By Robert A. Holden, Esq., Senior Vice President
Now that the results of election night 2014 have sunk in, 12 new Governors (eight Republicans, three Democrats, and an independent) are preparing to take the reins in their respective states. As you might expect, a review of their key campaign issues shows a number of common themes and sets expectations for these new Governors as they take office in 2015.
Health Care – Medicaid Expansion and State Health Care Exchanges
As health care reform moves into its second year of implementation, the new Governors will look to impact the effects of reform in their states. The primary focus will be on addressing Medicaid eligibility expansion and the purchase of private health insurance through health care exchange market places pursuant to the ACA.
While the new Republican Governors certainly expressed their dissatisfaction with how reform has been implemented at the Federal level, each of them will address different realities in their home state. Taking over from predecessors who had invested considerable effort in health care exchange implementation, Governors-Elect Larry Hogan (R) of Maryland and Charlie Baker (R) of Massachusetts both inherited failed health care exchange roll-outs for the 2014 plan-year. Baker has called the implementation of the Affordable Care Act in Massachusetts a disaster, citing the cost of hundreds of millions of dollars for a failed website and temporary coverage for residents who could not enroll as well as increasing premiums and policy cancellations for people who liked the plans they had. He has stated his intention to pursue a waiver for Massachusetts from the ACA to return to its old system. Hogan has not developed a specific plan to address health care reform in Maryland, but focused on the Maryland health exchange as a waste of money during his campaign and suggesting that Maryland should have proceeded as Virginia did.
As Attorney General of Texas, Governor-Elect Greg Abbott (R) filed an ultimately successful lawsuit allowing states to have the option of expanding their Medicaid eligibility without the risk of losing all Medicaid funding. Accordingly, he is expected to continue his opposition to expansion efforts. In contrast, his Republican colleague in Arkansas, Governor-Elect Asa Hutchinson, inherited a novel approach to Medicaid expansion from his predecessor. Called the “Private Option,” Arkansas residents seeking to enroll in Medicaid under expanded ACA eligibility may enroll in private insurance plans through the state exchange. While Hutchinson is opposed to Obamacare generally, he made no sweeping promises and has remained open minded on the Private Option. On record as in favor of the Private Option, he has said that if it is not working for the benefit of the taxpayers, he will gladly end it.
Pension Reform and Government Transparency
A number of incoming Republican Governors indicated their desire to increase transparency and openness in their states, particularly with respect to employee pensions. In Texas, Governor-Elect Abbott has supported stricter oversight of public pension funds, urging pension boards to prohibit fund trustees and managers from working for companies doing business with the boards, requiring registration of pension fund actuaries, and recommending pension boards have at least one member with investment expertise. In Illinois, Governor-Elect Rauner (R) ran on a platform called “Shake Up Springfield” which focused on pension reform, and called for stronger action than the reform bill that passed in Illinois in the 2014 session. Arizona Governor-Elect Doug Ducey (R) has also focused on state employees, stating his desire to hold the government more accountable for every employee. He has proposed the creation of a task force to review state assets, conduct internal reviews and to research other states’ practices. He also said that 27 percent of current state employees will be eligible to retire by the next gubernatorial election, and that once those employees leave, a more stringent look must be taken before hiring replacements.
In Pennsylvania, Governor Elect Tom Wolf (D) has taken a different tack on government transparency, focusing on campaign finance. He has promised to completely reform campaign finance laws, make the laws regarding gifts for lawmakers stricter and placing more scrutiny on contracts between private law firms and state government officials. He has proposed lower limits on campaign contributions as well as complete transparency for donations over $100.
While incoming Democrats were not as focused on taxes as were Republicans, Governor-Elect David Ige (D) of Hawaii has planned specifically to balance the budget through more efficient collection of existing taxes rather than by raising taxes. Unsurprisingly, many Republican Governors-Elect made tax reform a substantial part of their campaigns.
Pete Ricketts (R) of Nebraska identified property taxes as a major priority. In 2014 the Nebraska Legislature approved a $25 million increase to the Property Tax Credit Relief Fund, which is now expected to hold more than $700 million, a record high. Ricketts vowed to work with the Legislature to identify the appropriate level of reserve, and to return the surplus to taxpayers in the form of property tax credits.
In Massachusetts, Governor-Elect Baker has pointed to welfare reform that helps recipients achieve economic independence as a top priority in his first term as Massachusetts Governor, particularly in the area of getting current welfare recipients off of the system. His campaign outlined a “Pathways to Self-Sufficiency” program during the race, as well as a plan to incentivize business to hire welfare recipients through tax credits.
Several incoming Governors focused on state income taxes. In Arizona, Doug Ducey has promised to simplify and reduce taxes, and will submit rate-lowering legislation annually in hopes of eventually getting rid of the income tax all together. As part of his “Bring Back Blueprint,” Governor-Elect Rauner plans to lower the Illinois income tax and freeze the property tax, implementing a 3% income tax rate and 4.8% corporate income tax rate which would return rates to their 2010 level. In Arkansas, Governor-Elect Hutchinson’s platform included lowering the income tax from 6% to 5% for taxpayers earning $20,400 to $33,999, and from 7% to 6% for taxpayers earning $34,000 to $75,000. While Maryland’s budget deficit may delay any tax relief in the short term, Governor-Elect Larry Hogan campaigned heavily on tax reduction.
Environment and Energy
Incoming Democratic Governors focused on a number of energy and environmental issues. In Pennsylvania, Tom Wolf (D) pledged to enact a five percent extraction tax on natural gas, create new regulations on gas extraction and expand clean energy businesses. He hopes that natural gas-based businesses will help expand the manufacturing sector, and that proceeds from taxes can be reinvested in state parks.
Governor-Elect Gina Raimondo (D) has introduced a large environmental program called “Rhode Island Green Bank and Clean Energy Finance Authority.” The program is intended to reward clean energy technology and attempt to create a slew of green jobs for the state. The program is based roughly on Connecticut’s Clean Energy Investment and Finance Authority and would have borrowing authority to capitalize itself.
In Hawaii, Governor-Elect Ige plans to direct the newly-created Pacific-Asia Institute for Resilience and Sustainability which is a public-private partnership aimed at addressing disruptive changes through global collaboration. He plans to mitigate risks from natural and man-made hazards and move for implementation of Department of Health rules that will reduce greenhouse gas emissions.
 “Statement from Asa Hutchinson on Private Option.” http://www.asaforgovernor.com/statement-from-asa-hutchinson-on-private-option
 “Government Spending,” Doug’s Plan. https://web.archive.org/web/20141105185209/http://www.dougducey.com/issues/spending/
 “A Fresh Start for Pennsylvania,” pg. 5-8. http://www.scribd.com/doc/206744023/Tom-Wolf-s-Plan-to-Give-Pennsylvania-a-Fresh-Start
 David Ige’s Action Plan: “Engineering Hawai’i’s Future” (Budget) http://www.davidige.org/action-plan/
 “A Real-World Plan for Reducing the Property Tax Burden for All Nebraskans.” http://www.petericketts.com/wp-content/uploads/2014/09/FINAL-Ricketts-Property-Tax.pdf
 “Economic Growth,” Doug’s Plan. https://web.archive.org/web/20141107032354/http://dougducey.com/issues/economy/
 “Asa Hutchinson Announces Tax Reduction Plan to Create Jobs & Spur Economic Growth.” http://www.asaforgovernor.com/asa-hutchinson-announces-tax-reduction-plan-to-create-jobs-spur-economic-growth
 The Washington Post, “Hogan: Maryland’s $600 million budget shortfall will affect plans for cutting taxes.” http://www.washingtonpost.com/local/md-politics/hogan-marylands-600-million-budget-shortfall-will-affect-plans-for-cutting-taxes/2014/11/17/261c5490-6ea7-11e4-ad12-3734c461eab6_story.html
 “A Fresh Start for Pennsylvania,” pg. 39-42. http://www.scribd.com/doc/206744023/Tom-Wolf-s-Plan-to-Give-Pennsylvania-a-Fresh-Start
 Providence Journal, “Raimondo economic plan puts focus on clean, efficient energy.” http://www.providencejournal.com/breaking-news/content/20140423-raimondo-economic-plan-puts-focus-on-clean-efficient-energy.ece
 Providence Business News, “Partisan differences energize power plans.” http://pbn.com/Partisan-differences-energize-power-plans,98474?print=1