At the start of each year, I sit down with NCSL CEO Tim Storey to discuss the most important issues facing state legislatures in the upcoming session. Storey discussed state budgets, technology, education policy and how the new federal administration’s plans for deporting people in the country without documents will affect states.
At the start of each year, we sit down with NCSL CEO Tim Storey to discuss the most important issues facing state legislatures in the upcoming session.
While the November election did not bring big changes for state legislatures—there was minimal turnover at both the legislative and executive levels—the big change in the federal government may mean significant changes in the state-federal relationship.
State budgets, which determine much of what states can do in the new year, are stable in most states and rainy day funds generally are in good shape, Storey said. But revenues are not on the rise and, as is true at the federal level, that means less willingness by legislatures to fund new programs.
A trend of rising health care costs will also affect states through their Medicaid programs and likely result in a strong focus on controlling costs. Storey also discussed other key areas of policy, including K-12 education, social media and kids and AI. One wild card for states is immigration and how they will respond if the new administration follows through on aggressive plans for deporting people in the country without documents.
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Ed: Hello and welcome to “Our American States,” a podcast from the National Conference of State Legislatures. I’m your host, Ed Smith.
TS: I don’t think this is going to be a super activist administration. I don’t know that you are going to see vast policy change coming to the stage from Washington any time soon because you know it is essentially tied in the House and I think it’s Washington. They have trouble doing much of anything anymore.
Ed: That was Tim Storey, the CEO of NCSL and my guest on this first podcast of 2025. At the start of each year, I sit down with Storey to discuss the most important issues facing state legislatures in the upcoming sessions. While the November election did not bring big changes for state government, there was minimal turnover at both legislative and executive levels. GOP victories in Congress and the White House may bring changes to the state/federal relationship. State budgets which determine much of what states can do in the New Year are stable in most states. And rainy-day funds generally are in good shape Storey said. But revenues are not on the rise and as is true at the federal level, that means less willingness by legislatures to fund new programs.
A trend of rising health care costs will also affect states through their Medicaid programs and likely result in a strong focus on controlling costs. Storey also discussed other key areas of policy including K-12 education, social media and kids and AI. One wild card for states is immigration and how they will respond if the new administration follows through on aggressive plans for deporting people in the country without documents. Here is our discussion. Tim, welcome back to the podcast.
TS: I am honored to be back, Ed, and as always, thank you.
Ed: Well, this is our annual chat about the state of state legislatures as we get ready for sessions to begin many of them in January. As usual, there is a whole lot more to discuss than we could possibly get to in one podcast, but we will hit some high points here. Why don’t you just start by setting the scene and what do we see as legislatures open up in 2025. What’s the general outlook?
TS: Well, there’s two sides to this coin. There is you know what has changed in legislature’s state world and then there is what has changed in Washington federal world which has a big impact on legislature state world. So, when we look forward to the 2025 sessions, obviously we just went through a fairly big election. Eighty percent of legislative seats were up as always, every two years, but there was relatively little change from a partisan perspective. And even the legislative turnover wasn’t there was no spike there. Roughly 22% or something like that so it was just kind of normal one-fifth turnover in legislative seats. The big thing was very few chambers went from one party to the other. There was very little partisan control shift. So, we kind of have the same dynamics in terms of partisanship in the states, partisan leadership in the states. A few states got a little closer. A few states got a little farther away in terms of the majority/minority. Not a lot of big party change in the states so it’s not like there was oh there is a big new wave of this party or that party coming in with a new agenda and big things to happen. Most of the majorities are still the same so if they had a big agenda, they probably accomplished it in the last couple of years.
Where you did have change, of course, is in Washington and not just that you got President Trump returning to the White House, the Senate that goes to the Republicans. You know the House actually a little closer than it was before the election and because of that, I don’t think this is going to be a super activist administration. I don’t know that you are going to see vast policy change coming to the states from Washington any time soon because you know it’s essentially tied in the House and I think it’s Washington. They have trouble doing much of anything anymore. However, the campaign highlighted a number of issues for the American people that also become issues at the states. And so, I think there is some connection between conversation that happens at a big national campaign like for the White House and then what legislatures might focus on. So, there might be some states focusing on immigration policy. For example, traditionally the domain of the federal government, but you are going to see states coming at it from probably two very different perspectives. Maybe in some cases, some bipartisan approach to that particular issue. That’s the two sides of the coin. Relatively no change from the election in the states. And by the way, no governors changed parties so I’m just talking about the legislative side of the equation of maybe three party-controlled shifts. Four if you count the odd year election in Virginia in 2023.
So, no change in governors, but big change in Washington partisan lives so there’s the two sides of that coin. But the thing that I always start with, you know, is budgets and where the economy stands. It feels like there’s some shifting sands on the economy right now and the economy is not sure where it’s going to go. But what I do know is that states are starting to tighten the belt already. We already know that there’s a handful of states where they are projecting revenue shortfalls in FY25 so they know they are coming in short and that will impact how they budget for FY26 the next fiscal year.
I am definitely catching a vibe from both legislators as well as fiscal staff and it’s not all states. Some states are in very sound in terms of their revenue, they are exceeding projections. But all states are sound in terms of their budget stability. States have very healthy rainy-day reserves. You know revenues have been very strong for several years now coming out of the Pandemic. There was a lot of federal aid that came through the states that has helped do a number of programs. I think nearly every state had cut taxes in the last couple of years so you know so that’s affected too. You know you have reduction in revenue because states cut taxes when they had excess funds. So, I think the theme for the 2025 sessions is it’s not a crisis on the budget front, but it’s going to be a lot tighter. Not the hey we got money. Bring us a program. Let’s go after we’ve got a lot of problems to solve; we’ve got money to solve it. That’s not the case.
Ed: Let me ask you one thing before we dive into some of these sorts of more down in the weeds there. One thing we talked about last year when we had this conversation was the dynamics that tend to govern legislatures during an election year versus a post-election year. And in an election year, various things happen. Part of it is people are spending some of their time election year and also maybe not stepping into some of the hot button social issues and that sort of thing. And I just wonder now we’ve had not only an election, but a change in the federal administration. You just talked about that a little bit. How does that affect state legislatures?Does that sense of a new sheriff in Washington have a big effect on legislatures?
TS: I have always had this. I don’t know this empirically, but I’ve always had this sense, this intuition that there is a cycle to legislatures in their problem-solving mode and that the legislature that takes the seats the January seats after the election, there is more of a burst of policymaking that comes with that. So, they are saying look we ran, we heard from our constituent’s door knocking that business is saying they’ve got a workforce shortage. You know we’ve heard from our state employees that they can’t fill jobs at the prison or at the nursing home. And so, they’ve been out on the campaign trails so they come in and the first sessions after elections with a little more of a policy problem solving orientation so I think you see more proactive policymaking in these sessions versus the ones before the election where there’s maybe a little more reluctance to do anything super bold. Being very careful with state budgets. And again, you had this big national conversation. Heard a lot about reproductive health for women and the abortion issue. We heard a whole lot about immigration. We heard a whole lot about inflation and the economy. So that’s on top of what these folks were hearing when they were knocking on doors or meeting with funders you know who were saying like oh, we really supported your campaign and boy we’ve got you guys we got to do something about this workforce issue. You got to do something about privacy and technology. So, I think these sessions are the ones where you see the more active policymaking legislatures with that hat on so that’s what I expect.
Ed: You talked a little bit about budgets before. Let’s dive into that a little bit more. So how does it breakdown? The states are as you say probably done their tax cutting and may be in a more cautious mode now. Talk a little bit more about that.
TM: 9:16
TS: I don’t know the exact number, but easily 45 states or more have done substantial tax cuts in the past two or three years. And some of them have done multiple. You know they did a round before the 22 election and then another round in the 23 sessions and before the 24 elections. At the same time, they have been investing in other things. Pay raises for teachers in many states has been a popular item. A very expensive you know that’s a high-ticket thing. The balance between letting taxpayers have the money back when times are good, but that also means that you will have less revenue in the future so that’s going to bring about some restriction on the money that’s available for legislatures to solve problems. And the economy in some parts of the Country is not as robust as it has been so you are seeing pockets of economic slowdown so to speak. You still have a very challenging housing market which is a big factor. Consumer confidence, consumer spending seems to be a little bit shaky. All this leads to legislatures know that the budgets will not be flush. The days of big surpluses that we saw just a year or two ago on top of and including the federal money that was coming into the states big time both Covid relief money and other funds. The budget committees are not saying like okay we’ve got a surplus. Let’s you know we can do this and this and this. It’s going to be the opposite. And when they do have shortfalls, they are going probably start to go into those rainy-day funds which are now I think rainy day funds are as strong as they have basically ever been.
Ed: I guess we are just not sure how hard it is going to rain, but I guess we will find out. Let’s dive into some of the key policy areas and one of the first of course is the education. I know there’s ongoing concern about kids catching up from the losses they suffered during the Pandemic. There are certainly issues about workforce and mental health as well among young people. And what do you think lawmakers are going to focus on?
TS: The other question is how do you solve these things. How do you get after it. What do you do about the COVID gap in achievement and they are aware of it. You know they are aware of that problem that has come up you know scores have gone down and it’s reflected and what can you do to catch up and there’s a whole lot of options on the table. One that jumps out is more school choice. There’s a number of states particularly Republican states who are leaning harder into vouchers and in school choice than ever before. It’s such a huge ticket item for states so obviously pay is a big factor in terms of retention. The workforce shortage of you know workers in occupations across the board continues to be a major problem for states both on their own workforce, the state workforce whether it is teachers, health care workers, highway patrol, prison workers, you name it. Natural resources. Everything that states do. No one is saying like wow we just got an embarrassment of applicants who are well qualified. So that obviously hits not just teachers but every role that you have that supports the education system and that’s you know bus drivers and food workers and administrators. Everything. So that workforce issue, it’s going to come up whatever we talk about, it’s going to come up as a behind the scenes issue on every single one of these.
Hard to know how to get out of there. They are working on alternate certifications, looking at the skills required for state jobs in particular. Major issue for educators. You know we’ve also got. I think we’ve kind of forgotten that we are really getting into the baby boomer retirement days that you are about to have I think the last baby boomers turn 65 maybe in two years. So, you’ve got this big demographic thing that is happening as well where it is that big old bulge in the data that bulge in the snake has finally hit retirement age and they are not all retiring at 65, but you are phasing in so it’s real now. I remember 15, 20 or 30 years ago. You remember this too every other conference we had, there was a session on the graying of America and what it is going to mean. Well, it’s here. And I think that’s playing into workforce shortages as well which also hits education.
Ed: Certainly, another place of concern workforce as well is health care, particularly Medicaid, which I wanted to ask you about because it is such a big piece of state budgets. In 2024 I think they pretty well spun down all the people who had been stayed on the rolls of Medicaid because of the COVID emergency. We’ve got a new federal administration that certainly suggested there may be changes in the Medicaid program. What do you think states will be looking at? Are they kind of wait and see mode at this point in terms of the feds or what are they going to be doing?
TM: 14:41
TS: I think if they can I think they are all having to look at controlling costs, controlling Medicaid costs is a vexing problem that has persisted and it is not like this is new. Health care costs while they sort of didn’t spike up in the last couple of years, it seems that costs are starting to jump again. I felt like we had a couple of years respite in double digit health care costs increase. That affects obviously Medicaid as well. So no, it’s back to cost containment. It’s back to looking for savings you know and that’s eligibility. But you are right. I mean you had the roles went down. It’s almost like that provided some fiscal cushion because you didn’t have to cover as many people, but despite that the cost I think I saw data that said it exceeded that so there were savings from the decline in eligibility and the roles did decrease. The number of people on the Medicaid eligibility decreased, but that has been more than accounted for by increased costs. So, it’s the same story. It’s just you know states have to get into the weeds more and more and more. That means looking at drug costs, equipment costs, personnel costs. It’s a very, very difficult issue because it just keeps growing. It is the budget item that you know has become after education you know the second biggest item. And that wasn’t always the case. Everybody thinks like oh yeah Medicaid has always been the big-ticket item and it wasn’t. It used not to be nearly as big of a portion of the budget. It has grown and grown and grown and grown. So, if you looked at it over time take a 20-year series and you look at the pie chart of state budgets, Medicaid wasn’t anything close to what it is now.
Ed: Let me switch over to asking you about technology. AI, social media and kids concerns about privacy. This has all come up certainly in recent years and do you see anything new this year. Are people states going to continue to work on those issues?
TS: This is going to be the year of AI in terms of actual legislation. That’s a piece of it but you know the states have been looking at this now for a year or so in terms of study and study committees and networks you know including NCSL’s AI and privacy taskforce. So yeah, I think this is going to be a huge year for legislation in all of these technology issues, privacy, security, cybersecurity and definitely AI. I think the first angle is you know protecting kids. Everyone seems to be tuned into that issue and put a lot of age gates for downloads, but then when you get into the details and you start getting some bohemia fights between powerful technology interests so I think you are going to see some legislatures bust through and do some real stuff this time around and not we really just had a couple of states that have done anything. You know big California legislation. Colorado and a couple of others and even those are going to get revisited and finetuned so this is the year you are going to see the bill introductions on these things go way up and there will be a correlative increase in legislation getting passed. So yeah. The year of AI probably.
Ed: Before we leave that workforce issue, we talked about that just earlier in the education context and you were pointing out that this is sort of a whole society challenge. Do you see any particular approaches that states have come up with that seem to be really gaining traction?
TS: I think so much of it has been focused on retraining, getting people skilled or just saying match the, you know, match the skills, reducing the requirements. You know looking at certificates and requirements that kind of thing. Some of it is just more pay and better benefits. States are doing that as well. You are in a very competitive world from an employment standpoint and at the end of the day, states are just big giant employers so they also have to come in and say we got to stay competitive if we don’t want this to go off the road. We’ve just got to get more people in the pipeline. More people trained you know matched to the kinds of jobs that exist and that’s what I hear about and I have definitely heard about these programs where an increasingly number of states are saying we’re going to eliminate this credential or that credential for this kind of job or that kind of job including the additional requirement of a college degree in some of these jobs. They are saying well the college degree is great, but that’s not what you need to do this particular role so we’re going to start to waive that and take a harder look at it. And I think you know investing in apprenticeship programs and mentorship programs those kinds of things so that you just really doing more job training than maybe what we think of as a traditional college university education.
Ed: Let me ask you about immigration. The incoming Trump administration, of course, has talked quite a bit about deportation. What do states do here? What do you expect legislatures to do. I’ve seen a few headlines of legislatures doing one thing or another, but I have no sense of what the trend is or and I’m wondering what you are hearing?
TS: Well, there’s limits on what states can do in terms of immigration. It is a federal issue really at the end of the day. But you’ve seen, you know, governors deploying National Guard to support boarder enforcement and governors from other states do that with the support of legislatures who obviously at the end of the day have to help with some of the funding for that. So, I think some of it is almost I don’t want to diminish it by saying symbolic, but like you know a lot of legislatures and this is one where it is fairly partisan. You know you’ve got some legislatures saying we’re going to resist any kind of deportation efforts within our state and others are going to say we are going to do everything we can to assist with the deportation project if it comes to that. And you know Donald Trump doesn’t take office yet for a number of weeks and it will take time to start a federal action. It’s clear to me that in a fairly partisan way, legislatures who are supporting Trump are saying okay what can we do to help and legislatures who are not you know Democrats are saying what can we do to pushback and not be of assistance so with the law enforcement and sharing data that kind of thing. I don’t want to dismiss it as an important issue. It is obviously an incredibly important issue for the Country, but it’s a lot of positioning to see where this really goes.
Ed: I guess we will find out if how much of a role legislatures end up having in all of this when it comes to states either assisting or resisting.
TS: But remember what I said earlier that workforce is going to come up on every one of these issues so you know that is something they have to think about. What role do immigrants documented or undocumented play in the economy and the workforce and those are real issues and I have heard legislatures who are saying let’s find some middle ground on some of this so to speak. I’m not the expert so I don’t want to camp out and say these are the borders of the middle ground, but this notion of we need some of these workers who can we talk about a different kind of solution and that might be where the legislatures actually from both parties, from very conservative, very progressive. And I’ve heard very conservative legislatures in particular say well we need a commonsense approach to this so they may do some of that pushing back. We will see.
Ed: Well, that leads into my final sort of policy question which is about housing. Of course, a large part of the workforce building new houses is I have certainly read is a lot of people who are not documented. This of course used to be a local issue. It’s not a local issue anymore. Now it’s both a state issue and a federal issue, I think. And I wonder what are legislators talking about in terms of how to address this and what they can do.
TS: I think the big trend has been on zoning reform and the states trying to do a little more mandating on zoning to encourage local governments to take down some of the barriers on construction and building faster so that is going to be a continuing trend. You know it’s been in a number of states, but it is going to expand because it seems to be something that nudges things along and gets more construction going. Incentives for construction, incentives for rezoning reform; not just financial incentives, but also red tape incentives to try to streamline some of the building barriers to getting new houses built. I think the support for first time buyers that seems to be where the biggest challenge is. The housing market has gone up like a rocket ship in terms of the cost of it and some of it will just flat out depend on the mortgage rates. If they start to come down, the economy is always the biggest wildcard and we’ve had you know really this steady growth economy and it has worked pretty well for state budgets and the ability for states to tackle problems. That could be coming to an end. I hope not. I remember it wasn’t 24; it was 23 where like man it was 90 out of 100 economists like this is it. This is the recession year. It’s over. Take recession to the bank and then it was another good growth year. It’s a fool’s error to say what the economy is going to do.
Ed: We covered a lot of territory and I’m sure I left something out that you want to bring up so anything else you would like to talk about.
TS: Energy supply I think is a big one. I think this consumption by AI and technology and crypto of energy of compute power is real. The numbers are substantial. You know I was a little surprised. I couldn’t quite tell then I started to see like oh wow. You are talking like big time a need for energy in certain states, in all states. So, this push for cheap power is going to grow. Boy it really seems like there is more interest in nuclear than ever before from the aisle so I think that’s going to playout as the year goes on.
There are insurance management risk issues around natural disasters. You know I’m speaking from western North Carolina, which had a pretty unusual natural disaster, and the need to figure out how to ensure in some of these high-risk areas continues to be a Gordian knot, so I think that will be a big deal. Oh, another one we didn’t talk about, which I think is going to be it kind of goes to the mental health which we know is still a major concern for lawmakers because what they hear from constituents and their families and their kids, there has been a little burst of restricting cellphones for teens particularly in school and K12 and some of that is coming from the state level. Some of it is coming from local school districts. I think we will see more of that. That is just interesting to me. Every time we have this conversation it feels like yeah, we talked about this. We talked about this last year and the year before because these things don’t get worked out in a year or two. It just takes time. Legislatures in states there are democracies that work. You know there is a lot of hand wringing you know that Washington seems to be unable to come together to solve problems. But democracy is still working pretty darn well in states in state Capitols.
TM: 26:30
Ed: Well Tim, I think the last couple of years have been interesting as a lot more people in this country have come to appreciate the wide range of issues that state legislatures cover. That’s why we like to do podcasts about these issues, Tim, and I thank you so much for going through all of this and I know a lot of people will listen to this and will see how it turned out next year. Take care.
TS: We will have to relisten to this version before next year’s and say well is that what happened. We should be held accountable but let me assure everybody the States are working; democracy is working in the States and it’s good that we are talking about it. Somebody needs to be. Thank you so much, Ed.
Ed: I’ve been talking with Tim Storey, the CEO of NCSL about the upcoming legislative sessions. Thanks for listening.
You can check out all the podcasts from the National Conference of State Legislatures by searching for NCSL podcasts wherever you get your podcasts. This podcast “Our American States” dives into some of the most challenging public policy issues facing legislators. On “Across the Aisle” host Kelley Griffin tells stories of bipartisanship. Also check out our special series “Building Democracy” on the history of legislatures.