NCSL Podcasts

2023 Legislative Forecast: Uncertainty Ahead | OAS Episode 177

Episode Summary

Tim Storey, the CEO of NCSL, joined the podcast to talk about the 2023 sessions for state legislatures, when every legislature in the country will in session. While state budgets are in good shape, Storey notes that legislators have the same concern and uncertainty about a possible recession and ongoing inflation as everyone else and that likely will make them cautious in their spending plans. A big issue that touches every area of the economy from construction to schools is the workforce. Storey said he expects that will be a focus for many legislatures. In the health care area, mental and behavioral health are top of mind for many lawmakers, especially as those issue affect young people. The fentanyl crisis is also an issue sure to draw the attention of many legislators in 2023. We also discussed the legislative role as states implement myriad programs funded by the billions of dollars in federal aid under federal infrastructure and inflation reduction legislation.

Episode Notes


Episode Transcription

Ed:       Hello and welcome to “Our American States," a podcast from the National Conference of State Legislatures. This podcast is all about legislatures, the people in them, the policies, process, and politics that shape them. I am your host, Ed Smith. 


TS:       Legislators who I’ve spoken with, and legislative staff are I think anticipating in a somewhat positive way the new sessions that kick off in nearly every state next year. A couple of states start this year. All of the states are in session in 2023.


Ed:       That was Tim Storey the CEO of NCSL. I sat down with Storey just before Christmas for our annual ritual. A look at the key issues facing legislatures as the new year begins. While state budgets are in good shape, Storey notes that legislators have the same concern and uncertainty about a possible recession and ongoing inflation as everyone else. That likely will make them cautious in their spending plans. A big issue that touches every area of the economy from construction to schools is the workforce. Storey said he expects that will be the focus for many legislators. In the health area, mental and behavioral health are top of mind for many lawmakers especially as those issues affect young people. 


            We also discussed the legislative role as states implement myriad programs funded by the billions of dollars in federal aid under the federal infrastructure and inflation reduction legislation. Here is our discussion.


Ed:       Tim, great to have you on the podcast. 


TS:       Oh, I always love being on the “Our American States” podcast. So, thank you Ed. I’m looking forward to it.


Ed:       So, Tim, why don’t we start with the overall picture. What’s the shape of state legislatures as we enter 2023 and sessions start to open up in almost every state? 


TS:       The dynamics of legislatures are super dynamic, always changing, but they do react to certain things that happen on a regular basis. And you know one is the 2022 midterm elections are in the rearview mirror now. And yes, people are already campaigning for 2024. But we now enter that sort of first year of the cycle for most states. So, I think legislatures are in a position of eagerness for sessions honestly. I think budgets are healthy for the most part across the country. There are a few clouds now on the horizon that weren’t there even just a month ago. Legislators who I’ve spoken with, and legislative staff are I think anticipating in a somewhat positive way. The new sessions that kick off in nearly every state next year. A couple of states start this year. All of the states are in session in 2023. 


            I think there is a little bit of optimism that this election went well from an administrative standpoint and again the state budgets are healthy for now, so you know most states are looking at you know solving some of the big problems that have landed at their doorstep once again.


Ed:       Well, let’s talk a little bit more about state budgets. I think that six months ago maybe we thought things were even rosier, but fear of a recession and of course ongoing pretty high inflation affects everyone. So how are legislators talking about their budgets and where are the concern areas?


TS:       Everybody is tuned into the same economic news as the general public. And you know of course they get very sophisticated analysis from fiscal staff who do an outstanding job in terms of monitoring current economics landscape as well as trying to project into the future where things are headed. The entire U.S. economy and not to mention the global economy is it a true inflection point of uncertainty. The dynamics that exist between continued high inflation, a number of instable things around the world like the war in Ukraine. Like the incredibly high inflation is Europe. The supply chain issues that continue. Issues with China. So, there’s big external factors that no one can control for, but we have what I would describe, and most economists would describe as continuation of inflation at the same time extremely low unemployment across the board in essentially every state. You’ve also got trillions of dollars sort of in the economy unspent so that’s a big factor. You got a fed that continues to tighten down on interest rates to try to control a slowing of the economy. And but the fact is, these economic dynamics are essentially unprecedented. They are sort of coming out of COVID, a war in Europe, other things that are playing into it. Massive stimulus--over $6 trillion spent by the federal government over the course of the last two years both in terms of COVID spending as well as the infrastructure bill and the Inflation Reduction Act. So, there’s a great deal of liquidity you know money pouring into the U.S. economy and still much of it going in. My point is we are I feel like a place of relatively historic uncertainty. There’s no analog for this set of dynamics. And maybe that’s how it is with any change and transformational phase in the economy. 


            So, state budgets exist in this big economy. And oftentimes much of what happens has major impacts on certain states. For example, if you are one of the gas dependent states oil is now trading back, I don’t know exactly the amount, but last I checked, it was trading in the mid to low 80s after being up around 125 at one point per barrel. So, a big drop in oil. No one knows how long that is going to last. So, the word of the day is uncertain. On the other hand, rainy day funds are full. States have been preparing. Revenue has been strong exceeding expectations, exceeding projections in almost all states. So, on the one hand, states are in terrific position financially and physically. Perhaps the most stable budgets have been in in certainly my memory and over 30 years. So maybe you have to go back to the Great Depression frankly. Certainly, stronger than they were in the recession in 2008 and 2009. The U.S. economy and the world economy are unstable, uncertain I think is the word, because no one knows. You know, you have economists who can legitimately make a case that the recession is coming in six months, coming in 12 months. You have other economists who say there’s no guarantee of a recession. The market is sort of going back and forth between those two forecasts. But the good news is state budgets are healthy for now and there is still federal money that’s left unspent that they are still trying to work through to solve problems. 


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Ed:       Well, I think maybe the great uncertainty is the headline for our podcast.


TS:       When you talk about the budgets and economy, I think that’s absolutely true and I hear from legislators and legislative leaders, they want to be extremely careful in terms of how they spend money especially to put things in sort of the permanent budget that have to be funded year after year after year. So even though there is excess of funds, there is a great reluctance to spend on things that become continuation items in future budgets. 


Ed:       Let me ask you about workforce. I know that this is a huge issue and I know that at your recent meeting in California that this came up as a just something that touches almost every aspect of life. So, talk a little bit about that and what can legislators do about this?  What kinds of things do you think they will be doing?


TS:       That’s right. So, I in a way have done like an informal focus group one on one with maybe 20 legislative leaders over the past few weeks. And what’s interesting to me is that it just continuously comes up. You know they might be saying you know the biggest issue in our state is we’ve got a massive shortage of people in healthcare in nursing homes. So, okay that’s a workforce issue. Now we have tremendous challenge recruiting teachers and retaining teachers. That’s a workforce issue. We have so many unfilled police jobs. Not so much state police, but local police and of course legislators hear about that. And then they’ve got their own employers. So, you got major companies saying we cannot find enough people to fill the jobs we have. And we are in a transition. I think Covid was in many ways the catalyst. The pandemic was a catalyst for this huge shift in how Americans work and the jobs that are necessary. 


            Legislatures as public policy leaders are expected to, you know deal, with these issues to help employers, to help their citizens who also are dealing with high inflation are trying to figure out what can they do to find more people to fill these jobs. So, you’ve got two sides of this. There are the state jobs that legislators have a direct responsibility for, like I said, teachers, health care workers, prison workers, across the board are the many jobs that states have to recruit. And then on the other side, you’ve got private employers who in the same economy like I said I think 20 some states have an employment rate at 3% or lower. All the rest are in the same neighborhood. So, this remarkably low unemployment and the number of people who are out of the workforce some because of COVID and what happened during COVID. And then it is the silver tsunami is happening now. We are watching the big wave come ashore. The demographic tsunami that everybody knew was coming. We’ve been talking about it for at least 15 years of the baby boomers retiring. So, this is all happening at the same time. And people are coming to legislators saying what are you going to do. It’s fascinating as is often the case when you look across all 50 states, it’s a multi, multi, multi-pronged approach. Different kinds of training programs. Different kinds of apprenticeship programs. Changing benefits for workers to get different kinds of people into the workforce. Trying to deal with some of the adjacent issues like child or childcare. You know there are so many people who would like to be in the workforce, like to have jobs, but have such challenges finding childcare. So, trying to deal with that issue and thinking a lot about higher ed and you know kind of how higher ed relates to the jobs we have now and the things that we need people to do to make the economy strong and give them jobs that pay a living wage that are respectable and also let them live their best life.


            I feel like it is sort of this crosscutting issue underlying you know whatever you talk about, the first thing you talk about well where are you going to find the people to do that. You can come up with a great program, but if you don’t have folks who can do it. They are looking at their state recruitment and retention programs. They are poaching from other states. I mean there is this, you know, active campaigning between you know some states to other states, like hey come to our state. We are better than that state. I’ve seen these advertisements. State workforces are looking at remote work options in ways they never have before because you have to do that to compete and for the kind of jobs that can be done remotely. And then setting up new programs as fast as possible to train nurses and coders and cybersecurity people who you know there is a massive shortage of people who can do that kind of work. It just goes on and on and on and on.


Ed:       Let me ask you about health care. It’s almost front of mind for states especially given the amount states spend both on health care for their employees as well as their Medicaid programs. We did a four-part series on legislation related prescription drug costs this past year and I’m sure that will continue to be an issue for legislators, but what are the other health care issues along with workforce, which is going to be a big one. What are some of the other things you think states will work on this year.


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TS:       The biggest thing that our health staff, of course we have an amazing team of people here who are experts on every aspect of health care and the intersection between state policy and health care that Americans get. The biggest thing that is kind of popping out I guess is mental health issues and behavioral health issues. There clearly is an attention to that particular part of our health care universe that has not existed before. There’s a lot of early speculation was to why we seem to find ourselves in a place where the mental health issues are exploding. Not just among the entire American population, but especially among teenagers and younger people. It is documented and it’s personal. You know my kids are struggling with it as I think many are and you know so I’m encouraged. It is bipartisan. And I think the challenge is trying to stand up systems that are needed like yesterday, but you have to train people. A number of states have passed mental health legislation actually a small number of states, but I think you’re going to see a number of them looking at it hard to where you can find more resources for youth mental health, more access in schools for mental health programs. You know we ask schools to do so much as it is. And now they are having to deal with what I think again the experts can’t say this is why this is happening. COVID and the pandemic are clearly an issue and there’s a lot of I think legitimate speculation about the impact of social media and smartphone devices. You know these are if your kids 11, 12, 13, 16 years old. Kids get these phones really young. You know they have had access to social media and phones. So that’s probably playing into it. The bottom line is it seems to me this is the top health issue beyond workforce. I mean I think workforce is a big one. 


            The other thing that comes up in the health space is the telehealth, the continued expansion. Probably because it’s like a creative solution to the workforce problem. So, you’ve got to find ways to get people in with professionals. The traditional doctors and nurse practitioners and those kinds of people as well as mental health professionals. So, I think that’s it’s the behavioral mental health thing is what I’ve heard, and our staff seem to find when they start surveying and talking to legislators around the country.


Ed:       I have heard this so often from so many people in so many different contexts.


TS:       It is phenomenal. And you know it’s interesting when we all kind of see something and we hear it, and we wonder if there is some confirmation biases at play but at the end of the day it starts to say oh it’s not just. Wow, it seems like everybody I know is being hit with major mental health issues within families, within social networks particularly among teens. So, you know it’s encouraging. You know one of my favorite sayings you’ve heard me say it before is the best time to plant a tree is 25 years ago and the second-best time is today. And so, I think there’s a big attention to like let’s start thinking about how the systems integrate between, you know, the traditional healthcare system and behavioral healthcare systems and looking at getting resources and putting them into this.


Ed:       Yeah, I think you are right. I think there is going to be a great deal of attention focused on this. I think there already is, but I’m sure that legislators are going to dig into this in many, many other states. There’s going to be hundreds of billions of dollars going to the states from the federal government particularly under the provisions of the Infrastructure Investment in Jobs Act. And I wonder what’s the role of legislatures in dealing with that funding and when will people start to see this showing up in their own states.


TS:       I think the role of legislatures is to set broader policy; not to get involved in this project or that project. Honestly that’s for professional planners and transportation experts and infrastructure experts. I think legislatures have two key roles. One is to sort of set the big policy. We want to make sure that broadband covers every square inch of our state. Those kinds of things. And looking at the laws that might make that more challenging or make it easier. So that’s a good example. I think when we get through this in five or 10 years somewhere maybe sooner, we are going to have massive broadband penetration in this country and perhaps it’s something coming to 100% not counting Alaska’s you know completely empty thousands of square miles. There’s that. Just sort of setting the broad policy. We want the focus to be on ports, on broadband you know setting some priorities.


            The other thing is the oversight piece of it. It’s going to be really critical that legislatures watch and ask a lot of questions about how the various departments within their state governments are using this federal money and speaking up for their constituents and trying to say you know we’ve got to look at. This is not unlimited, but it is an incredible amount of money. We will see some pretty incredible results over the longer term. Actually, not the long term; medium term. But legislatures have to be you know sort of constantly asking questions and then thinking about okay what is our role in terms of finding people to do these jobs. You know, another workforce issue. You know, there’s all this money chasing not enough talent to build ports, to build water systems. I think that’s where the legislative role is. This is where, by the way, the immigration issue comes into play on all these workforce issues. The federal government has got to solve the lack of policy on federal immigration. States are doing everything they can, and I hear this from both parties. And they are saying come up with a solution. And as long as the sort of the ends of the bell curve sort of drive the conversation when the vast majority of policymakers want a solution to the immigration conundrum in this country. That’s not the best word to use, but just the lack of a policy and how it makes it impossible for a workforce standard in treating people well as they enter the country and managing it. That’s a little bit of a one off, but I think it relates to all of these whether it’s healthcare, infrastructure, and construction. You know public safety. You name it. 


Ed:       I’ll be right back with Tim Storey for the rest of our discussion after this short break.


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Ed:       Let me switch over and ask you about education also an area of major concern for legislatures and of course spending for the states. What do you see as the top issue in that area that legislatures will focus on. I’m guessing it’s probably workforce. 


TS:       Well, it is. I mean that’s you know as I joke when I did a couple of talks on this you know stop me if you’ve heard this one before, but it is workforce. And it’s not just teachers. It’s bus drivers, which has been a problem for years. Cafeteria workers and sanitation workers. I mean everybody. Administrators. Everybody working in and around the education eco system. On top of that is this achievement gap that’s come about as a result of I’d just say a lost year of COVID. Now that we are starting to see the data come through and of course the U.S. government, the Congress and the White House put massive funds in through the SRA program. There’s billion and billions of dollars available to the school systems so I think that’s one of the challenges and much of it come through the states because this is, as we all know, the No. 1 thing states budget for and you know continues to be, although obviously Medicaid is rapidly gaining. What happened and has now been well documented the students really regressed in learning and achievement. You know is there anything that can be done. So, the states are going to get creative in terms of pouring money into special tutoring, extra tutoring programs and just getting creative about what can be done to close this gap for this generation. This Covid generation of school kids and again it’s personal. I saw it. The virtual school you know worked for some kids. But on the whole and I’m not criticizing or judging the education folks who were trying to do it. I mean everybody was doing their best and I think their motives were pure. But it just was it was not all that effective and now the data shows it. So, what do we do now?  You can’t change what happened in the past. I think that’s going to be top of mind for legislatures as they start to look at education systems as well as the workforce shortage across the board. 


            And then you got college debt and affordability which is something we’ve been talking about for a couple of years now. Sort of in the education space just shifting to higher ed. Legislatures are now especially given what’s happening with the federal government low forgiveness. And I hear legislators more and more and more not just conservative legislators but really talking about the value proposition and the increasing tuition costs. Is it really the system that serves the students that serves the state best. 


Ed:       Let me ask you about crime. Certainly, crime statistics and ads and all that played a role in the election and voters indicated it in at least in polling that it was a big concern. What do you think we are going to see in this area as legislatures reconvene? 


TS:       Well, it was a major crime as a major campaign issue in many legislative campaigns as was inflation. You know those were sort of things that the republican candidates really wanted to make the center of the campaign. Of course, Democrats had other issues that they were making the center of the campaign including affordable housing, the abortion issue in the wake of the Dobbs decision. Tax issues also came up commonly during the campaign and spending issues. So, I think all of those are ones that you know we should expect candidates to try to act on the things they said they were going to do during the campaigns. And there is a direct line between I’m running to get this done and then try to get it done when they get to the state house. And I think criminal justice was one of those. It’s one of those perception issues. It’s a Nextdoor issue. There is that app where people talk about lost cats. And man, if you go on the one in my neighborhood and I think it’s very typical around the country, it’s just every other post some suspicious character was stealing packages off of porches you know. So, there is a perception of uptick in crime. We know that violent crime is up at least a year ago. And of course, that’s the other thing this data tends to lag so it’s hard to say where are we today relative to a year ago. So that’s a whole lot of caveat to say that I expect many legislatures will look at their criminal justice system which is stretched to the breaking point. It's not that funding is the issue for policing. And by the way, the relationship between more police and the decline in crime is tenuous. So, you got it’s very complicated when you start to look at the data. I think there is a perception that we’ve got to tackle particularly property crime like auto theft, catalytic converter theft. I mean anyone you talk to has a story that’s a one person removed about a porch pirate, or a catalytic converter install. So, I just think it’s something we’ll be talking about. 


            But again, it’s not like we lack for prison space. I mean we do lack for prison space because incarceration is so expensive. We do have a lot of people incarcerated so it’s looking at alternatives to incarceration so we can spend the money wisely. And it’s the workforce issue. I mean if you are throwing money at something, you’ve got to have people to manage systems, evidence systems. You know better uses of evidence and more detectives to actually investigate crimes. I mean that’s a big part of the problem. It’s not just the street level police. It’s the investigators and the prosecutors and the systems that bring these people to court. 


            I think it’s one of those that I don’t know that there is a lot of solutions off the shelf. It’s like we haven’t been talking about violent crime and property crimes. Auto theft is skyrocketing in certain parts of the country. Again, look at the price of cars right so there is an incentive unfortunately for criminals to steal cars because they are so overvalued right now. I think there will be a lot of discussion and I don’t know exactly what they can do but and we’ve done a lot of criminal justice reform in terms of sentencing reform in the last several years, so I feel like that’s something that the states have devoted a lot of attention to. But we also need to in this category talk about the fentanyl crisis in the country and overdoses. It is remarkable. It’s like we are back at the Opioid crisis when all we talked about, I want to say five or seven years ago was the Opioid crisis and every state was putting together task forces and passing packages and looking at it from every angle. And now fentanyl has kind of right back there. And it’s a different kind of drug and it’s a more difficult drug from what I understand from a law enforcement perspective. But you’ve also got to look at it from a mental health perspective and from a health perspective. I have a feeling we are going to be talking about the fentanyl crisis for the next few years.


Ed:       That ties into what you were saying earlier about the mental health and behavioral health problems. But these figures for overdosing deaths exceeding 100,000 in the last reporting period I saw it just, it kind of takes your breath away.


TS:       According to the data, we are in a new world with fentanyl that has a lot of familiar. It looks a lot like the Opioid crisis. But the origins are very different because of how fentanyl is produced and brought into the U.S. market so it’s going to be another challenge for us. 


Ed:       Well Tim, you and I could sit here for another hour and talk about different issues that state legislatures will likely face in 2023, but I think we are going to wind it up and I just wonder if there is anything else on your mind as we head into the new year and new sessions.


TS:       There are so many and I’m sorry our time is up because you know there are many and you hate to leave anything off the table. I mean privacy and cybersecurity. I think states are going to be looking really hard at people’s online privacy and you know with everything that is happening in social media the corporate world with Twitter and so I can guarantee you they are going to be talking about that. Affordable housing is a major issue in just about every state I mean it seems like. It’s not just traditionally urban states, but it’s urban and rural states and I know that’s going to be a top issue in legislatures and then it’s just again the fiscal issues. I think a lot of states are looking at their surpluses. Looking at tax rebates. Tax cuts in some cases. Tax relief. But also with a really keen eye towards boy there’s something on the horizon and hard to say what it is. Our forecasting, our weather forecasting is far superior to our economic forecasting. It is a much more precise science to forecast the weather in ten days than it is to forecast the economy in ten days. Its my humble opinion not to cast any aspersions on the many and brilliant economists in the world who are trying to figure it out. So, I think that’s the measure of the day. But I do hope that maybe some of the instability and the fever of that is starting to break. I certainly hear it from legislatures of all stripes. People are fed up and I think meaning the general public, the voters, are really, really exhausted by this. This just destructive belittling conversation that has taken place for the number of years and they want to see it turned like let’s just talk to each other and stop listening to the tiny percentages of people who spew all of this horrible stuff into the atmosphere through social medias. So, let’s just start ignoring these folks because they are not for people. They are not the American people. Vastly of the American people just want solutions and if it’s not exactly what they want, they are okay with that. But you got these tiny groups on the fringes who are just all or nothing. It’s not going to work. So, I do feel a little bit optimistic about these sessions more so than a year ago and the year before that that I feel like maybe we are just turning a little bit of a curve on what we do together and just republicans are going to pass republican policies, democrats are going to pass democratic polices. But they can at least listen to each other. Here and there they are going to find a whole lot of common ground. So that’s my hope for 2023. And I think it’s going to be a good year. I really do. I’m not into the doom and gloom recession camp so I think that’s something we don’t necessarily need to dread and it’s not an election year in most states so we can focus on policy and not necessarily just all electorate politics. 


Ed:       Well, that is a good note to end on. I certainly hope that your optimism about a return to just arguing about policy instead of all of these other things is on the money because I think that legislatures and the whole society would be much better off if that’s where we are. Tim, thank you very much. Take care. And look forward to the new year.


TS:       Thank you Ed. I really appreciate what you are doing with the podcast and great job as always and look forward to being on again sometime.


Ed:       I’ve been talking with Tim Storey, CEO of NCSL about the key issues facing legislatures as they convene their sessions in 2023. Thanks for listening. 


            You can check out all the podcasts from the National Conference of State Legislatures by searching for NCSL podcast wherever you get your podcasts. Tim Storey, NCSL’s CEO, hosts Legislatures:The Inside Story where he focuses on leadership and legislatures. On the Across the Aisle podcast host Kelley Griffin tells stories of bipartisanship. Also try our special series Building Democracy on the history of legislatures.


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