As a new year and a new state legislative session gets underway, we sat down with Tim Storey, the CEO of NCSL, to discuss the coming legislative session and where he expects legislators to focus their efforts when it comes to budgets, education, Medicaid and more.
As a new year and a new state legislative session gets underway, we sat down with Tim Storey, the CEO of NCSL, to discuss the coming legislative session and where he expects legislators to focus their efforts.
Storey sees a mixed picture on budgets, with most states sitting on substantial rainy day funds but cautious about the revenue picture in the new year. Issues around Medicaid will loom large because of changes to the program included in H.R. 1, otherwise known as the big, beautiful bill.
K-12 education, as it always is, will get plenty of attention from legislators who are concerned about a number of issues, including lagging student achievement following the pandemic and the alarming increase in mental health issues among young people. Storey also thinks AI, data centers, housing the workforce as major areas of focus in legislatures.
And not to be left out is the unprecedented attention to mid-decade redistricting that has taken a lot of attention in a handful of states.
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ES: Hello and welcome to “Our American States,” a podcast from the National Conference of States Legislatures. I’m your host, Ed Smith.
TS: Policymakers at all levels of government are aware that the mental health problems affecting youth in America right up into their 20s is something different. Something monumental has changed. And this is, I think, a very bipartisan issue.
ES: That was Tim Storey, the CEO of NCSL, and my guest on this first podcast of the new year.
As we do every year, Storey sat down to discuss the coming legislative session and where he expects legislators to focus their efforts.
Storey sees a mixed picture on budgets, with most states sitting on substantial rainy day funds but cautious about the revenue picture in the new year. Issues around Medicaid will loom large because of changes to the program included in H.R. 1, otherwise known as the bug beautiful bill.
K-12 education, as it always is, will get plenty of attention from legislators who are concerned about a number of issues, including lagging student achievement following the pandemic and the alarming increase in mental health issues among young people. Storey also thinks AI, data centers, housing the workforce as major areas of focus in legislatures.
And not to be left out is the unprecedented attention to mid-decade redistricting that has taken a lot of attention in a handful of states.
Here’s our discussion.
ES: (00:00):
Hey, Tim, great to have you on the podcast for our annual preview of this year's legislative sessions. I wonder if you could start by giving listeners just kind of an overview of 2026, how many legislatures will be meeting and maybe some of the real front burner issues you expect them to deal with.
TS: (00:20):
Well, almost all legislatures meet except for the biennial ones. That's the couple that take the year, so to speak, off. Thirty-eight of them start in January. So, January starts off rocking. It'll be an exciting year, very much influenced by the fact that it's an election year, not just any old election year, but a very big election year. Legislatures will get back to work. As you know, I am fond of sometimes comparing them with their other legislative body in Washington. Legislatures get nose to the grindstone fast because they have relatively limited sessions. They will average about a hundred days in session, the states that are in. Most states have session limits. Thirty-six states, I think, have some kind of limits on legislative sessions. A handful have no limits, but even those manage their calendars very, very stringently in the election year because of filing deadlines, primary elections, and then the general election.
TS: (01:17):
Plus, they have a lot of work to do. Twenty-six will be another blockbuster year. Legislatures are always busy. Legislatures are always making significant policy decisions and pioneering solutions as our society continues to evolve, grow, become more complex. The nature of the economy changes. Legislatures are doing what they can to make sure that we all live in better states.
ES: (01:44):
Yes. We've discussed the contrast between the federal legislature and the state legislatures a number of times before. And this year may be the banner year . ... Other than the HR1, the big, beautiful bill, other than that, the utter lack of productivity by the federal legislature.
TS: (02:03):
I don't want a federal government that's not addressing the nation's issues. And you got to give credit on the One Big Beautiful Bill Act. It was, of course, people who listen here and our constituents will perhaps disagree on whether or not it was beautiful or not, but no one can disagree on the fact that it was big. A thousand pages, if memory serves, and got into many areas of policy, many of which have a direct impact on state government's state legislative activity. So that is absolutely one of the things, the passage of the One Big Beautiful Bill Act, that will be on the minds of legislatures going into next year. But if you look, again, and I do this periodically at the number of bills passed, I think I looked not too long ago when it was somewhere around 40 something. Most issues having to do with veterans, but nothing of significance besides the thousand-page bill that was more than significant.
TS: (03:04):
I mean, it really did get into so many different areas of American life.
ES: (03:11):
Yeah. We're going to get into some of the details about that, but first let me ask you, and I usually ask you this question upfront every year, budgets. Budgets are the core of state operations. If you don't have the money, you can't do a lot of things. And I have been told by people who are a lot more knowledgeable than I am, that budgets are going to be quite constrained this year, at least in a lot of states. And I wonder if you can talk a little bit about why that is and how that will affect legislatures and the kind of actions they take.
TS: (03:43):
Well, I don't think you can say budgets will be quite constrained because we've had a number of years where you could sort of lay a generalization across where state revenues were going and how state expenditures were looking. This year's a lot trickier on a couple levels. One, you got some states that are projecting serious shortfalls in FY27. So, the budgets they'll be working on next. They're not panicking. You got to remember states ,they're in the best sort of defensive position perhaps in history. Rainy day funds are full, reserve funds are full, so they are prepared to weather economic storms. However, there are a lot of red lights flashing in some states, but I can't just sort of paint them all with one brush. Some states are showing strong revenues. Some states are showing steady and declining growth, and some states are showing problems with revenue.
TS: (04:44):
And this is partly the nature of how states fund their operations. There are really 56, if you take the territories in D.C. into account, 56 different ways that states collect revenue to fund the many programs that they do, education, roads. So, depending on whether your tax system leans one way or the other, you might be doing just fine. Even as we sit here today toward the end of December, the stock market is still very strong. It's almost certainly going to end in a very strong year for people who have investments. And if you're states that get a lot of revenue from taxes on investments, you're going to have a good year. Oil prices are way down. So, if you're a state like Alaska that depends heavily on extraction taxes, well, you're looking at some perhaps serious problems. I talked to someone from Alaska; they budgeted oil at $68 a barrel.
TS: (05:46):
And last I checked it was trading like $58, $60 a barrel. So just an example of two outliers, California and Alaska that are going to be, maybe revenue's not so bad, maybe revenue's in serious problems. So, I wouldn't say that states are in bad fiscal shape and that they're really dreading the budget process in ‘26. Here's how I would describe it. There are things, especially in federal law that were passed in the HB1, the Reconciliation Act, that will have long-term impacts, particularly around Medicaid, which is a huge commitment for states, particularly around SNAP funds for food assistance. Some of the SNAP stuff hits now, and there's a lot of administrative costs around administering new provisions of the program in terms of eligibility and determining eligibility, monitoring eligibility for some of these programs, Medicaid, SNAP. But those are probably costs that they're going to be looking at in like FY28, FY29.
TS: (06:51):
So, all the states know that there is a shortfall of funding coming on the big federal programs because the money is going to be less. The bill has cut funding. So ,there's a lot of caution, and I think that will be the word that in terms of budget making, caution, because of both long-term impacts and short-term uncertainty. Economists never know what's going to happen. They look at a lot of data, and they have a pretty terrible track record, but because they guess very high, like the economy's going to be strong or it's going to be a disaster. And I'm already looking at some of the forecasts for next year, the calendar year, and they're all over the place. I mean, I've seen some that have really dire forecasts and some that are good, and it's all contingent on the AI bubble. Well, it's the same with state economists and legislative economists, because depending on how the big economy goes, so goes state budgets.
TS: (07:49):
So, caution, uncertainty, and inconsistency.
ES: (07:56):
Let me pick up on that Medicaid piece and how HR1 is going to affect that. While there may not be a lot of budgetary effects this year, legislatures are probably going to have to start looking at a number of issues around that work eligibility being one of them, provider taxes being another. Do you expect to see a lot of activity in that this year as they get ready for ‘27?
TS: (08:20):
100%. I mean, there's still some education going on around what does this really mean. How does it affect our state? Because Medicaid populations vary greatly by state. Eligibility laws vary by state. It's an extremely complex program designed to provide medical assistance for the poor but also provides a lot of medical assistance for the elderly because disproportionate poverty among elderly populations. And of course, it's intertwined with private insurance markets and health costs because one thing that seems like they say death and taxes are certainties, health care cost increasing seems to go in that category as well. Costs continue to go up, and that's for a whole variety of reasons. Expensive technologies, expensive medications, and labor shortage. Many of these, particularly in health care, the population grows and the population getting older. I mean, now we really are. We are in the midst of baby boomers winding up with serious medical issues.
TS: (09:27):
There continues to be a serious workforce shortage among the medical professions. All of these things conspire to also play into the Medicaid program. So, it will be a major topic of discussion in every state, whether you opted into the Affordable Care Act, Medicaid expansion or not, it's still going to affect your state.
ES: (09:52):
Let me ask you about a couple of other big areas for state spending and legislative concern. Education, of course, is one of the big ones. I think we still see kids trying to catch up from the COVID learning losses, the issue around social media with kids, mental health of our young people, and more. I could go on. Where do you think lawmakers will focus in this area?
TS: (10:18):
The awareness of the problem is now a given. Policymakers at all levels of government are aware that the mental health problems affecting youth in America right up into their 20s is something different. Something monumental has changed. And this is, I think, a very bipartisan issue. There's no place that isn't affected by this. It's a rural issue, it's an urban issue. So, I think there's a keen awareness of the problem, and it's been growing over the last number of years. This has been on our radar for a while, but now you're seeing states look at all kinds of factors, including social media and starting to legislate more in that realm that I think they'll continue to do that. You're seeing lawsuits around First Amendment issues, and of course, there's no federal legislation on this. So, this is something the states are pushing into, like banning phones in schools or taking phones out for the school day devices.
TS: (11:26):
A few states have sort of moved forward and now you're going to see more states looking to see like, OK, what has Texas done? What has California done? Because I know these are two states that have legislated in the area. … There's a number of them. So no, I think it's our most overused word is crisis. This is certainly a crisis. The data is startlingly clear. I will also say that it's a higher ed issue. I was just recently, this is just more of a personal connection. I was on a panel talking about higher ed and a couple of people from deans and presidents or whatever these people were for higher ed were saying, "This is one of the biggest issues we're trying to cope with because it's impacting learning and higher ed." And here's another oldie but goodie, there's a workforce shortage, getting qualified people to help in all these settings, whether it's K-12, middle school, high school, and on into college and university settings, major problem for the United States.
ES: (12:32):
AI seems to loom over so many different areas, data centers, the electricity demand, effects on the workforce, privacy, on and on. There's been a lot of legislation and now the federal government is talking about precluding states from doing that. How do you think legislatures will respond, will grapple with this issue?
TS: (12:59):
Legislatures have been digging into AI and its impact on our economy, on our people for at least the last three years, when it really became salient. AI's been around a long time, really sort of hits into the mainstream consciousness. I feel like in my lifetime, when I saw the fax machine come into the workplace, I saw the internet come into the workplace. I believe the experts who say there's no parallel to this. I'm sort of conscious as I hear myself say those words that there was someone in 1928 who's like, "This car," or whatever the car came along, like, "This will be the technology that changes everything forever." And of course it did, and we adjusted as a humanity and the same with smartphones, the remarkable leaps, now people are connected the world over. And I think when you try to stack it up with these major society shifting, world changing technology leaps and innovations, I'm in the camp that there's perhaps nothing like AI, it's sort of putting a stake down like this is the biggest of all those things.
TS: (14:12):
I think that's why every legislature, every policymaker, because there are also people who live in their communities who are hearing from everybody about, who are starting to see it, starting to see AI come into certain professions and job areas and certain IT coding, these places and really have a major impact on people's jobs, people's lives. And then there's all the ways that we're interacting with it that we don't even know algorithms are being used to determine how we relate to each other, how we relate in terms of commerce. Legislatures are looking at that. They are compelled and feel a called to address this because their constituents are pushing on them. And this isn't a red state or a blue state thing. We've seen AI legislation in more than half of the states. There's this other side, which is there are national security issues around development of AI.
TS: (15:07):
The President of the United States in particular issued a fairly unique executive order. He has called on the US Attorney General to sue states if they enforce their AI laws. Now, I think from talking to legislators, I was surprised and I've had a number of conversations with legislators in the past week or so about this. And it was almost like, well, our laws on the books, it's going to continue to be the law that who has to comply with it, whether it's companies or whoever, they're going to comply with it. If we get sued, we'll go to court and we like our chances because of the federalism aspect of this. So, I just did not get the sense that a tremendous fear rippled through from the executive order that came from the White House. I'm just going to say that. I think states are going to continue to study it, work on it, pass laws on it.
TS: (16:01):
There are political elements to it now, particularly since President Trump has made a very strong stand opposing any legislation or regulation at the state level. So that might mean that maybe some of the pro- Trump states are a little more reluctant, but I think even they are going to continue to examine the impact of AI on society, as well as the impact of AI on state government. How do we use it? That's one side of it. So, you asked about the executive order about the federal order. By the way, NCSL is strong believer that states have been very responsible listening to industry and passing the laws. And Congress is just not able to do anything. I mean, there's all kinds of dynamics at play and the interests are extremely well resourced, so Congress has been unable to act. So, I think the states are doing well.
TS: (16:58):
I've been making a point recently that we all know that California has the fourth largest economy in the world. What we don't know, the state with the lowest GDP in the United States would be the 65th largest country in the world. So, our states are massive economic and sophisticated engines of policy. So, we think like, oh, country X, Y, or Z is looking at regulating whatever. Our middle size states are bigger than most countries by far. And these are like the medium size states, Wisconsin, Minnesota, those states, Washington. So, I think it's very appropriate for these states who have large economies, sophisticated resources to make policy and access to experts to be moving into this and doing what's right for the people of their states.
ES: (17:54):
Tim, you mentioned earlier that this is election year. I think there are more than 80 legislative chambers where members are going to be standing for election. And how does that affect how legislatures approach their year?
TS: (18:12):
Oh, it overshadows. It undermines, not undermines, but it is behind the scenes. It is in the back of the mind of everyone in legislatures. These are very political institutions, always have been, always will be. Let's not pretend that politics don't have tremendous influence on the way policies get crafted. It is a monumental election year. There are 37 governors’ races. So ,this is the high governor year out of the four, there will be a special emphasis on the governor's races this year. And then you have well over 80% of legislative seats up. We have been in a stretch, which is to say the last six, eight years with below average change in state legislatures. The district maps have a lot to do with that. The two parties start with 45% of the vote, if not more. And if you're in a state where it's predominantly Democratic, you're just going to win the majority of seats, and then you probably have a map that leans your way.
TS: (19:15):
So, we just haven't seen a lot of change between chambers in quite a while. This year, you're going to see a lot of legislative chambers in play. Midterms are notoriously and very consistently not good for the party in the White House. We know that the Republicans and the Trump administration political machine have to know that they start out with a handicap. They're wearing ankle weights in the sprint. And so, they have to be, I don't know, more innovative, more clever, more active, spend more money, get their people out, whatever it takes. But they start out with a disadvantage. And you'd say that about the Democrats if when Biden was in the White House or Mom was in the White House. Democrats are feeling their oats, they know the data, they've run the numbers. We've got very granular data now in terms of legislative seats and voting indices.
TS: (20:14):
If these midterm elections hold, and it's not just one off, it's the whole lot of them. They have not gone well for the Republican Party. If next November's midterm election looks anything like that, you're going to see a big shift towards the Democrats. And that will be in the back of their minds, both parties and the people who are advocating inside the capitols on every decision, kind of what's happening, what's going to happen? Is this an issue? I might have a different hearing with, argument with, next when there's a new legislature after November. Can I run the clock out in some cases? Do I want to run the clock out? I got to get this done now because it's going to be a different set of characters, a different cast after this election. So, it is a major election cycle. We're less than a year out, but we're less than a year out, meaning that everything with a grain of salt, we'll see how things develop.
TS: (21:15):
As we sit here today, I think you're going to see some substantial change in legislatures, unlike we've seen in the last three, four cycles, two-year cycles.
ES: (21:26):
So ,Tim, redistricting is usually not a big issue in the middle of the decade, but it will be, or it has been in 2025, and it'll have impacts in 2026. I wonder what your take is on this. Is this a huge deal? If you read, look at the media, it's certainly a huge deal. Or is it more isolated to a few states and it may end up being a wash? I don't know. I really can't come to a conclusion.
TS: (21:55):
I'm going to go with answer B. I do think it's gotten probably a disproportionate amount of attention, level of ink, so to speak. It is somewhat limited to a handful of states. And in those states, it has been toxic. The administration has really insisted and encouraged legislative allies to do a redistricting that put the Republicans in a better spot. There's no mystery about that. And the Democrats then looked at their opportunities. And of course, California did something that I thought was just extraordinary. I would have never imagined they could put something on the ballot, turn that around as fast as they did. Clearly, it has agitated the energy on both sides. Mid-decade redistricting wasn't even in the nomenclature, wasn't even the lexicon just 20 years ago. I remember when it first started, I was of course steeped in the redistricting process and very much involved in that at the time.
TS: (22:56):
This is something novel. We have not seen it. So also, a reason to pay a lot of attention to it to see, are we going to keep doing this? And I think I've talked to many legislators, including some who have voted for these bills and some that have voted against these bills. They're not enjoying this. This is not something they have an appetite for. I think that this might be an interregnum of doing this. It's going to be very difficult to have a fix, like a national fix to this. Probably take a constitutional amendment of the United States Constitution, which is unlikely. Supreme Court has made it clear that this is legal, so there's nothing unconstitutional about it as it's happening now. There are some state questions, state challenges, and then sometimes the maps get into other issues like voting
rights issues. So those will continue to be litigated.
TS: (23:49):
I think on the whole, and it's really happening at the federal level, I'm not aware of anybody redrawing their own legislative plans. So, this has really been sort of a federal action. And at the end of the day, if either party gains five, seven seats, I don't think that's going to be the difference. It's not insignificant. And I'm not just going to brush it off as a nothing burger. It's major, particularly in these states where it has taken a lot of energy. And I worry about the institution when lawmakers focus on these hyper political issues that really tend to tear them apart. And I've seen some of that in some states. Of course, Indiana has been very well publicized, and you just hope that the relationships can heal when these kinds of issues tear them apart.
ES: (24:38):
Yeah. I think that's an excellent point that the legislatures themselves and their ability to get all these other important things done, introducing this level of partisanship into what is already a pretty partisan situation seems fraught.
TS: (24:55):
It's gasoline on the fire. It's these legislators, I like to believe, and I have lots of evidence that they work well together to when something is, boy, this just raw. I mean, hard, bare-knuckle politics. I hope it just doesn't leave a mark that doesn't heal quickly.
ES: (25:15):
There's plenty of other policy areas that legislatures will focus on without quite so much attention as it is to redistricting and some other things. Workforce issues, you mentioned those earlier, and the cost and availability of housing are two of them. And I wonder if you think there's going to be a lot of attention paid to those by legislatures this session.
TS: (25:36):
100%. Absolutely. I mean, it's interesting. We talk about some of these things which are headline grabbers and they lead to fascinating conversations, but what people really care about, their jobs, the prices they pay for the things they need and buying a house, having a place to live. I mean, this is like Maslow's hierarchy. This is what people are worried about. It's what people are thinking about every day. And I like to think that in our system of representative democracy, legislators are aware because they live in these communities, they're very connected. They understand this continued major problem, particularly housing, that all of these are interconnected. Workforce shortage, construction workers, there's no doubt a shortage for people who are knowledgeable in construction in the trades. So, this is another element of trying to put more volume up in terms of places for people to live. This workforce issue has been a major issue for at least five years, I feel like.
TS: (26:44):
And it's been COVID, everything is sort of pre-COVID, post-COVID. So, you come into COVID, economy goes kind of off the rails, but not for that long. I mean, think about it, we were sort of parked for nine months, 12 months, and then roared back. And now the problem is finding qualified people. It's very niche, not all professions, not all occupations, not all jobs, but continues to be a major drag on the economy as well. And then housing, there's no index you can look at and say that we don't have enough housing. And it should be a number one issue. And we talk about other things that are kind of more sexy and salient, but it's a massive deal. It's a massive problem.
ES: (27:30):
Those are core issues for sure. I do know one area of the workforce which does not have a problem. There's no shortage of podcasters in America. I know that for sure.
TS: (27:44):
Influencers. We need more influencers.
ES: (27:49):
Influencers. There you go. Well, Tim, as we wrap up here, I have touched on fewer policy issues than maybe I usually do because there's all these other redistricting and Medicaid, that kind of thing. But are there other things you think are going to be particularly important this year for legislatures to take on?
TS: (28:11):
The thing that everybody's talking about, and you just barely touched on it because we kind of went a different direction, but this data center and electricity, supply, demand, infrastructure, I mean, I'm just starting to kind of get my head around it and it's very bright light, clear that this is something almost every state is grappling with. And it's such an interesting tale and there's some really good work on it of how the consumption around AI has just suddenly ramped up. And because energy planners, I mean, they do a pretty good job of planning long term and understanding the energy needs of their communities as they grow. And we've invested in so many forms of energy over the past number of years, and our use of natural gas has just gone up exponentially as well as other sources of energy, wind and solar. Now you've got nuclear, again, there's a lot of discussion of expanding nuclear resources.
TS: (29:16):
So ,I don't know, I put that data center thing. I just feel like there's going to be ... Every state's going to have bills looking at data centers and regulating them because then they got all these NIMBY issues around data centers. We didn't talk specifically about K-12 education and it's the biggest thing the states do, always has been, will continue to be. I mean, I know we talk a lot about Medicaid and healthcare, but let's not forget that half of the budget's going to education and the mental health issues are big in problems for education, workforce, having enough people to be in schools and teach children. This continues to be a problem in many places across the country. And then the damage that was done after COVID Clearly the data shows that it had a major impact and there's catch up that has to be done and educators are trying to come up with creative ways, working with their lawmakers on are there different ways to invest or expand in certain areas for certain populations.
TS: (30:17):
So, math and reading proficiency is not where it is supposed to be. So, K-12, major issue. And we could go on and on.
ES: (30:30):
Well, it's going to be, I'm sure, a very active year, but the elections will loom large. So, it'll be interesting to have this chat next year and find out where all this has come down. So, thanks, Tim, as always for giving us this preview, and we look forward to talking to you again soon.
TS: (30:48):
Really appreciate you, Ed. Have a great week. Have a great start to the new year.