Disagreements over closing deficits, budgetary expenditures and expanding Medicaid are forcing several legislatures to extend their sessions and a number of other states facing significant shortfalls are struggling to figure out how to fill the gaps before their fiscal years end. According to the National Association of State Budget Officers, only 25 of the 50 states have passed new budgets this year, and for most, a June 30 deadline accompanied by a government shutdown is fast approaching.
You might expect single-party controlled governments to have an easier time addressing budgetary shortfalls, while divided governments would face some form of friction. After last year’s election, Republicans ended up controlling the same number (23) of state governments as they controlled before the election, despite the increase in the number of divided governments.
Yet several of these single-party controlled states – namely Alabama, Connecticut, Florida, Louisiana, Kansas, South Carolina and Wisconsin – have been unable to pass a budget this year and at least half of them will need to return for a special session in order to complete their work (Florida commenced a special session at the beginning of June). In addition, this budgetary discord has appeared in split control states like Alaska, Illinois, Minnesota, New Mexico and Washington. These disputes are pitting party against party, chamber against chamber and legislature against governor, including some unexpected intra-party clashes. And, in only two cases – Minnesota and South Carolina – are lawmakers feuding despite having budget surpluses.
Let us look at the issues driving the turmoil in the individual states.
Governor Robert Bentley (R) vetoed the budget passed by the legislature, ensuring the need for a special session. Lawmakers were at odds regarding the creation of new revenue to fund the government and the Senate passed an “ugly budget” before it adjourned. Governor Bentley is expected to ask lawmakers to approve taxes and budget changes during the anticipated summer special session. The state’s fiscal year begins October 1, so the state is not facing a June 30 deadline or a potential government shutdown like others. Senate President Pro Tem Del Marsh (R) has indicated he wants to consider legalized gambling as a potential source of new revenue. During the session, the governor proposed more than $500 million in new taxes, but met resistance in the legislature.
Governor Bill Walker (I) ordered the legislature into special session in April to consider three bills dealing with the state budget, prevention of sexual abuse and expansion of Medicaid. During the legislature’s regular session, Governor Walker, a former Republican elected as an independent with support from the Alaska Democratic Party, faced strong resistance to many of his proposals from Republicans in the House and Senate. Republican leaders in both the House and Senate are currently negotiating with the House Democratic caucus, but for now, the legislature remains stuck without a budget deal that includes enough money to fully fund the state government.
The Connecticut General Assembly adjourned June 3 with several agenda items left undone, including the bill necessary to implement the state budget. This measure, known as the “implementer,” contains policy provisions needed to implement the state’s $40 billion budget. Typically the implementer also contains amendments which make broad policy changes that failed to pass earlier in the legislative session as well as smaller changes intended to assist a small group or town. Other legislation left undone includes one of Governor Dannel Malloy’s (D) top priorities, An Act Concerning a Second Chance Society, which is intended to lower incarceration rates and help non-violent offenders, as well as a bill which would encourage police to use body cameras.
Florida began its special session June 1 and is attempting to recover from the breakdown of its regular session. The regular session ended in acrimony between the House and Senate over Medicaid expansion. The legislature failed to pass a budget and under the state constitution lawmakers must deliver one by July 1. Senate Republicans are pushing for a form of Medicaid expansion, but are facing stiff opposition from their House colleagues as well as Governor Rick Scott (R). House Speaker Steve Crisafulli (R) has said “the majority of this chamber sees problems with the Senate plan.” If a budget solution is not found in the coming days, Governor Scott has warned the state faces a potential government shutdown.
Illinois is facing one of the largest budget gaps of any state. The fights regarding the state budget and the $3 billion shortfall have reached a point where Governor Bruce Rauner (R) has warned of cuts and closures if a budget agreement is not reached. The Democrats in control of the legislature insist on tax increases and Governor Rauner wants more spending cuts and a loosening of some business regulations. The governor said he won’t approve an unfunded budget and points to Democratic leadership for a compromise.
Facing a deficit of more than $1 billion, lawmakers are squaring off against Governor Bobby Jindal (R) over how to best address the problem. The governor has threatened to veto any budget plan or tax bills that do not meet Grover Norquist’s “no tax” requirements. Republicans in the legislature have sought Norquist’s approval to raise some taxes and state Representative Joel Robideaux (R), the Chair of the House Ways and Means Committee, even sent Mr. Norquist a letter asking for guidance. Mr. Norquist responded that any change in the net tax burden would be considered a tax hike and lawmakers should instead focus on cutting spending. Lawmakers are facing a Thursday deadline to deliver a spending plan to the governor. It is worth remembering that Governor Jindal is likely to announce his candidacy for President later this June, so this decision could impact how he receives the legislature’s budget.
Centrist Republicans and Democrats have joined together in criticizing Governor Sam Brownback (R) for driving the state into a $400 million budget shortfall with the tax cuts passed in 2012 and 2013. The most contentious issues have been about how much to increase the sales tax and how much to backtrack on previous cuts to income taxes. The legislature’s disagreements have resulted in the longest legislative session in state history. A bill passed by the Senate would increase the state’s sales tax and the cigarette tax, plus increase taxes on business owners by $24 million, the highest figure Governor Brownback is willing to accept. However, House Republicans do not think that figure is enough to fill the shortfall.
Governor Mark Dayton’s (D) vetoes of the budget bills passed by the legislature in the final days of the regular session have made a special session necessary. Governor Dayton vetoed the omnibus agriculture, environment, and natural resources bill, the omnibus jobs and energy bill and the education budget bill. Legislative leaders have been meeting with Governor Dayton before convening a session, and the governor has reportedly agreed to a House Republican request to increase spending for early childhood education and K-12 schools. Additionally, the governor and legislators have reached an agreement concerning a $373 million public works spending bill. Governor Dayton has stated that he has no intention of allowing the state to go into a shutdown and until this week, he and Republicans were at odds over the state auditor’s authority regarding county finances, which has delayed the start of a special session. Governor Dayton has reportedly backed down from his demands concerning the state auditor, and could call for a special session starting Friday, pending a written agreement with the Democratic and Republican legislative leadership.
Lawmakers and Governor Susana Martinez (R) held talks about the possibility of a special session after failing to pass a capital spending bill during the final day of session due to disagreements over how to fund the work. After reaching a deal on infrastructure and tax proposals, the legislature successfully convened for a one-day special session June 8. The legislature passed three bills stemming from the deal, including a $295 million capital outlay package and a set of tax incentives.
Lawmakers in North Dakota are set to reconvene for a special session June 16. The House and Senate were unable to reach a final agreement about several issues contained within the state’s Retirement and Investment Office and Public Employees Retirement System budget before adjourning April 29. House leadership refused to sit down with Senate leaders to resolve the differences; instead, the House adjourned for the session and the Senate refused to accept the House version of the budget. Since then, a six-member committee has struck an agreement and now awaits a decision by a 17-member panel to reconvene the legislature. The upcoming session is expected to last one day.
The legislature adjourned the 2015 regular session without passing a budget and will return June 16 to work on the budget and bills in conference committee. Unresolved disagreements between the House and Senate over transportation funding consumed the remaining time of the regular session and forced the chambers to return for a three-day special session. Besides passing a budget, the legislature is expected to take up legislation that will regulate transportation network companies. The state Public Service Commission issued a cease-and-desist order against Uber in January, but granted a temporary license after criticism with the expectation that the legislature would pass a bill during session.
In April, Governor Jay Inslee (D) called the legislature back for the first special session after House Democrats and Senate Republicans failed to agree on an operating budget for the next two years. That 30-day session ended without an agreement and the governor called for a second special session starting in late May. As seen in other states this session, transportation issues are a cause of disagreement between the chambers. The House and Senate are debating an increase in the gas tax to pay for transportation projects. The legislature is also debating an increase in the capital gains tax and must address education funding and school class size issues. The state faces a potential government shutdown if a deal is not reached by June 30.
After passing tax cuts last year, some Republicans promised that the state’s structural deficit would be gone. Wisconsin’s nonpartisan Legislative Fiscal Bureau has since projected the state will end the year with a $233 million deficit after starting the year with a $517 million surplus. As seen in other states, projected revenues have fallen short, resulting in a shortfall. During this year’s budget negotiations, Republican lawmakers have not given Governor Scott Walker (R) everything he wants. In particular, Governor Walker is facing pushback from lawmakers over transportation funding. Governor Walker proposed $1.3 billion in new bonding for transportation, but Assembly Speaker Robin Vos (R) said he is contemplating a transportation budget with no borrowing at all, which has forced the governor to concede that he would sign a budget without the proposed borrowing. As in Louisiana, Governor Walker is expected to announce his candidacy for President after the state completes its budget work.
Why are states struggling with budget shortfalls when many see the economy as improving? According to one report, “Truth and Integrity in State Budgeting,” states are resorting to “sleight of hand” to balance their budgets and fill glaring gaps in their employees’ pension programs. The report was produced by a task force headed by former Federal Reserve Board Chairman Paul Volcker and former New York Lieutenant Governor Richard Ravitch. In every state but Vermont, “balanced budgets are required by state constitution or statute. However, in reality there is no common definition of a balanced budget, which leaves open the opportunities for accounting gimmickry,” according to the study.
Divided legislatures and governments are known for their uncertainty and inconsistency in passing legislation; now we are seeing more states with one-party control suffer from the same problems. Additionally, as action in Congress stalled on many issues over the last few years, the states stepped in and were seen as the place to accomplish your legislative goals. Are we seeing a change in this dynamic? If so, how are you adapting your government affairs strategy in light of this increased level of uncertainty at the state level?