict abortion access in case Roe was overturned. Since the Dobbs decision, many of those abortion prohibitions and restrictions have gone into effect, while a handful remain held up in court.
Indiana enacted its own ban this summer and lawmakers in West Virginia and South Carolina are still debating new restrictions. Reproductive health care will be a top trend in 2023 as states respond to the ruling by enacting restrictions or solidifying protections based on political ideology. Depending on how elections for governor and state legislative control turn out in several states, notably Pennsylvania (governor race), Michigan (governor race) North Carolina (supermajority control of the legislature), we could see new restrictions added in 2023. Additionally, reproductive rights are on the ballot directly via ballot measures in California and Vermont, both with abortion protection measures, and Kentucky and Montana, where anti-abortion measures are on the ballot. Kansas voters already rejected an anti-abortion ballot measure during this summer’s primary election. And Michigan voters are waiting to hear if the state supreme court will allow an abortion protecting measure to appear on November’s ballot.
Both Corporate Social Justice and more traditional Environmental, Social, and Governance (ESG) issues will be top of mind for state legislatures in 2023 following years of increasing interest. Broadly speaking, though these issues can be difficult to define, corporate social justice commonly includes areas such as LGBTQ+ and civil rights, election law, firearms regulations, reproductive rights, and other headline-grabbing topics. In 2023, we expect to see a great deal of legislation regarding sexual orientation and gender identity following a year where Republican Trifecta states enacted various pieces of legislation affecting the transgender community and the U.S. Supreme Court cast doubt on its previous protections of marriage equality. In 2022, Florida enacted legislation (and several other states followed suit) prohibiting “classroom instruction” on gender and sexual orientation.
Gun control is also likely to be a hot topic in the states after the Supreme Court struck down restrictions on concealed carry in New York State Rifle & Pistol Association v. Bruen and a series of mass shootings around the country. In addition to New York, the ruling affects five other states with similar restrictions: California, Hawaii, Maryland, Massachusetts, and New Jersey. Each state will likely need to pass new legislation to comply with the ruling.
Finally, we expect ESG issues specifically to be debated in several states as the Securities and Exchange Commission’s (SEC) long-awaited rule proposal on climate-related disclosures has brought a national spotlight to Environmental, Social, and Corporate Governance (ESG) regulations. The California Legislature introduced two bills that other states may model moving forward: SB 260, which would require companies with annual revenue over $1 billion and do business in California to publicly disclose their scope 1, 2, and 3 greenhouse gas emissions, and SB 1162, which would require employers to submit pay data reports to the California Department of Fair Employment and Housing that include the median and mean hourly rate for each category of race, ethnicity, and sex within each job position. Additionally, New York and Washington both introduced versions of the “Fashion Act” that would have required clothing companies that do business in the state and have global revenue above $100 million annually to disclose their supply chain sustainability risks and their plans to mitigate them. Also, expect blue states to continue to introduce and enact various pieces of legislation restricting state investments in an array of industries such as fossil fuel companies and gun and tobacco manufacturers. Red states are likely to continue to push back on these restrictions by prohibiting investment in financial companies that boycott certain businesses, following the lead of Texas, West Virginia, and Florida.
In 2022, tax policy action was defined by states' strong revenue environment: flush budgets meant that lawmakers focused far more on cutting taxes than raising them. If the national economy continues to weaken, this situation won’t last.
We expect Republican state lawmakers to continue their efforts to reduce, flatten, or eliminate the personal income tax in 2023, as Iowa, Georgia, Mississippi, and West Virginia have all debated doing in the last few years. This has been a long-standing goal of GOP politicians and many have already laid the groundwork for another round of reductions next year. Given the fiscal realities of the personal income tax, the more states cut, the more likely it is that they will need to raise tax revenues from elsewhere to make up the difference, which could mean expanding the sales tax base to new services.
We also expect state lawmakers to continue their efforts to levy new taxes aimed at the "big tech" industry; however, as written, these taxes impact many businesses beyond the technology industry. The proposals have taken several forms: taxes on digital advertising and taxes on the collection or sale of consumer data. The issue is not partisan: lawmakers on both the left and right have both considered these novel policies. Recent proposals have been challenged in court (like Maryland's digital advertising tax) or not received enough support to pass; however, this issue will likely continue to spread in 2023.
Since 2021, the federal government has earmarked to the states over a trillion dollars in subsidies devoted to infrastructure funding through the Infrastructure Investment and Jobs Act (IIJA) and the American Rescue Plan Act (ARPA). The IIJA includes over two hundred individual funding streams, and some of its major identified areas of investment include surface transportation and highways, electric vehicle (EV) charging infrastructure, railroad rehabilitation, energy efficiency and reliability, water infrastructure, and broadband internet access. States and other aid recipients are responsible for identifying appropriate projects while incorporating federal guidance; fact sheets outlining each state’s funding can be found here. Some consistent themes in state spending goals include repairing aging infrastructure, making transportation networks healthier, creating EV charging systems, and improving broadband access. As of July 2022, the White House reported that over $110 billion of IIJA funds had been announced and sent to states, tribes, territories, and local governments for use on thousands of projects.
The IIJA includes about $55 billion in funds designated to improve water infrastructure, especially notable in light of the ongoing water crisis in Jackson, Mississippi. This amount will augment about $14 billion which has already been distributed to refurbish water systems under the ARPA. Most of these funds are earmarked for drinking water or clean water improvement projects, and states are required to match a certain percent of funding. This percentage increases from 10% to 20% for projects that are approved more than two years after funding becomes available, so states should be motivated to pursue water-related projects as quickly as possible.
As the focus has shifted toward implementation of the law, there has been some controversy as a group of Republican governors challenged a Federal Highway Administration memo urging states to prioritize existing repairs, bike lanes, and public transit over highway expansion when using federal funding. Disputes back and forth are likely to continue as states look to implement IIJA provisions that are consistent with federal goals.
According to recent polls, gun violence and crime rank as the second most important issue for Americans heading into the 2022 midterms. Expect to see legislation aimed at the rise in crime numbers across the country. Conservative legislators are likely to introduce measures aligned with traditional views on policing, and a broader group of elected officials may try to undo recent reforms aimed at bail and sentencing reform and laws allowing for early release. Recent recall efforts to remove progressive district attorneys in California and Colorado suggest public support for these measures.
Homelessness will continue to be an issue as people struggle with the expiration of COVID-19 implemented eviction bans and rising interest rates and costs of goods due to inflation, as well as increasing rental rates. According to a database from the National Conference of State Legislatures, 34 states have enacted 173 laws on housing this year, including legislation on home buyer savings accounts, military and transitional housing, COVID-19 tenancy relief, affordable housing, first-time home buyer programs, allowing for the repurposing of other buildings into housing, credits and incentives, and workforce housing amongst other things. We anticipate similar legislation being introduced going forward as states continue to deal with this pressing issue.
The number of undocumented immigrants coming across the southern border remains high. Expect conservative states to increase funding for sheriffs, police departments, efforts to combat human trafficking, jail facilities, and surveillance equipment as well as introduce measures aimed at preventing immigrants from receiving public benefits or voting, and in border states, building physical walls or barriers. It is also likely that additional governors will feel pressured to issue emergency declarations related to immigration that will allow for the use of the National Guard, similar to actions in Arizona and Texas.
Inflation has become an increasingly prevalent issue for state legislators in recent months. In August, President Biden signed the Inflation Reduction Act. This bill targets energy and prescription drug costs in hopes of having a positive impact on inflation. However, these measures will not go into effect immediately and it will likely be months before the effects of this bill are actually seen. This bill leaves room for continued action by state governments.
One way we expect states to continue to attempt to address inflation in 2023 is through taxpayer rebates. Many states have recorded significant budget surpluses, affording them the ability to send rebates. California and North Carolina both proposed gas rebate checks during the 2021-2022 session and while neither measure passed, other states may introduce similar legislation as gas prices continue to increase. General rebates or stimulus checks have been more successful. In California’s 2022-2023 budget, stimulus checks up to $1,050 were approved for eligible households. In May, Delaware sent residents who filed 2020 taxes $300 rebate payments. In Georgia, residents who filed their 2020 and 2021 tax returns will be eligible for rebate checks of up to $500. In June, Virginia approved a one-time $250 rebate payment to residents who filed a tax return prior to July 1. In total, 14 states passed some form of rebate or stimulus check during the 2021-2022 session. These rebates are mostly targeted toward specific groups of people and are only available to those who filed tax returns. As inflation increases and states continue allocating budget surpluses, it is likely rebate checks will be debated next year as well.
Another approach to inflation that state legislators have taken this year that will likely continue in 2023 is to address price gouging. Minnesota, New York, and Pennsylvania introduced bills to ban price gouging of gas, energy, food, and other essential commodities. Governor Beshear (D) in Kentucky and Evers (D) in Wisconsin both signed executive orders preventing fuel price gouging this year. These price gouging measures prevent fuel retailers from increasing the price of fuel by a specified percentage amount over a short period of time. These measures often set a price ceiling that retailers are not allowed to exceed. The primary target of price gouging efforts thus far has been gas, but it is likely that if inflation continues to increase other industries such as energy or food could be addressed in 2023.
Another way states may attempt to address inflation is to raise the minimum wage. Many states have already increased the minimum wage to $15 per hour in recent years, but now that Hawaii has enacted legislation to raise the wage to $18 per hour, additional Democratic Trifecta states may follow suit. Thirteen states currently have automatic minimum wage increases tied to increases in the cost of living. As these inflation-tied increases begin to go into effect there will likely be debate by legislators within those states and within others who are not experiencing the same automatic increases.
A significant contributor to inflation has been the supply chain disruptions that are a lingering result of the pandemic. While supply chain issues are difficult to address, legislators in Georgia, Idaho, Kentucky, New Jersey, and Rhode Island introduced legislation in 2022 that would ease commercial driver restrictions, requirements, and licensing. If supply chain issues continue to persist, it is likely that states will continue to propose a rollback of these requirements.
Alternative energy and electric vehicles (EVs) will be prominent issues in 2023 as the general public seeks relief from rising gas prices and the states receive funding to build electric vehicle infrastructure. The Infrastructure Investment and Jobs Act (IIJA), also known as the “Bipartisan Infrastructure Law” offered states funding for the placement of EV charging infrastructure on the National Highway System. All 50 states have submitted EV infrastructure deployment plans to unlock the first round of funding. We expect that states will propose additional legislation beyond highway charging as those plans are approved. States such as Minnesota and New Jersey have introduced legislation to install charging stations at workplaces, in multi-family housing, and in certain public places, continuing to install charging infrastructure at highway rest areas to bolster market opportunities. State transportation authorities are already mandating fleet conversions to electric vehicles to work within the expanding network. Massachusetts and Maryland have introduced legislation to convert all public transportation vehicles to electric.
With EV purchasing incentives via tax credits and rebates, legislatures and the industry are seeking to make electric vehicles more affordable, closing a gap in purchasing. New York offers rebates for purchasing previously owned EVs. And as EV purchases increase, states fear a decrease in gas tax revenue, so expect states to consider implementing new fees to support funding transportation-related projects. Some states are already examining new revenue collection methods, including Indiana, implementing fees at charging stations via a kilowatt-by-hour system (kW/hr). The recent enactment of the Inflation Reduction Act will begin infusing a huge pot of federal subsidies into the purchase of EVs, as well as electrifying home compliances, heat pumps, rooftop solar, and electric water heaters and HVAC units.
We expect to see alternative energy continue to be a viable policy alternative to fossil fuels. Legislation conducting feasibility studies in New York to add solar panels to all public buildings, Louisiana for an offshore wind energy pilot project, and Hawaii for renewable hydrogen production will continue transitioning the energy system from fossil fuels. It is clear that 2023 will see the biggest expansion yet for the electric vehicle industry and alternative energy in infrastructure, purchasing, and preparing for an eco-friendly future.
A perennially popular issue, we expect the states to address various health care issues in 2023. Mental health will be in the spotlight as states attempt to address an increase in gun violence, an increase in overdose deaths, and establish the funding, infrastructure, and implementation of the 988 mental health hotline.
Twelve states have declined to expand their Medicaid program under the Affordable Care Act (ACA). The North Carolina General Assembly considered an expansion bill this session, but Medicaid expansion failed to gain the key support of the House Speaker. In November, South Dakota voters will decide whether to expand Medicaid in their state with a ballot measure this November. Other states that have not adopted Medicaid expansion will not have political conditions favorable to do so in the coming year.
Drug pricing continues to be a concern of both federal and state legislators. In August, President Biden signed the Inflation Reduction Act into law. The bill contained a provision that allows Medicare to negotiate drug prices on medications that have no generic equivalent and account for the greatest Medicare spending. It also capped out-of-pocket spending for Medicare beneficiaries at $2,000 per year beginning in 2025. While Medicare is a federal program and not administered by the states, this will have a significant impact on drug costs. Three states, Louisiana, Maryland, and Washington adopted bills capping co-pays for insulin ($75, $30, and $35 per 30-day supply, respectively). Twenty-seven other states introduced similar legislation. Although a popular policy with voters, there is major disagreement among policy experts as to the effectiveness of such plans.
The COVID-19 Public Health Emergency (PHE) has caused a ripple effect throughout the healthcare system. One of the biggest changes has been in Medicaid eligibility. States have been unable to perform redeterminations of all Medicaid beneficiaries during the PHE. The federal government has provided states with a 14-month deadline to “unwind” their Medicaid programs and conduct redeterminations for beneficiaries. The clock starts ticking when the PHE is ended, and the government has promised a 60-day warning before that happens. So far, that alert hasn’t come. States are still in the process of developing their strategies for unwinding, but most anticipate using a majority of the 14 months to complete the process.
More states are enacting comprehensive privacy legislation giving consumers rights over their data, and unless Congress moves forward with proposed legislation this year, states will continue to take the lead on the issue in 2023. Lawmakers have departed from the initial model set in California and have either adopted a more business-friendly model as seen in Utah, or a more consumer-protection model as seen in Connecticut. While there has been disagreement on how much regulation there should be on general consumer data, there is a growing consensus that more should be done to protect children. The California Legislature passed a bill this year that requires certain online services likely to be accessed by children to have certain default privacy settings and limits the use of information collected on the consumer. Other states could push similar legislation if Congress does not act on the issue first.
The recent Dobbs ruling by the U.S. Supreme Court on reproductive rights has also raised concerns about how location information and other data collected from apps could be used to prosecute women who have had an abortion, so expect proposals to minimize the uses of health and location data collected from consumers.
Much of the focus on algorithms has been in respect to how they are used to censor certain political views on social media, which will be a hot-button issue in Republican-controlled states after Texas and Florida passed measures last year. But there is increasing scrutiny on the use of algorithms in other areas — for credit scores, employment decisions, and law enforcement. Lawmakers are still catching up to this technology, so expect a lot of task forces and working groups, but increasingly lawmakers are proposing bills that require more transparency of algorithms, protect certain civil rights from algorithms, or implement moratoriums on certain uses.
Cybersecurity has become a huge national concern, so legislation requiring certain standards for vulnerable industries will continue next year. Hackers have begun targeting governments and companies with ransomware, and some lawmakers have responded by setting protocols for such incidents or even prohibiting the payment of ransom.
Legislation regulating cryptocurrencies and the blockchains that power them will be a major issue throughout state legislatures in the coming years as Web3 and blockchain development continue to be integrated into the U.S. economy. Issues surrounding the environmental impacts of cryptocurrency mining, adoption of cryptocurrency as a form of legal tender or payment for labor, regulation of decentralized autonomous organizations (DAOs), property rights of digital assets, tax structure and compliance, and cybersecurity/fraud prevention are just some of the issues that have been deliberated in state legislatures in the last few years and we expect to see more in 2023.
During the 2021-2022 legislative year, 37 states introduced cryptocurrency legislation. Wyoming amended provisions in state statutes regulating decentralized autonomous organizations (DAOs). Washington and West Virginia updated unclaimed property laws to include digital currencies. Connecticut has required the Board of Regents of Higher Education to develop instruction programs to help small businesses in electronic commerce and digital currencies. Indiana and South Dakota also enacted digital asset legislation during the 2021-2022 legislative year.
On August 3, 2022, a bipartisan bill known as the “Digital Commodities Consumer Protection Act of 2022” was introduced in the U.S. Senate to provide the Commodity Futures Trading Commission jurisdiction to oversee the spot digital commodity market. This bill also classifies Bitcoin and Ethereum as commodities while allowing for some digital assets to be considered securities.
As blockchain technology and Web3 continue to grow in development and usage, and as more companies accept cryptocurrencies as a means of payment, state legislatures and the federal government will work to identify how to properly regulate the industry. We expect many of the states that introduced previously unsuccessful legislation surrounding the crypto industry to reintroduce those measures.
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