Capitol Ideas | 2018 | Issue 2 | Funding the Future by The Council of State Governments

MAR | APR 2018

FUNDING THE FUTURE TOP FIVE STATE ECONOMIES 10 YEARS AFTER THE GREAT RECESSION THE PRICE OF NATURAL DISASTERS THE ECONOMICS OF MARIJUANA LEGISLATION

10 Q U E S T I O N S W I T H HOUSE SPEAKER CRISANTA DURAN | Colorado

Jo i n th e C S G Fa m i ly by Becoming a Henry Toll Fellow! T h e C S G H e n r y T o l l F e l l o w s h i p , o u r n a t i o n â&#x20AC;&#x2122;s premier leadership development program for state government officials from all three branches of government, is accepting applications for its five-day, five-night training in Lexington, Kentucky, Aug. 24â&#x20AC;&#x201C;28, 2018. Application deadline

April 30, 2018

For more information visit csg.org.

March/April FUNDING THE FUTURE ON THE COVER Colorado Speaker of the House Crisanta Duran became speaker in January 2017 at the age of 36 and is the first Latina speaker of the Colorado House. Under her leadership, the 2017 legislative session worked to prevent rural hospitals from closing, issued an infusion of funds for Colorado’s transportation system and boosted public school funding. Her economic development efforts have helped make Colorado’s unemployment rate the best in the nation. Before being elected to caucus leadership, Duran was chairwoman of the Legislature’s Joint Budget Committee. Colorado was ranked No. 1 by U.S. News and World Report for economy in 2018. Photo Courtesy Garrett Hacking, Photography G

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BUDGETING SUCCESS

STATE OF OUR STATES

THEN AND NOW

BUILDING RESILIENCE

Governors across the nation addressed their constituents at the beginning of this year through the annual state of the state addresses. While there were many similar themes from balancing budgets to investing in education and health care, many states are facing challenges unique to their citizens. Find out more about what governors will be focused on in 2018.

The Great Recession started in December 2007, giving states a little over 10 years to get back to prerecession levels of employment, wages and fiscal stability. The recession lasted 18 months, making it the longest downturn since World War II. This infographic shows what’s changed, and what hasn’t since then.

As large-scale natural disasters become more frequent and costly, states are looking at infrastructure spending as an investment in emergency preparedness. The price tag attached to U.S. weather disasters in 2017 was $306 billion—a record high. The previous record of $215 billion was set in 2005.

MAR/APR 2018 | CAPITOL IDEAS

MAR/APR

FEATURES

WHAT’S HAPPENING AT CSG

THEY TWEETED IT | fiscal issues

REGIONAL ROUNDUP | east

REGIONAL ROUNDUP | south

REGIONAL ROUNDUP | midwest

REGIONAL ROUNDUP | west

10 IN THE KNOW | evaluate debt and

plan for the future

48 FINAL FACTS | all about the benjamins

SPOTLIGHT: Funding the Future

12 Budgeting Success

28 Growing Revenue

38 Federal Government Shutdowns 101

Thirty states and the District of Columbia have laws legalizing marijuana in some form, and eight states and the District of Columbia have legalized marijuana for recreational use. While legal marijuana in North America was estimated to be a nearly $10 billion industry in 2017, it might not be the golden goose that will solve states’ fiscal issues.

32 Drug Policy is Personal for a Legislator

18 When Working Doesn’t Mean Saving Traditionally, U.S. workers have saved for retirement through their jobs, but according to analysis of U.S. census data by The Pew Charitable Trusts, more than 30 percent of full-time employees don’t have access to a workplace retirement plan.

20 State of Our States Governors across the nation addressed their constituents at the beginning of this year through annual state of the state addresses. While there were many similar themes from balancing budgets to investing in education and health care, many states are facing challenges unique to their citizens. Find out more about what governors will be focused on in 2018.

22 10 Questions:

MAR/APR 2018 | CAPITOL IDEAS

Colorado House Speaker Crisanta Duran

Colorado Speaker of the House Crisanta Duran became speaker in January 2017 at the age of 36 and is the first Latina speaker of the Colorado House. Her economic development efforts have helped make Colorado’s unemployment rate the best in the nation.

24 Then and Now The Great Recession started in December 2007, giving states a little over 10 years to get back to prerecession levels of employment, wages and fiscal stability. The recession lasted 18 months, making it the longest downturn since World War II. This infographic shows what’s changed, and what hasn’t since then.

in Nebraska Carrie Howard died March 24, 2009. Carrie, the daughter of former Nebraska state Sen. Gwen Howard and sister of Sen. Sara Howard, is one of many lives lost to the opioid epidemic. While her story begins like many others— a severe car accident and a prescription for painkillers— her story ends a little differently.

34 Facing Rising Corrections Costs, States are Course Correcting State budgets have been saddled with rising corrections costs for decades due to growing prison populations, which are the result of sentencing practices and high recidivism rates, among other drivers. A swift look at any state budget will reveal that corrections costs represent a significant portion of expenditures.

36 Where Do State and Local Tax Dollars Go? While the federal government plays a major role in setting tax policy nationwide, state and local tax allocations can have an arguably greater impact on the daily lives of Americans because state and local leaders are able to adjust policy based on the needs of people within their localities.

40 Tax Plan Opens Door to New Investments

42 Building Resilience As large-scale natural disasters become more frequent and costly, states are looking at infrastructure spending as an investment in emergency preparedness. The price tag attached to U.S. weather disasters in 2017 was $306 billion—a record high. The previous record of $215 billion was set in 2005.

46 Selling Your State A common challenge among all state leaders is how to differentiate their state from other states and, therefore, attract new residents and businesses. State policies and special programs can help infuse a workforce with needed talent, lure major companies or retain graduates.

publisher DAVID ADKINS

dadkins@csg.org

editor-in-chief KELLEY ARNOLD karnold@csg.org

contributing KATY ALBIS

writers CSG Justice Center, Publications Editor and Communications kalbis@csg.org

managing editor COURTNEY DANIEL JENNIFER BURNETT cdaniel@csg.org

CSG Director, Fiscal and Economic Development Policy jburnett@csg.org

associate editors SHAWNTAYE HOPKINS shopkins@csg.org

LISA MCKINNEY lmckinney@csg.org

DEBRA MILLER CSG Director, Health Policy dmiller@csg.org

CAPITOL IDEAS, ISSN 2152-8489, MAR/APR 2018, Vol. 61, No. 2—Published by The Council of State Governments, 1776 Avenue of the States, Lexington, KY 40511-8536. Opinions expressed in this magazine do not necessarily reflect the policies of The Council of State Governments nor the views of the editorial staff. Readers’ comments are welcome. Subscription rates: in the U.S., $42 per year. Single issues are available at $7 per copy. POSTMASTER: Send address changes to Capitol Ideas, Sales Department, The Council of State Governments, 1776 Avenue of the States, Lexington, KY 40511-8536. Periodicals postage paid at Lexington, Ky., and additional mailing offices. Mailing lists are available for rent upon approval of a sample mailing. Contact the sales department at (800) 800-1910. Copyright 2018 by The Council of State Governments. Periodicals postage paid at Lexington, Ky., and at additional mailing offices.

technical editor CHRIS PRYOR cpryor@csg.org 30

graphic designers THERESA CARROLL

SFI-01681

tcarroll@csg.org

CHRIS PRYOR cpryor@csg.org

CHAD YOUNG cyoung@csg.org

email capitolideas@csg.org website capitolideas.csg.org

Gov. Gary Herbert UTAH CSG National President

Assemblyman Michael Benedetto

KENTUCKY CSG National Chair

NEW YORK CSG East Co-Chair

David Adkins

Wendell M. Hannaford

CSG EXECUTIVE DIRECTOR/CEO dadkins@csg.org

CSG EAST DIRECTOR whannaford@csg.org

Sen. James Seward NEW YORK CSG East Co-Chair

Sen. Ed Charbonneau Senate Pres. Pro Tem INDIANA Ron Richard CSG Midwest Chair

MISSOURI CSG South Chair

Michael H. McCabe

Colleen Cousineau

Edgar Ruiz

CSG MIDWEST DIRECTOR mmccabe@csg.org

CSG SOUTH DIRECTOR fitzgerald@csg.org

CSG WEST DIRECTOR eruiz@csg.org

Sen. Stuart Adams UTAH CSG West Chair

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Senate President Robert Stivers

what’s happening at csg

WHAT'S HAPPENING AT CSG?

CSG Justice Center Welcomes New Director

Leadership development programs offered in each of the CSG regions are designed to equip talented state policymakers with the skills and strategies they need to meet the unique challenges they face in their states and regions. Each of the four programs attracts emerging state leaders who are striving to improve state government and their personal effectiveness as public servants. Find out more about the CSG East’s Eastern Leadership Academy, CSG Midwest’s Bowhay Institute for Legislative Leadership Development, CSG South’s Center for the Advancement of Leadership Skills, and CSG West’s Western Legislative Academy at csg.org/csg_regional_programs.aspx.

Megan Quattlebaum joined of The Council of State Governments Justice Center as its new director in March. She was formerly a research scholar in law at Yale University Law School and lecturer in law at Columbia University Law School. Quattlebaum, a graduate of Sarah Lawrence College and Yale University Law School, also previously served as the program director of Yale Law School’s Justice Collaboratory where she was named a Senior Liman Fellow in Residence.

Register for Your Regional Meeting CSG’s regional meetings address policy issues unique to their states, and provide the opportunity for attendees to build relationships with colleagues close to home. Visit your CSG region’s website for registration information.

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CSG MIDWEST 73rd Midwestern Legislative Conference Annual Meeting July 15–18 | Winnipeg, Manitoba, Canada

CSG SOUTH 72nd Southern Legislative Conference Annual Meeting July 21–25, St. Louis, Missouri CSG EAST 58th Eastern Regional Conference Annual Meeting Aug. 5–8, Rye Brook, New York CSG WEST 71st Annual Meeting Sept. 11–15, Snowbird, Utah

Upcoming Regional Leadership Programs

Application Deadline for Henry Toll Fellowship The application deadline for the CSG 2018 Toll Fellowship is midnight Hawaiian Time, Monday, April 30. The CSG Henry Toll Fellowship is one of the nation’s premier leadership development programs for state government officials. A total of 48 state leaders from all three branches of government will be accepted to the program, which will take place in Lexington, Kentucky, Aug. 24–28. Apply online at csg.org/tollfellows or nominate someone for the program at tolls@csg.org.

MIC3 Celebrates Month of the Military Child The Military Interstate Children’s Compact Commission, or MIC3, celebrates the Month of the Military Child in April, recognizing and honoring the significant role military youth play in our communities and the sacrifices they make. In 2011, the University of New Hampshire Cooperative Extension Military Youth and Family Program started the “Purple Up! for Military Kids” campaign, encouraging participants to wear purple as a visible way to thank military youth for their strength, and it is now celebrated nationwide. MIC3, a CSG affiliate organization, is a governmental entity operating under the Interstate Compact on Educational Opportunity for Military Children. For more information, visit mic3.net.

they tweeted it

They Tweeted It Governor Kay Ivey @GovernorKayIvey • Feb 14 We can make AL’s business & industry sectors the envy of the nation by making our workforce the envy of the nation. I joined WF leaders at the #ALWFC18 to discuss topics pertinent to strengthening the workforce & to increase employability. @aidtedu @al_labor @ManufactureAla

Justin Theal ‫‏‬ @Justin_Theal • Sep 29 2017 It’s not just @fema. Billions in federal disaster assistance flow from 17 other agencies: http:// ow.ly/cb0L30fx3U2 @PewStates #NEMAForum2017

Alberta Darling @SenDarling • Feb 15 Today, I testified with @RepAmy31 and Rep. Jason Fields on a bipartisan bill to modernize and update laws to help more people afford a home and rehabilitate homes in Milwaukee.

J.R. Claeys @jrclaeys • Feb 14 Transportation & Public Safety Budget today unanimously recommended all KSDE expenditures from the State Highway Fund be moved back into the State General Fund, freeing up over $100m annually in the State Highway Fund to complete delayed T-Works projects. #ksleg Rep. Drew Hansen@RepDrewHansen • Feb 9 The WA House of Representatives just passed my bill creating state-level #NetNeutrality protections 935: overwhelming bipartisan support! Senator Liz Krueger @LizKrueger • Feb 14 With New York’s neighbors ending marijuana prohibition, their gain will be our loss.

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Amelia M Keane @AmeliaKeaneNH • Feb 8 .@NHHouseofReps just voted to give Paid Family & Medical Leave (#HB628) a chance to pass. A measure 82% of Granite Staters support because it benefits workers, employers, and families #nhpolitics

Harold M Love Jr. @LoveforHouse58 • Jan 17 Glad to join Leader @craigfitzhugh in Finance Ways and Means to advocate for Broadband expansion across TN. Every Tennessean should have Equal Access to Internet for Education and Economic Development #tnleg

regional roundup

The East CT • DE • MA • MD • ME • NH • NJ • NY • PA • RI • VT • NB • NS • ON • PE • PR • QC • VI PARENTAL RIGHTS

GUN POLICY

Maryland Gov. Larry Hogan signed a bill in February that will permit women who are sexually assaulted to sue to terminate the parental rights of attackers if the victim becomes pregnant. The Washington Post reported that the bill failed in past attempts over the years partly because of debates about men’s rights, the appropriate burden of proof and whether men who lose parental rights should still be required to pay child support. The law went into effect immediately after it was signed.

Rhode Island Gov. Gina Raimondo signed an executive order in February establishing a statewide red flag policy to help keep guns out of the hands of people who could harm themselves or others, according to USA Today. Rhode Island became the sixth state to take this action and the first state since the Feb. 14 shooting at a Florida high school. Raimondo said the immediate step would help make residents safer and it “sets the table” for lawmakers to tackle gun control.

OVERDOSE DEATHS VOTING MACHINES Pennsylvania Gov. Tom Wolf ordered counties that plan to replace their electronic voting systems to buy machines that leave a paper trail, The Associated Press reported in February. Although his budget doesn’t include money to replace voting systems, Wolf wants to ensure that machines include a safeguard against hacking. A paper backup would also make a ballot audit easier.

The number of overdose deaths involving the synthetic drug fentanyl spiked in Vermont in 2017, according to the Burlington Free Press. Health Commissioner Mark Levine submitted a report to the Legislature in March that showed the synthetic opioid was involved in 68 fatal overdoses, compared to 51 in 2016 and 29 in 2015. Of the 68 fatal fentanyl deaths, 30 also involved heroin.

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ABUSE PROGRAM

A statewide child abuse and neglect prevention program in Maine will end because state officials said it duplicates other programs and is not evidencebased. Maine Department of Health and Human Services officials announced in February that the Community Partnerships for Protecting Children program, which launched more than a decade ago, would not be renewed, according to the Portland Press Herald.

For more on CSG East, visit capitolideas.csg.org and www.csg-erc.org.

The 2018 CSG Eastern Regional Conference Annual Meeting and Regional Policy Forum will be held Aug. 5–8, 2018, in Rye Brook, New York. By bringing together state and provincial officials from across the ERC region, the annual meeting will provide participants with a unique opportunity to meet and network with colleagues to share ideas on issues of common concern. All of ERC’s policy committees will meet and are open to all participants. The affiliated organizations of the Council on Communities of Color and Eastern Trade Council will also meet. National experts will speak at plenary and concurrent sessions and provide insights on critical regional issues. For more information, visit csg-erc.org.

regional roundup

The South AL • AR • FL • GA • KY • LA • MO • MS • NC • OK • SC • TN • TX • VA • WV WIND ENERGY Texas topped the nation in electricity generated by wind energy, with nearly three times the installed capacity as second-ranked Oklahoma, according to reporting by The Dallas Morning News. In 2017, wind generated 17.4 percent of Texas’ overall electricity, though at certain times of the year it was significantly higher. During March and April of 2017, wind accounted for about one-quarter of the state’s electricity. Texas installed 1,170 megawatts of wind capacity last year, nearly 17 percent of the national total. The Southern Legislative Conference’s Special Series Reports, Blown Away: Wind Energy in the Southern States (Parts I and II), explore the impact of wind energy expansion in the Southern region.

AUTOMOTIVE PLANT

RURAL DEVELOPMENT North Carolina Gov. Roy Cooper launched a new program to support local governments in rural areas, The News and Observer reported. The initiative, called Hometown Strong, will focus on economic development projects, including infrastructure

CYBERSECURITY The Office of Louisiana Gov. John Bel Edwards announced the creation of a new, 15-member cybersecurity commission to advance the state’s cyber ecosystem and position Louisiana as a national leader in cyber business, education and research. The commission will be responsible for coordinating cybersecurity strategies among state agencies, local governments, private companies and academic institutions.

MENTAL HEALTH A behavioral health facility in Oklahoma City will open a new mental health unit focused exclusively on military members, veterans and first responders, The Oklahoman reported. The 24-bed unit, part of the Hope for Heroes program, is designed for those suffering from post-traumatic stress disorder, combat stress and other types of trauma related to their service. The unit is tailored for people in specific professions who have dealt with similar experiences that often are different from the trauma encountered by the general public.

For more on CSG South, visit capitolideas.csg.org and www.slcatlanta.org.

MAR/APR 2018 | CAPITOL IDEAS

The 72nd Annual Meeting of the Southern Legislative Conference will be held in St. Louis, Missouri, July 21–25, 2018. Convened as the focal point and culmination of its yearly activities, the Annual Meeting of the Southern Legislative Conference is the nation’s largest regional gathering of state legislators, legislative staff and government officials, and the premier public policy forum for Southern state legislators. Focusing on both existing and emerging state government innovations and solutions, the SLC Annual Meeting provides policymakers diverse opportunities to engage regional and national policy experts about the issues that matter most to them and their constituents. As the foundation of policy discussions, the conference’s six standing committees highlight topics that are the most critical and relevant state government policy issues facing the Southern region. Of equal benefit, numerous informal discussions allow state government officials to share their knowledge and experiences with colleagues facing similar challenges and opportunities. This hallmark of the SLC Annual Meeting gives policymakers an opportunity to meet and collaborate on a broad spectrum of state government issues. Reduced rates apply until June 1. Visit slcatlanta.org for more information.

Toyota and Mazda selected Huntsville, Alabama, for a $1.6 billion joint venture automotive production plant, according to AL.com. When it is completed, the plant is expected to produce 300,000 vehicles a year and employ about 4,000 people at an average salary of $50,000. Toyota Corollas and a new Mazda crossover for the North American market will be built at the site. The cumulative payroll of the plant will be greater than $5 billion over 20 years, resulting in about $1.3 billion in gross revenue.

improvements, broadband access and workforce training. Through partnerships with leaders from government agencies, businesses and nonprofit entities, Hometown Strong will leverage state and local government resources to facilitate the completion of development projects and other long-term needs for rural areas. The initiative will begin with selected counties to test the new approach, followed by a wider rollout across the state with counties interested in participating.

regional roundup

The Midwest IA • IL • IN • KS • MI • MN • ND • NE • OH • SD • WI • AB • MB • ON • SK SUNSCREEN

WATER QUALITY

A bill that would allow Indiana schoolchildren to bring sunscreen to school was waiting for Gov. Eric Holcomb’s signature after it passed both chambers of the Indiana General Assembly in February. Sunscreen has been treated like a medication on school grounds, but Senate Bill 24, known as the sunscreen bill, would change that. Students wouldn’t need a prescription to bring it to school and sunscreen wouldn’t have to be kept in a special location, The Indianapolis Star reported.

Iowa Gov. Kim Reynolds recently signed a bill that will create about $270.2 million over the next 11 years in funding for water quality projects, according to the state’s nonpartisan data agency. The Gazette reported that the funds will support projects designed to filter nutrient pollutants out of Iowa waterways and to decrease soil erosion and pollutant runoff into waterways.

FEMININE HYGIENE The Nebraska Department of Correctional Services has announced a new policy that allows women in state prisons to get generic tampons and pads for free, the Omaha World-Herald reported in January. Previously, only generic pads were available for free and all other feminine hygiene products, including generic tampons, were available for sale in prison canteens. Brand-name products will be available for purchase under the new policy.

CRAFT BEER Michigan Gov. Rick Snyder recently signed legislation that will expand the availability of growlers for takeout of craft beer purchases, The Associated Press reported. The bill was sponsored by state Rep. Tommy Brann, a restaurateur. The use of growlers is a popular way for beer drinkers to take beer home. The bill revised the definition of an “eligible merchant” for legally selling and filling growlers.

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DRIVER’S LICENSES

In order to increase security and meet federal standards, new and renewed driver’s licenses and ID cards will be mailed to Ohioans after they visit the Bureau of Motor Vehicles, according to The Columbus Dispatch. Drivers will receive a temporary card at the BMV to prove they obtained a license. The card should arrive in the mail about 10 days later.

For more on CSG Midwest, visit: capitolideas.csg.org and www.csgmidwest.org.

Winnipeg, Manitoba’s capital city and a cradle of Canadian culture, is the site of this year’s Midwestern Legislative Conference Annual Meeting—the premier event for legislators from the 11-state Midwest region and four affiliate provinces. The nonpartisan, family-friendly MLC meeting will be held July 15–18 in downtown Winnipeg at the RBC Convention Centre and the Delta Hotels by Marriott Winnipeg. As it has in past years, the event will feature a diverse mix of policy sessions, presentations by highly regarded speakers, and professional development training for legislators. It also offers programming for the adult guests and children of attendees. Evening events for all attendees and their guests will be held at some of Winnipeg’s premier destinations. A registration discount for legislators is available through May 14. For more information, visit csgmidwest.org.

regional roundup

The west AK • AZ • CA • CO • HI • ID • MT • NM • NV • OR • UT • WA • WY • AB • AS • BC • GU • MP STEM CELL RESEARCH

ROBOCALLS

California received its first royalty check at the end of 2017 for its investment of billions of public dollars over the past decade in stem cell research, the San Francisco Chronicle reported. City of Hope, a medical research center, sent more than $190,000 to the State Treasurer’s Office related to research funded by the California Institute for Regenerative Medicine, which issues grants for stem cell studies.

A federal district court judge ruled in February that Montana’s ban on political robocalls is constitutional although many people in the state receive the calls during election cycles because of lack of enforcement since the law was enacted in 1991, the Billings Gazette reported. A Michigan company that uses automated telephone calls, or robocalls, to reach voters challenged the Montana law, claiming that the ban deprived the company of its freedom of speech. U.S. District Court Senior Judge Charles Lovell, however, determined the law is “constitutionally permissible content-based regulation of speech.”

SUICIDE RATES

CSG West’s 71st Annual Meeting in Snowbird, Utah, will provide legislators, legislative staff and private-sector participants with opportunities to learn from one another, as well as regional and national experts, on topics important to Western legislators. During the meeting, all CSG West policy committees convene, providing substantive engagement in both regionally and nationally relevant topics such as energy, public lands, education, fiscal affairs, health, economic development, trade, water, regional trends and the environment. The Canada Relations Committee and North America Summit foster conversation on issues unique to the West as the only region to share borders with both Canada and Mexico. General sessions afford attendees an opportunity to hear from selected keynote speakers on a variety of important topics. Professional development sessions provide skills development relevant to the legislative environment.

Early bird registration ends Aug. 10. Visit csgwest.org for more information.

HUMAN TRAFFICKING Northern Colorado held its first-ever Human Trafficking Symposium on Feb. 22 to fight the state’s sex trade industry, according to The Denver Post. During the daylong event various facets of human trafficking were covered to help northern Colorado professionals, community members, faculty, staff and students learn more about the industry and about how to combat the problem. Colorado State University hosted the symposium.

HOUSING DISCRIMINATION In February, Washington state lawmakers passed bills that prohibit landlords from rejecting housing tenants based on the source of their income, The Associated Press reported. Senate Bill 5407 prevents landlords from rejecting applicants who receive Social Security, veterans’ benefits or Section 8 housing vouchers. The House and Senate approved separate bills in early February and the measures needed to be reconciled before final approval. Only 12 states ban similar discrimination.

For more on CSG West, visit: capitolideas.csg.org and www.csgwest.org.

MAR/APR 2018 | CAPITOL IDEAS

In addition, the host state—Utah, this year—showcases their most innovative industries through a variety of interactive off-site policy tours. CSG West Annual Meetings rotate among the 13 Western member states and have also convened in the Canadian provinces of British Columbia and Alberta.

Utah Gov. Gary Herbert recently created a task force to address an increase in the number of teen suicides in his state. Herbert asked members of the task force to work with suicide prevention groups to create a list of recommendations for reducing the number of suicides, The Associated Press reported. The rate of suicides among youth ages 10 to 17 more than doubled from 2011 to 2015. In February, the task force announced recommendations, including urging gun-owning parents to keep guns locked up.

in the know

State Strategies to Evaluate Debt and Plan for the Future by Mary Murphy and Frances McGaffey From the White House to statehouses to city halls, many policymakers agree the nation needs greater infrastructure investment. What’s less clear is the most strategic and cost-effective way to pay for these investments. In many jurisdictions, debt is certain to play an important role in paying for capital improvements. According to the Securities Industry and Financial Markets Association, a membership organization for capital market participants, states and municipalities borrowed $204 billion in 2017 to pay for roads, bridges, state university buildings and other infrastructure improvements—allowing vital projects to move forward with the costs spread over time and paid for by the taxpayers who will benefit. Yet as state and local governments grapple with a growing need to pay for new projects and maintain their existing investments, gauging whether a state can afford to take on new debt—and how much—can be difficult. Policymakers don’t always have access to the data necessary to evaluate their state’s full portfolio of long-term obligations or the information they need to assess how financial commitments made in the current fiscal year will affect budgets down the road. Twenty-nine states use debt affordability studies to manage long-term borrowing. These analyses vary across the states because debt portfolios differ substantially, too. But several elements are present in all of these studies, including data and analysis on outstanding debt, an analysis of obligations relative to the state’s capacity to support them, and projections to evaluate the state’s borrowing capacity in future budget years. The core of an affordability study is its debt capacity model, which analyzes outstanding debt and debt service, anticipated future issuances, revenue and economic forecasts, and interest rates in order to project debt levels in future years.

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In any forecast, actual outcomes may diverge from what the model predicts: revenues may be lower than expected, a state’s economy may grow faster than anticipated or interest rates may unexpectedly rise. Varying the model’s assumptions—also known as performing a sensitivity analysis—can illustrate how the affordability of state obligations could change if future conditions differ from current expectations.

Sensitivity analysis is especially important in states that rely on volatile tax sources to pay down their debt. For example, Oregon’s revenues rely primarily on income taxes—a funding stream that can vary widely from year to year. That state’s debt capacity model incorporates regularly updated revenue forecasts and calculates changes to borrowing capacity based on both a 10 percent increase and a 10 percent decrease in general fund revenue. This forward-looking analysis helped the state make prudent borrowing decisions during the Great Recession. As revenues declined, the Legislature delayed some projects to keep the state’s debt at an affordable level. In addition to modeling general fund borrowing capacity, debt affordability studies can also help policymakers understand the full range of long-term liabilities for which public revenues are committed, such as borrowing by authorities and universities. States take a variety of approaches to including these obligations in their affordability studies, often excluding them from the capacity model if the borrowing has no legal claim on state funds. In Rhode Island, the study includes an analysis of the debt burden of each authority, and uses

credit rating criteria for similar entities to recommend nonbinding, specifically tailored debt caps. Virginia takes a different approach: its debt affordability study examines the impact on the commonwealth of assuming repayment for all outstanding “moral obligations.” These commitments are not legally binding on the state, but the state may appropriate funds and pay the debt service if necessary; for example, to protect the fiscal health of the issuing entity and its own credit rating. Other states simply report the obligations of other entities, such as local governments or independent public authorities, using the debt affordability study to convey this data in one place. States can also use debt affordability studies to examine the combined claims on future revenue created by borrowing and unfunded pension and retiree health care liabilities. Unlike bonded debt, which typically carries a fixed payment schedule, retirement liabilities fluctuate based on investment performance and state contributions can vary from year to year. Despite these differences, retirement liabilities and debt both represent a claim on a state’s future revenue. Considering them together can inform decisions on debt capacity. In the last two years, North Carolina Treasurer Dale Folwell has recommended that the Tar Heel state raise its borrowing cap to free up cash to pay down retirement liabilities while allowing the state to continue investments in capital assets through prudent borrowing. Incorporating robust data and forward-looking analysis helps policymakers establish evidence-based affordability policies—or borrowing caps. In some cases, like New Hampshire and Oklahoma, states use a debt affordability analysis to manage borrowing levels so they align with statutory or constitutional debt limits. In others, such as North Carolina and Rhode Island, the study is used to define the level of long-term debt deemed “affordable,” based on expected economic and fiscal outcomes. The affordability analysis can guide borrowing decisions made in the current fiscal year, and outline the expected levels of borrowing the state will be able to support in future budget years. Because of variations in tax structure, the type of borrowing used, the particular agencies authorized to issue debt, and borrowing limitations across state lines, no two debt affordability studies will look the same. However, by providing information on a range of liabilities, strong debt affordability studies can help lawmakers and finance experts make borrowing decisions that are informed by the most relevant data—and help protect taxpayer dollars in the process. Mary Murphy is the fiscal policy director at The Pew Charitable Trusts. Her work focuses on assisting policymakers with crafting policies that promote long-term fiscal stability, including strategies and policies to: mitigate revenue volatility, manage long-term debt effectively, and detect and respond to local financial distress. Frances McGaffey is a senior associate at The Pew Charitable Trusts, where she researches state debt management practices and provides customized analysis to help states navigate fiscal challenges. She holds a Bachelor of Arts in political science from Vassar College and a master’s degree in public policy from The George Washington University.

The Bottom Line

In This Section

by Courtney Daniel A budget is at the center of every state and local government. It charts the way forward for education, health care, public safety and more. While it’s easy to focus on the numbers on the page—increasing revenue and managing debt—it’s important to remember the bottom line of why state budgets matter: people. Citizens in every state rely on their elected leaders to make sound budgeting decisions for today’s constituency as well as future generations. That means making measured, data-driven decisions and listening to the needs of our communities.

The bottom line of a state budget shouldn’t be about a number, but about how state leaders have utilized revenue and managed debt to best serve their constituents. With a federal government shutdown continually hanging on the horizon, it’s more important than ever for states to provide consistency and reliability by passing a budget that works and that is reflective of the needs of their communities.

18 – Retirement Savings 20 – State of Our States 22 – 10 Questions with Colorado Speaker of the House Crisanta Duran 24 – Then and Now: 10 Years after the Great Recession 28 – Growing Revenue 32 – One Family’s Story 34 – Corrections Costs 36 – Where Do State and Local Tax Dollars Go? 38 – Government Shutdown 101 40 – Bringing New Business 42 – Cost of Natural Disasters 46 – Selling Your State

MAR/APR 2018 | CAPITOL IDEAS

In this issue we look at how states are making and passing budgets that work. Some states are implementing innovative state and local collaborations to bring in new business and launching marketing campaigns to attract a more robust workforce. Other states are embracing new revenue sources like marijuana and working to keep health care costs low.

12 – Top Five States in Best Fiscal Condition

funding the future

Budgeting Success by Courtney Daniel

MAR/APR 2018 | CAPITOL IDEAS

Elected officials work every year to create and maintain a healthy economic outlook for their states by attracting new businesses, creating jobs and implementing smart tax policy. U.S. News and World Report, using data from McKinsey & Company, ranked every U.S. state in areas of growth, employment and business environment. Check out this snapshot of the top five most economically sound states named by U.S. News and World Report for 2018.

top 5 states in best fiscal condition

Colorado Colorado has a long history of robust tourism due to its diverse geography. In fact, the Colorado Tourism Office reported that 77.7 million visitors spent about $19 million in Colorado in 2015. It was also one of the first states to legalize marijuana, which generated almost $250 million in tax revenue in 2017, according to the Colorado Department of Revenue. With many robust revenue sources, and as one of the healthiest states in the nation with a low unemployment rate, itâ&#x20AC;&#x2122;s easy to see why Colorado was selected as the No. 1 state for economy in 2018.

POPULATION

5.6 MILLION

HIGH SCHOOL GRADUATION

UNEMPLOYMENT

$338.2 BILLION

# OF COMPANIES

547,352

Source: U.S. News and World Report, 2018 Best States Ranking; U.S. Census Bureau; U.S. Bureau of Economic Analysis; Bureau of Labor Statistics.

MEDIAN INCOME

$62,520 MAR/APR 2018 | CAPITOL IDEAS

91%

GDP

funding the future

Utah Utah’s residents are the youngest in the nation with a median age of 30.7 years old, according to 2016 data from the U.S. Census Bureau. Utah also had the nation’s third-highest population growth between 2000 and 2010. Utah’s unemployment rate is below the national average, and the average household income is higher than the national average. It also saw a 3.9 percent increase in GDP in the second quarter of 2017.

POPULATION

MAR/APR 2018 | CAPITOL IDEAS

3.1 MILLION

HIGH SCHOOL GRADUATION

91.5% UNEMPLOYMENT

3.1%

GDP

$165.1 BILLION

# OF COMPANIES

251,419

Source: U.S. News and World Report, 2018 Best States Ranking; U.S. Census Bureau; U.S. Bureau of Economic Analysis; Bureau of Labor Statistics.

MEDIAN INCOME

$62,518

top 5 states in best fiscal condition

Washington Washington has 1,400 aerospace-related businesses, generating $69.9 billion in economic activity and providing more than 136,000 jobs according to the Washington Department of Commerce. Washington has also benefited from marijuana legalization; the industry brought in $220 million in tax revenue by its second year. The second largest employer, behind aerospace, is the military and defense sector employing 127,000 active duty, reserve, guard and civilian personnel. According to the state’s Department of Commerce, Washington’s military and defense community generates over $13 billion, nearly 3 percent of the state’s GDP.

POPULATION

7.4 MILLION

HIGH SCHOOL GRADUATION

UNEMPLOYMENT

4.7%

$499.7 BILLION

# OF COMPANIES

541,522

Source: U.S. News and World Report, 2018 Best States Ranking; U.S. Census Bureau; U.S. Bureau of Economic Analysis; Bureau of Labor Statistics.

MEDIAN INCOME

$62,848 MAR/APR 2018 | CAPITOL IDEAS

90.6%

GDP

funding the future

California California’s economy is the biggest in the U.S. and it is the most populated state in the nation. California has the largest entertainment industry in the country and is home to many technology companies in Silicon Valley. However, the industry sector that includes finance, insurance and real estate made up the biggest portion of California’s GDP at 21.8 percent, according to the Bureau of Economic Analysis. Visit California, the state’s nonprofit tourism agency, found that travel spending in the state was $126.3 billion in 2016 and supported more than 1 million jobs.

POPULATION

MAR/APR 2018 | CAPITOL IDEAS

39.5 MILLION

HIGH SCHOOL GRADUATION

82.1% UNEMPLOYMENT

4.4%

GDP

$2.7 TRILLION

# OF COMPANIES

3,548,449

Source: U.S. News and World Report, 2018 Best States Ranking; U.S. Census Bureau; U.S. Bureau of Economic Analysis; Bureau of Labor Statistics.

MEDIAN INCOME

$63,783

top 5 states in best fiscal condition

Florida There is no doubt that tourism has played a major role in generating revenue over many years in Florida. According to Oxford Economics, it accounts for 9.5 percent of the stateâ&#x20AC;&#x2122;s GDP and supports 17 percent of total employment. But agriculture has also played an important role in generating revenue. According to the Florida Department of Agriculture and Statistics, the state ranked seventh in the U.S. for agricultural exports with over $4 billion of agricultural commodities shipped in 2015. The Florida Chamber of Commerce projects the stateâ&#x20AC;&#x2122;s economy will hit the $1 trillion mark in 2018.

POPULATION

20.9 MILLION

HIGH SCHOOL GRADUATION

UNEMPLOYMENT

3.9%

$964.8 BILLION

# OF COMPANIES

2,100,187

Source: U.S. News and World Report, 2018 Best States Ranking; U.S. Census Bureau; U.S. Bureau of Economic Analysis; Bureau of Labor Statistics.

MEDIAN INCOME

$48,900 MAR/APR 2018 | CAPITOL IDEAS

87.2%

GDP

When Working Doesn’t Mean Saving by Jennifer Burnett

MAR/APR 2018 | CAPITOL IDEAS

Traditionally, U.S. workers have saved for retirement through their jobs, but according to analysis of U.S. census data by The Pew Charitable Trusts, more than 30 percent of full-time employees don’t have access to a workplace retirement plan.

In total, 58 percent of U.S. workers have access to a workplace retirement-savings plan, although only 49 percent participate in one. That means more than 30 million full-time, full-year, private- sector workers ages 18 to 64 don’t have access to an employer-based retirement plan. If you are a millennial, the chances your employer offers a plan are even slimmer: 45.1 percent of millennials lack access to retirement savings plans, compared to 34.9 percent of Generation Xers and 30.2 percent of baby boomers. When you don’t have access to a retirement plan at work, it is far less likely that you will have enough saved once you hit your golden years.

“Half of all U.S. families have nothing saved for retirement. Not having access to a retirement plan at work can have a drastic impact on savings,” said Sarah Mysiewicz Gill, senior legislative representative of State Government Affairs for AARP. “We know that workers are 20 times more likely to save for retirement if they can do so through automatic and regular payroll deductions.” A new set of programs have emerged from states —dubbed “Work and Save programs”—that are designed to fill the gap between those with access to a workplace retirement plan and those without. “Work and Save programs operate similarly to a 529 college savings plan, where the state sets up a backup, plug-and-play 401(k) or IRA through public-private partnership,” Gill said. “Small business owners can use these 401(k)s and IRAs without having to be responsible for operating them. Employees choose if they want to participate, how much they want to save, and what they want to invest in.”

According to Gill, these programs are bipartisan endeavors, appealing both to those concerned with the inadequacy of the social safety net and those concerned with personal fiscal responsibility. “Lacking adequate savings, millions of Americans will likely rely on taxpayer-funded safety-net programs when they are no longer in the workforce,” she said. Over the past two years, nine states have enacted laws that increase access to workplace savings plans. In 2017, more than half of states considered a variety of bills that envision public-private partnerships to create low-cost workplace savings options. One state that has already launched a Work and Save program is Oregon. In 2015, the Oregon Legislature passed House Bill 2960 and directed the State Treasury and Oregon Retirement Savings Board to plan, launch and administer the program OregonSaves, which is a voluntary, workbased retirement program for Oregonians lacking access to a savings option through their employer. “Oregon has recognized for more than 20 years that we have had this developing retirement readiness issue,” said Lisa Massena, executive director of OregonSaves. “We knew that between a third to a half of the population appeared not to have a plan at work. And a very large chunk of people appeared to not have any retirement savings.” “So, there was a concern at the state level that was going to lead to some really bad outcomes both for citizens and taxpayers,” Massena said. When people retire in poverty they often slip into the social services safety net. “That might sound good, but in fact that is not a very good place to be if you don’t have to,” Massena said. “We’ve identified that over a 15-year period the state may save as much as $98 million [in safety net spending] just by virtue of this program going live,” Massena said. While savings to the state is important, quality of life is just as important, she said.

retirement savings

Access to employer-sponsored retirement savings by generation Baby Boomers

No access to a workplace retirement plan

Generation X

Millennials

Access to a workplace retirement plan %

“If there’s something where you can take a logical step and improve the quality of life for everybody, you certainly want to take a good look at that,” Massena said. Although every state’s upfront costs will be different, Massena said “it’s not a stretch at all to say that it takes tens of millions of dollars to get a program like this running.” To offset some of those costs, Oregon set up their program in the form of the public-private partnership. The Legislature funds a piece of the program in the form of a general fund loan. “And the provider, we’ve given them a long enough contract term and terms within that contract that allows them to break even over a period of time.” “We’re outsourcing everything that makes sense to outsource and retaining things like high-level program management and the enforcement work that will ultimately need to be done,” Massena said. “So we’re keeping things pretty light from an in-state perspective.” Utah state Sen. Todd Weiler introduced workplace savings legislation in his state. Although ultimately his bill didn’t pass, Weiler continues to be an advocate for these types of programs, telling The New York Times, “I approach this issue with sound conservative principles of fiscal responsibility. And what is true in Utah is true nationally. The free market has somewhat failed us, for some reason.”

workers in Utah don’t have a way to save for retirement at work and the average 401(k) account balance in 2012 was just under $27,000. He also explained that payroll deductions—like those that are generally offered with employer- sponsored retirement savings plans—are key to helping Americans save for retirement. He posited that a vast majority of people will accept the responsibility to build a financially secure retirement, but asking people to go out and navigate the complex world of retirement products on their own isn’t realistic—state policymakers have to find practical solutions to these problems, like Work and Save programs.

% “States are considering several models—which is the beauty of this nationwide movement. As laboratories of democracy, states can create a Work and Save program that fits their own needs,” Gill said. “So far, states are considering automatic IRA, payroll IRA, multiple employer plans, or MEPS, and marketplaces.” “In 2018, we expect similar state action on these commonsense solutions to help Americans save,” Gill said. “So far this year we’ve seen activity in Tennessee, New York, Hawaii, Iowa, New Hampshire and Virginia.”

A 2015 AARP survey found that a large majority of those in Utah without access to a workforce savings plan—84 percent—would take advantage of a plan if offered. Several other states plan to introduce programs this year, including California and Illinois, whose pilot programs will go live in 2018. Washington will open its Marketplace website this year, which is a shopping tool for small businesses that want to offer their own retirement plans, but the state won’t run the plan on their behalf like Oregon.

Last year, Weiler told attendees at CSG’s Public Pension Policy Academy in Lexington, Kentucky, that his state lags behind the rest of the country when it comes to workplace retirement savings. He noted that 52.6 percent of private-sector

funding the future

State Our States PROMIS M O

“I’D LIKE TO TALK

E XCER P T S FRO M GOV ER N O RS’ 2018 S TAT E O F T H E S TAT E A D D R E SSE S

ABOUT

FAIRNESS.”

T C A PIT U

IO L AT

ALASKA GOV. BILL WALKER said the Legislature can work together and pass a sustainable budget on time.

CONNECTICUT GOV. DANNEL P. MALLOY described the state’s rich tradition of fairness and suggested changes in areas such as health care that would ensure the tradition continues.

“It is a rock concert for nerds.” MICHIGAN GOV. RICK SNYDER announcing his state as the host of the FIRST Robotics world championship in April.

MAR/APR 2018 | CAPITOL IDEAS

They were not roped and tied by ideology when pragmatism was the best path to progress.

Be a partner NOT AN IMPEDIMENT

to small businesses. IDAHO GOV. C.L. “BUTCH” OTTER, referring to his political role models: former presidents Thomas Jefferson and Ronald Reagan.

NEW MEXICO GOV. SUSANA MARTINEZ said her state must fight for a better economic future.

state of our states

Delaware Gov. John Carney’s listed 2018 priorities: • A stronger economy • Better schools • Safer communities

WE NEED TO STOP WAREHOUSING MOMS & DADS, SONS & DAUGHTERS IN PRISON WHEN MANY JUST NEED

SUBSTANCE ABUSE TREATMENT. OKLAHOMA GOV. MARY FALLIN said not enough people are getting needed mental health and substance abuse treatment.

Oregon’s rising economic tide should be lifting all boats. OREGON GOV. KATE BROWN said her state has been a leader in the economic recovery, but many families are still under water.

2018

Closing

Words

ALOHA! HAWAII GOV. DAVID IGE

• A strong, stable workforce

1,500 new manufacturing jobs were created last year in Rhode Island, GOV. GINA RAIMONDO said.

$735 million has been added to pre-K through 12 education systems since IOWA GOV. KIM REYNOLDS took office seven years ago.

167,745 rounds of ammunition have been seized by Arizona’s Border Strike Force since it launched two years ago, ARIZONA GOV. DOUG DUCEY said. During this time, the strike force has also seized 238 guns and 47,842 pounds of marijuana.

ONE LAST TIME FROM THIS PODIUM:

Giddy

UP!

COLORADO GOV. JOHN HICKENLOOPER

MAR/APR 2018 | CAPITOL IDEAS

State of the State

MAHALO

• A healthier state

funding the future

T E N

Q U E S T I O N S

W I T H

COLORADO SPEAKER OF THE HOUSE

Crisanta Duran by Courtney Daniel Colorado Speaker of the House Crisanta Duran became speaker in January 2017 at the age of 36 and is the first Latina speaker of the Colorado House. Under her leadership, the 2017 legislative session worked to prevent rural hospitals from closing, issued an infusion of funds for Colorado’s transportation system and boosted public school funding. Her economic development efforts have helped make Colorado’s unemployment rate the best in the nation. Before being elected to caucus leadership, Duran was chairwoman of the Legislature’s Joint Budget Committee. Colorado was ranked No. 1 by U.S. News and World Report for economy in 2018. Photo Courtesy Garrett Hacking, Photography G

U.S. News and World Report currently ranks Colorado as No. 1 in economy and cites factors such as high job growth, a low unemployment rate and a friendly business environment as to why it tops the list. What role has the Colorado Legislature played in setting the stage for economic growth?

MAR/APR 2018 | CAPITOL IDEAS

“We are proud to have a thriving economy in Colorado and we continue to attract new jobs, new businesses and new events. This year, for the first time, we hosted the Outdoor Retailer Show, one of many tangible rewards for our forward-thinking conservation policies and commitment to public lands.

During my times as speaker and serving in the Legislature, we have promoted economic development and workforce development programs so that more Coloradans have the education and training they need to get the high-skill, high-tech jobs that our economy is now producing in great numbers. But we understand there is more we can do to improve the lives of hardworking Coloradans. That’s why we are focused on investing more in education and transportation and on bringing down the cost of child care and housing.”

Colorado was one of the first states to legalize marijuana in 2012. How did this move support economic growth?

“Colorado voters overwhelmingly supported legalization. Our state has worked with industry and stakeholders to safely and effectively regulate marijuana and invest the tax revenue into school construction.”

What lessons did you learn as Joint Budget Committee chair that you took with you into your role as speaker of the Colorado House of Representatives?

“I was proud to serve as chair of the Joint Budget Committee. In this role, I focused on putting partisanship aside and working to get things done on behalf of hardworking Coloradans. The 2014 state budget that our committee drafted provided for significant increases for K–12 and higher education and funded a variety of measures to boost Colorado’s economy and increase the economic security of Colorado families, with a focus on affordable housing and child care. As speaker, I know there is much we can accomplish together when we roll up our sleeves and hammer out bipartisan solutions to problems facing Coloradans.”

As the first Latina speaker of the House, what unique perspective do you bring to the Colorado Legislature?

“I am honored to serve as the first Latina speaker of the House and the only Latina speaker in the country. As a sixth generation Coloradan who comes from a legacy of strong women, I know there are still barriers that we have to tear down. Together, we must ensure the doors of opportunity for our women leaders who will lead us into the 21st century remain open and are not slammed shut by 19th century policies and ideas that are designed to take us backward. I have always believed in the power of people to problem solve for our communities. As a public servant, I have worked to ensure that every member of our community—no matter her or his race, gender, age, income level or background—has a fair opportunity to reach her or his full potential.”

10 questions

Around the country states are grappling with aging infrastructure. How has Colorado worked to fund necessary projects?

How has the state Legislature worked to make sure low and middle-income families can thrive in Colorado?

“So many people are moving to our state for the mix of sunshine, scenic beauty and economic opportunity that we call the Colorado way of life. And I don’t blame them.

“Our overall state economy is one of the strongest in the nation, maybe the strongest of all. But too many hard-working Coloradans aren’t seeing the benefit.

In Colorado—like across the country—it is crucial we invest in infrastructure that supports local businesses, ensures Americans have access to quality jobs, and preserves our country's natural beauty by organizing our roads and highways to move people, not just cars, and keeps our environment clean.

At the Legislature, we are working to bring down the cost of child care and housing. We are working to renew a tax credit that has been shown to be effective at increasing development of attainable housing for Coloradans, so that we can help address the high costs of housing. We are also working on legislation to increase the rights of renters.

Last year, we passed important legislation that not only saved our rural hospitals but leveraged nearly $1 billion in transportation funding that is going toward infrastructure projects across our state. This year, investing in transportation remains a top priority for us and I understand that Coloradans are depending on us to manage investments of this magnitude responsibly. We cannot simply mortgage away our future.

We have renewed our push to ensure access to family and medical leave for hardworking Coloradans who need to take care of a sick relative or a new child. No one should have to risk financial ruin—or getting fired— if they have to attend to family medical care. These commonsense policies will improve the lives of hardworking Coloradans.”

In Colorado, we have torn down many of the same political roadblocks we are seeing come out of Washington today. We should be doing that across the country to ensure we have an economy that works for all— not just the well connected.”

When we are willing to have tough conversations, we have to be willing to push ourselves to think deeper about what is possible.”

What is Colorado’s approach to funding education and supporting teachers, administrators and students from kindergarten through high school?

“In Colorado, we will continue to advocate for efforts that can expand opportunity for every student and help them get ahead, like increasing access to a range of training and education opportunities and fixing the teacher shortage. We must increase funding for K–12 education. When we are willing to have tough conversations, we have to be willing to push ourselves to think deeper about what is possible. Sometimes it is uncomfortable to talk about how we do not have an equal playing field for all students, when we think about race disparities, income inequality or challenges for students with disabilities. In Colorado, we passed legislation that changed the focus to be about the kids who may not have been born in the wealthiest zip code or who face significant obstacles to succeed, because we must ensure all boys and girls in our state have the opportunity to meet their full potential and that they are armed with an education.”

What strategies have helped Colorado keep the unemployment rate low?

While serving as House majority leader in the 2015 and 2016 sessions, I coordinated and marshalled strong bipartisan support for the legislative package known as Colorado Ready to Work—more than a dozen new laws to boost Colorado businesses and train Coloradans for the good-paying, highly skilled jobs our growing economy is producing.”

What issues will be important to Colorado in 2018?

“There is much at stake in 2018. Coloradans are fighting to preserve and enhance the Colorado way of life. We are focused on bringing down the cost of child care and housing, protecting consumers, keeping our communities safe, investing in education and infrastructure and defending our clean air and water. We must continue to ensure communities can problem solve for themselves and that every child has the opportunity to reach their full potential. Sometimes it feels like our country is being pulled apart and that the very worst is bubbling up though the cracks. But not in Colorado, where we have been the barrier to forces of division. I believe there’s still more that binds us together than will ever divide us. It is up to us to continue to light the way for the next generation.”

Colorado’s tourism industry is booming. While its geographic resources make it a place people will always want to visit, how has the Legislature promoted tourism in the region and used the revenue to further bolster the economy or fund state programs?

“At the Legislature, we have continued to promote forward-thinking conservation policies that protect our treasured outdoor spaces and public lands. Colorado's outdoor recreation industry is an economic engine that supports nearly 230,000 direct jobs, our economy and our way of life. Clearly, our stunning mountains, canyons, plains, rivers and everything in between are why so many people want to enjoy our state. Our state has been working to promote outdoor recreation and the economic benefits are booming.”

MAR/APR 2018 | CAPITOL IDEAS

“Colorado’s unemployment is one of the lowest in the country but hardworking Coloradans deserve more opportunities to earn a better life for themselves and their families. Democrats in the Legislature have put forth policies to increase the minimum wage, make equal pay for equal work a reality, and provide for paid family leave.

» Speaker of the House Crisanta Duran, Colorado

funding the future

Then and Now 10 years After the Great Recession by Jennifer Burnett

The Great Re c e ssion started in December 2007, giving states a little over 10 years to get back to pre-recession levels of employment, wages and fiscal stability. The recession lasted 18 months, making it the longest downturn since World War II.

FROM LATE 2007 UNTIL EARLY 2010, THE U.S. SHED MORE THAN

8.5 million jobs.

Monthly Change in Employment

MAR/APR 2018 | CAPITOL IDEAS

January 2018, +200K

In just one month (March 2009),

802,000 jobs were lost. March 2009, -802K

Sources: (Top right) The National Bureau of Economic Research defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. (Above) U.S. Bureau of Labor Statistics.

after the great recession

STATE EMPLOYMENT Total employment has returned to pre-recession levels in all but three states—Alabama, West Virginia and Wyoming. While Texas added the most jobs over this period— 1.7 million—North Dakota grew the most, by 23 percent.

T OP 10

STATE REVENUE

STATES COLLECTED 6.3% MORE REVENUE IN THE SECOND QUARTER OF 2017

THAN THEY DID BEFORE RECEIPTS FELL IN LATE 2008 when adjusting for inflation.

STATE S WITH THE BI GGEST CHANG E I N E M P LOY M EN T SI NCE THE RECESSI O N (percent increase from Dec. 2007–Dec. 2017)

That means that the 50 states together HAD THE EQUIVALENT OF 6.3 CENTS MORE

in purchasing power in mid-2017 for every $1 they collected at their peak in 2008.

NORTH DAKOTA

TEXAS

HOWEVER

added 65,700 jobs

added 1,690,400 jobs

More than six years after the Great Recession ended, GDP remained about

23%

19%

$400 BILLION BELOW ITS POTENTIAL.

On a state-by-state basis, revenue in JUST OVER HALF OF STATES (29) HAS RECOVERED.

UTAH

COLORADO

added 184,900 jobs

added 270,900 jobs

17%

14%

WASHINGTON

FLORIDA

added 309,200 jobs

added 794,200 jobs

13%

12%

BIGGEST REVENUE LOSSES

BIGGEST REVENUE GAINS

ALASKA • -88.2% WYOMING • -39.6% OKLAHOMA • -17.8% FLORIDA • -15.8% NEW MEXICO • -15.7%

NORTH DAKOTA • +26.1% MINNESOTA • +22.1% COLORADO • +21.0% MARYLAND • +20.1% NEVADA • +18.9%

Source: Pew Charitable Trusts, Bureau of Economic Analysis.

NEW YORK

CALIFORNIA

added 841,400 jobs

added 1,421,300 jobs

IDAHO

MASSACHUSETTS

added 57,200 jobs

added 306,000 jobs

12%

11%

Source: Author’s calculation of data from the U.S. Bureau of Labor Statistics

MAR/APR 2018 | CAPITOL IDEAS

11%

funding the future

Median Household Income (percent change from 2007 to 2016) -15% to -7.6% -7.5% to 0% 0% to 7.5% 7.6% to 15%

NUMBER OF TOTAL PARTICIPANTS IN SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

Poverty rates 2007

38.1 million people 13% of U.S. population

26.3 Million

44.2 Million

2016

44.3 million people 14% of U.S. population

MAR/APR 2018 | CAPITOL IDEAS

2007

2016

Median Household Income

PERCENT OF STATE REVENUE FROM FEDERAL FUNDS

Unemployment Rate 2007

4.6% $58,149

$59,039 2017

2007

2016

28.1%

31.9%

2007

2015

4.4%

after the great recession

IN THE UNITED STATES

$59, 039

1.5 PERCENT

2016 MEDIAN HOUSEHOLD INCOME

FROM PRERECESSION LEVELS

TO P 5 Montana

AN INCREASE OF

B U T O N LY 2 8 S TAT E S E XC E E D P R E R E C E S S I O N L E V E L S IN SIX STATES INCOME REMAINS M O R E T H A N 5 % B E LO W 2 0 0 7 L E V E L S

STATE S WITH THE B I G G E ST C H A N G E I N M E DI AN H OU SE H O L D IN CO M E S IN CE TH E R EC ES S I ON (change from 2007–2016, inflation adjusted)

Vermont

North Dakota

Texas

Utah

+12.9%

+10.9%

+10.1%

+9.1%

+8.9%

$50,534 (2007) to $57,075 (2016)

$54,858 (2007) to $60,837 (2016)

$54,644 (2007) to $60,184 (2016)

$53,310 (2007) to $58,146 (2016)

$61,964 (2007) to $67,481 (2016)

Source: Author’s calculation of data from the U.S. Bureau of Labor Statistics

STATE MEDICAID SPENDING AS A SHARE OF OWN-SOURCE REVENUE

14.3%

16.7%

Average Days each state could run only on Rainy Day Funds

16.6

19.8

2007

2017

days

2007

2015

PERSONAL SAVINGS RATE

days

2.5%

2.4%

2007

2017

OUTSTANDING STUDENT LOAN DEBT 2007

Federal Deficit AS PERCENT OF GDP

$589.5 billion 2017

66%

62.7% 2007

2017

1.11%

3.43%

2007

2017

$1.49 trillion

MAR/APR 2018 | CAPITOL IDEAS

Labor force participation rate

MAR/APR 2018 | CAPITOL IDEAS

funding the future

growing revenue

The Economics of Marijuana Legalization by Lisa McKinney

or voters and state leaders in many cash-strapped states, marijuana legalization looks like a promising way to literally grow revenue. Thirty states and the District of Columbia have laws legalizing marijuana in some form, and eight states and the District of Columbia have legalized marijuana for recreational use. While legal marijuana in North America was estimated to be a nearly $10 billion industry in 2017, it might not be the golden goose that will solve states’ fiscal issues.

“I’ve always thought cost and revenue should not be the overwhelming concern, either if you are pro- or anti-legalization,” said Andrew Freedman of Freedman & Koski, a consulting firm that provides expertise in marijuana policy to state and local governments. “The direct regulatory system often takes up a third or a quarter of the direct revenue stream coming in, so there is still quite a bit left over for discretionary costs. On the flip side, the tax revenue itself is not as big of a game changer as it rests in some voters’ minds.” Freedman guided the marijuana regulation and taxation process in Colorado as the state’s first director of marijuana coordination. Freedman said during his time in Colorado marijuana revenue accounted for less than 1 percent of the total budget. There is also the cost and logistics of creating and navigating a regulatory system for a tightly controlled industry. The immediate regulatory costs of legalizing marijuana fall into three buckets: Setting up a regulatory and enforcement system, additional costs incurred by agencies that already exist, and change management. “There are a lot of people at the top, executive levels that have to invest a lot of time figuring out how best to govern this new system on the front end,” Freedman said. “All those are costs, but they aren’t staggering. There are societal costs and benefits that are much more difficult to determine.”

He said the most difficult fiscal issue that arises during the legalization and regulation process is paying those costs upfront before revenue starts coming in. Much of the initial cost requires a loan from the general fund, which can be difficult for some state governments to float. “Learning how to—in one sweeping moment—create a highly regulated industry that is supposed to compete with the black market and 100 years of pre-existing distribution networks—without having access to the federal resources you would for say alcohol or tobacco or any other highly regulated industry—is really difficult,” Freedman said. “You don’t have broad or immediate access to banking, which means you lack a lot of financial oversight in a heavily cash-based industry.” Marijuana is still federally illegal, so states that have legalized cannabis or are interested in exploring legalization must rely on each other for information and best practices. “It is beholden on state leaders to start creating the connective tissue with other states that is more than a weekly call, but is remaining in pretty constant contact to share lessons learned and real-time data about what is happening,” Freedman said. Maine state Sen. Roger Katz, chair of his state’s Marijuana Legalization Implementation Committee, said a key to getting the legalization process right is to take your time and be deliberate, particularly in a state like his where

LEGAL MARIJUANA IN NORTH AMERICA WA S E S T I M AT E D T O BE A NEARLY

$10 BILLION INDUSTRY IN 2017.

Marijuana legalization could create

$132 BILLION in federal tax revenue and inject

WE HAVE TRIED TO GO SLOW AND CONSERVATIVE IN HOW WE ROLL THIS OUT. » Maine state Sen. Roger Katz

into the U.S. labor market by 2025 if it becomes legal nationwide. Source: New Frontier Data. https://newfrontierdata.com

MAR/APR 2018 | CAPITOL IDEAS

OVER A MILLION JOBS

funding the future

MANY STATES REQUIRE DIGITAL TRACKING OF MARIJUANA PLANTS from seed to sale using radio frequency identification, or RFID, tags.

the marijuana legalization referendum passed by a narrow margin. “We have tried to go slow and conservative in how we roll this out,” he said. “We’ve had a few guiding principles: making sure (marijuana) doesn’t end up in the hands of children, we want to make sure we are doing everything we can to keep our highways safe, and we want to have a market that is available for small Maine entrepreneurs and a licensing system that is going to ensure safe, well-labeled products.” For those states that have navigated the legalization process, many have encoded how their new stream of revenue can be spent. Schools, law enforcement, and mental health and drug abuse programs are often the biggest beneficiaries of marijuana revenue. Oregon’s revenue distribution practices are indicative of this larger trend. Oregon collected about $108.6 million in state and local marijuana taxes from January-August 2017. About $9.5 million went toward regulatory and tax collection costs. In October 2017, Oregon announced it would distribute $85 million in marijuana taxes to fund

growing revenue

Medical marijuana broadly legalized Marijuana legalized for recreational use No broad laws legalizing marijuana

Source: Governing www.governing.com/gov-data/state-marijuana-laws-map-medical-recreational.html

schools, mental health and substance abuse programs, and law enforcement within a week—the first distributions of state marijuana tax revenues since the law allowing recreational use took effect in 2015. The State School Fund receives 40 percent; 20 percent of the funds are allocated to mental health and drug services; Oregon State Police get 15 percent; and 5 percent is used for alcohol and drug abuse prevention, early intervention and treatment services. Another 10 percent goes to cities, based on population

and number of licensees, and 10 percent to counties, based on total available grow canopy size and number of licensees. The largest share of revenue goes to the State School Fund, which flows directly to school districts for costs such as teachers and textbooks. Most of the fund’s $8.2 billion per biennium budget comes from the general fund and the state lottery. For 2017–2018, the state will contribute $4.1 billion to the State School Fund, with $36,684,952 being derived from marijuana

tax revenues, according to Michael Wiltfong, Oregon’s director of school finance and school facilities. This amounts to just under 1 percent of total state dollars contributed. The total value of the fund is closer to $6.1 billion, he said, which results in a proportionate share of approximately six-tenths of a percent of money derived from marijuana tax revenues. “However, we welcome these additional resources, as it does make a difference of approximately $52 per weighted student statewide,” Wiltfong said.

» Andrew Freedman, Freedman & Koski

MAR/APR 2018 | CAPITOL IDEAS

Learning how to—in one sweeping moment—create a highly regulated industry that is supposed to compete with the black market and 100 years of pre-existing distribution networks—without having access to the federal resources you would for say alcohol or tobacco or any other highly regulated industry—is really difficult.

Drug policy is personal for a legislator in Nebraska by Courtney Daniel

Carrie Howard died March 24, 2009. Carrie, the daughter of former Nebraska state Sen. Gwen Howard and sister of Sen. Sara Howard, is one of many lives lost to the opioid epidemic. While her story begins like many others—a severe car accident and a prescription for painkillers— her story ends a little differently. Carrie’s life, and untimely death, galvanized the Nebraska Legislature to tackle the opioid epidemic head on through a series of legislation spearheaded by her mother and sister.

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Carrie’s mother, Gwen, served in the Legislature eight years before her sister, Sara, ran and won the seat her mother was vacating in 2012. While Gwen was serving, Sara was attending law school with little intention of returning to Omaha. During that time, Carrie had a series of car accidents that changed the course of her life, her family’s life and the future of opioid policy in Nebraska.

“I didn’t know and I didn’t understand what addiction was at the time, but she clearly needed the drugs to function and eventually she needed them not because of the pain, but because there was a lot of pain associated with when she didn’t have them,” Sara said. “After that, it became years’ worth of struggle where she would get better and not be taking any medications, and then, for instance, she’d go to a dentist and they would do oral surgery and give a prescription for OxyContin or Vicodin and she would relapse back.”

Doctors were prescribing the medicines without knowing what her history or other prescriptions were because there wasn’t a mechanism in place for doctors or pharmacists to access the information. “What we didn’t know was that as addicts progress, and as my sister progressed, she got really good at doctor shopping,” Sara said. “She would have one doctor associated with one pharmacy and none of them were talking to each other and she could get a lot of pills that way.” In 2011, the former Nebraska senator, Gwen Howard, worked to pass legislation to solve this problem. She passed LB 237 that created the Nebraska Prescription Drug Monitoring Program, or PDMP. The PDMP, a statewide tool that collects prescription information, is housed in the Nebraska Health Information Exchange. Medical professionals can use this tool to access a comprehensive medical history electronically.

“Before she was really comfortable talking about Carrie’s illness and before anybody understood what was going on with opioids in our country, my mom created our first prescription drug monitoring program,” Sara said. “Innovation wise, Nebraska is cutting edge when it comes to electronic health records and information sharing.” In 2015, Sara filed LB 471, a full reboot of the PDMP. It required every patient to be included in the PDMP, medical providers no longer had to pay to use the system, every provider had to participate and pharmacies were added to the program. “This bill made the system free for all prescribers and dispensers, so doctors and pharmacists can see what is being dispensed,” Sara said. “We also worked with the veterinarians because in Nebraska they can dispense narcotics over the counter. I would venture a guess that we have the most comprehensive prescription drug monitoring system in the country.” Nebraska, which has the nation’s only unicameral and nonpartisan legislative body, passed the bill in February 2016 with no opposition. This year, Sara and her colleagues Sen. Brett Lindstrom and Sen. John Kuehn are leading the Nebraska Legislature to pass additional opioid legislation. Lindstrom has filed a bill that would require doctors and other prescribers to share information about opioid addiction with patients before prescribing them. Kuehn’s legislation would require a valid ID to pick up opioid pre-

Nebraska state Sen. Sara Howard (left) in a photo taken with her sister Carrie Howard. Carrie's death from opioid use in 2009 inspired Sen. Howard and her mother, former Nebraska state Sen. Gwen Howard, to work for legislation allowing Nebraska doctors to know what other doctors have prescribed for the same patient.

scriptions. And Sara’s bill would set a seven-day limit on opioid prescriptions for minors.

Addiction has no party, it’s not a Republican or Democrat issue, it’s a state issue.”

She has been working to address concerns about the recent legislation with members of the medical community, but also with her colleagues. Sharing her sister’s story has been one way she’s been able to demonstrate the need for tougher laws.

» Nebraska state Sen. Sara Howard

“I texted my mom and said I wish people could see all the medicine she was given in the last five months of her life,” Sara said. “And my mom, who hasn’t had the heart to get rid of anything of Carrie’s, said she had kept everything. She had shoe boxes of her pill bottles. She said she thought someday, someone would need to see how much she had been given.” Sara laid the bottles out in her office so her colleagues could see the number of pills prescribed.

Carrie had been prescribed about 4,500 pills in the last five months of her life, about 1,000 pills a month. A Pew Research Center survey conducted in August found that 46 percent of U.S. adults say they have a family member or close friend who is addicted to drugs or has been in the past. And for Sara, sharing her sister’s story has brought her constituents and colleagues together to try to solve this issue. “One of the reasons I’m so open about what happened with Carrie is because a lot of times people think it’s a problem for other families,

According to the Centers for Disease Control and Prevention, Nebraska has the lowest drug overdose rates in the country and was one of three states to see a decline in overdose deaths over a 12-month period that ended in January 2017. “I’ve worked here for six years and you almost never see the results of your work,” Sara said. “You just throw it out there and hope for the best. It’s really exciting and it means there are families that will never have to go through what my mom and I had to and that makes it 100 percent worth it.” With a recent estimate from the White House Council of Economic Advisers placing a financial loss of $500 billion to the national economy, and the U.S. experiencing more than 64,000 overdose deaths in 2016, it is clear why legislators in almost every state are working to pass legislation to curb the spread of addiction. “For those that have a personal experience, you have to be willing to share it, even if not in a public forum. And listen to the personal experiences of your constituents,” Sara said. “Addiction has no party, it’s not a Republican or Democrat issue, it’s a state issue. You can have unlikely allies in this fight.”

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“There are portions of our population that are more susceptible to addiction and I wanted to look at how we prevent opioids from getting into their hands,” Sara said. “This legislation makes a lot of sense for me understanding what I know now about what was going on with Carrie. Opioids were changing the way the receptors in her brain worked so that she always thought that she needed opioids to function. The brains of kids below 18 are still forming, so if they’re exposed to an opioid they’re much more likely to become addicted later in life.”

not a problem for their family,” Sara said. “So, it’s really impactful for my colleagues to realize it happened to someone’s family who is just like theirs, who’s a peer.”

FACING RISING CORRECTIONS COSTS, STATES ARE COURSE CORRECTING by Katy Albis

MAR/APR 2018 | CAPITOL IDEAS

A swift look at any state budget will reveal that corrections costs represent a significant portion of expenditures. In 2016, states spent a total of more than $57 billion on corrections, which encompasses the operation of prisons, probation and parole systems, alternatives to incarceration, and, depending on the state, juvenile justice programs.

State budgets have been saddled with rising corrections costs for decades due to growing prison populations, which are the result of sentencing practices and high recidivism rates, among other drivers. Even states that have recently seen declines in their correctional populations haven’t necessarily seen a decline in expenditures due to spending needs such as staffing and prison health care costs, according to a recent analysis by the Vera Institute of Justice. Presented with these overwhelming fiscal challenges, state leaders recognize an urgent need to improve public safety while spending smarter and focusing resources on proven practices. Since 2010, more than 30 states have taken a justice reinvestment approach

to use their criminal justice data to design and implement innovative, data-driven, and comprehensive approaches to shift resources toward more cost-effective public safety strategies. To create a better understanding of recent crime and criminal justice population trends both nationally and at the state level, The Council of State Governments Justice Center hosted the 50-State Summit on Public Safety in November 2017 in partnership with the Association of State Correctional Administrators, or ASCA. The summit came at a time when public safety officials and crime data are telling a complex story. While property crime rates have fallen significantly in almost every state, and the overall violent crime rate remains lower than it was a decade ago, it is no longer universally declining. In fact, FBI crime data also shows that violent crime increased overall in 18 states and in many individual communities across the country between 2006 and 2016. Further, the opioid epidemic has become a national crisis, and law enforcement leaders

describe engaging with more people who have serious mental illnesses than ever before. Teams of corrections and behavioral health professionals from every state attended the summit and left with information that will help them develop clear strategies for reducing crime and recidivism, improving outcomes for people who have mental health and addictive disorders, and directing resources toward policies and practices that work. At the summit, Bryan Collier, executive director of the Texas Department of Criminal Justice, described how, starting in 2007, his state helped change its trajectory of prison population growth with deliberate spending choices. “Our legislative leadership … invested over $200 million in treatment and diversion options,” Collier said. “And a key piece there was it wasn’t just throwing paint on the wall—it was actually investing in the programs that had track records already established. So they expanded those programs and put those programs in place where they weren’t.”

ALABAMA

In 2012, Idaho had a higher-than-average recidivism rate and one of the fastest-growing prison populations in the nation. In response, state policymakers from across the political spectrum passed the Justice Reinvestment Act in 2014 to strengthen supervision practices, revamp parole decision-making, and assess the impact of recidivism-reduction efforts. As of early 2018, Idaho has seen promising results, according to its annual justice reinvestment impact report. The state has averted more than $21 million in potential costs—there are now about 430 fewer people in prison than originally projected. In turn, the state has invested an additional $12 million in addiction treatment and services for people in the corrections system and related training for staff.

For the past six years, Georgia has used a justice reinvestment approach to avert prison growth, expand accountability courts, improve re-entry, and strengthen the probation system. The state saw a 6 percent reduction in its prison population between 2012 and 2015. Georgia lawmakers passed additional legislation in 2017 that is expected to reduce the projected felony probation population and allow the state to avert more than $7 million in spending that would have been required to hire additional probation officers.

NORTH CAROLINA

“These reforms have resulted in policies that will ensure that resources are concentrated on people on probation who are at the highest risk of reoffending and that we employ strategies shown to improve public safety outcomes for people on community supervision,” said Justice Michael P. Boggs of the Georgia Supreme Court in a report issued last year titled Georgia’s Justice Reinvestment Approach.

North Carolina’s prison population in 2010 was projected to grow by 10 percent over the next decade, so in 2011, lawmakers passed comprehensive legislation that focuses supervision and treatment resources on people who are at the highest risk of reoffending and have the greatest need for treatment. As a result, probation revocations, admissions to prison, and the state’s total prison population have all dropped significantly, allowing the state to close 11 small prisons. Due to this legislation, North Carolina averted the cost of building more prisons and saved about $277 million between 2012 and 2016, $48 million of which they reinvested in hiring probation officers and parole commission members, for a net savings of $229 million.

MISSOURI

GEORGIA

After years of addressing problems in the criminal justice system through policy and practice changes, other states are beginning to see payoffs as well. In 2015, Alabama passed justice reinvestment legislation to tackle prison overcrowding, high supervision caseloads, and a dearth of treatment in the community. Since that time, the state’s prison population has decreased by 15 percent, and more than 100 new probation and parole officers have been hired to reduce the number of people supervised by each officer. State leaders in Alabama are looking at a 16-percent decrease in the prison population and up to $380 million in averted costs and savings by 2021, according to recent projections by the CSG Justice Center.

IDAHO

corrections costs

And just over the past year, Missouri has also undertaken a justice reinvestment initiative to address recent upticks in violent crime, insufficient behavioral health treatment resources for people on community supervision, a growing prison population, and high recidivism. State lawmakers introduced legislation in early 2018 to improve the functioning of the criminal justice system. If the bill passes, the state will begin investing in expanding community-based treatment options, among other measures.

the cycle of reoffending among people on probation could therefore be more cost effective and have far greater public safety benefits than focusing only on people released from prison. State leaders must continue to use data-driven policy options to reduce crime and recidivism, avert growth in prison populations, and use limited resources on proven practices. “By breaking down silos, really talking to one

another, and figuring out how we can … come together to repurpose and redirect existing resources can go a long way to solving this problem,” said Valerie Arkoosh, chair of the Montgomery County, Pennsylvania, Board of Commissioners at the 50-State Summit on Public Safety. In 2018, the CSG Justice Center will release a web-based 50-State Report on Public Safety. The report will be available at 50statespublicsafety.us.

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Based on what states have seen thus far in their efforts to improve their criminal justice systems, it’s evident that being smarter about corrections spending requires looking beyond prison populations alone. For example, while the community supervision population accounts for a small percentage of arrests overall, people on probation account for two to three times as many new felony arrests as those on parole. Scaling up statewide efforts to break

funding the future

iel

by Courtney Dan

While the federal government plays a major role in setting tax policy nationwide, state and local tax allocations can have an arguably greater impact on the daily lives of Americans. According to Idaho Senate President Pro Tempore Brent Hill, one way leaders can respond to the unique needs of their cities and states is through state and local collaborations, such as the Idaho Opportunity Fund.

MAR/APR 2018 | CAPITOL IDEAS

The Idaho Opportunity Fund, a grant program established in 2013, was created to support the expansion of existing businesses and recruit new companies to Idaho. Local governments can apply for grants to improve electric utility systems, broadband, parking lots and more if those needs are directly related to job creation or expansion projects. The local government must be able to provide a match in funds that shows a commitment from the local government to the project.

“The state chips in for projects with the Idaho Opportunity Fund to help cities build out infrastructure, while cities kick in things like water and electricity with enterprise funds,” Hill said. “All of those unique projects are

funded with the state general fund, or city general funds and enterprise funds.” Hill, who serves on Idaho’s Local Government and Taxation and State Affairs committees, said most cities use state revenues for two purposes: their own general operations and streets and highways. “The state will share revenues from the sales tax and liquor taxes that fund general operations in the city, while gas taxes and registration fees flow to cities for the express purpose of maintaining streets and highways within those jurisdictions,” Hill said. The Urban Institute, a nonprofit research organization, found that state and local governments spent $2.8 trillion on general government in fiscal year 2015—states spending $1.3 trillion and local governments spending $1.5 trillion. Elementary and secondary education took 22 percent of those funds, 21 percent went to public welfare, 10 percent to higher education, 9 percent to health and hospitals, 6 percent police and corrections, and 6 percent highways and roads.

Leaders can respond to the unique needs of their cities and states through state and local collaborations.” » Idaho Sen. Brent Hill

State and Local Spending K-12

State 0.5% Local 40%

Public State 42% Welfare Local 4% Higher Education Health Maintaining Roads Safety Corrections

State 18% Local 3% State 9% Local 10% State 8% Local 4% State 1% Local 6% State 4% Local 2%

Source: The Urban Institute, U.S. Bureau of the Census Survey of the State and Local Government Finance, 2015

state & local tax dollars “For most of the large cities in Idaho, the average general fund expenditure on police is 27.7 percent of its budget, while fire is 23.3 percent of the general fund budget,” Hill said. “Only two large cities use general fund revenues for libraries, while most spend on average 12 percent on parks. Small cities, have specific levies for ambulance and cemetery districts, and school districts raise their own taxes with local levies in Idaho.”

snapshot of spending in the states

The Urban Institute released a report in 2017 titled What Everyone Should Know about Their State’s Budget that broke down state and local spending into categories like education, infrastructure and safety and put the data in a common framework to more easily compare states. “The goal of the … report is to get people to think beyond simple per capita spending comparisons. It’s one thing to know which states are in the top 10 or bottom 10 of per capita spending, but it’s another to know why they rank as they do,” said Tracy Gordon, senior fellow at the Urban Institute and co-author of the report. “Some states start out with more school-aged kids who may end up in public schools. Others may spend more on public sector employee salaries because of higher costs of living there.” While policymakers can control many factors around state and local spending like eligibility rules for programs to assist low-income families, there are some factors that are beyond their control. “(H)ow much a state spends on any given service or function depends on how many people get the service and how much they get. For example, states with more low-income residents may naturally spend more on Medicaid,” Gordon said. “But states may also have chosen to have strict or flexible eligibility rules. And families may choose to enroll in the program or not. So, the participation rate will depend on factors the state can’t control, like demographics and take up rates, and factors it can, like eligibility rules.”

K-12 EDUCATION

HIGHER EDUCATION

S P E N D I N G P E R C A P I TA

1 // Washington, D.C. $3,466 2 // Alaska $3,131 3 // Wyoming $2,865 4 // New York $2,829 5 // New Jersey $2,697

1 // Wyoming $1,040 2 // Alaska $1,008 3 // New Mexico $936 4 // Hawaii $880 5 // North Dakota $872

Gordon recommends that when local and state leaders set out to create policy, they look at the entire picture to better understand the relationship between data.

With varying funding streams, different philosophies, and other factors like cost of living, state and local leaders across the nation have unique obstacles, but innovative state and local collaborations and utilizing data are tools elected officials can use to set tax policy that works for their communities.

TRANSPORTATION

SAFETY

S P E N D I N G P E R C A P I TA

1 // North Dakota $1,796 2 // Alaska $1,657 3 // Wyoming $1,298 4 // South Dakota $1,122 5 // Vermont $1,068

1 // Alaska $433 2 // Washington, D.C. $379 3 // Wyoming $373 4 // California $360 5 // Delaware $308

Source: The Urban Institute, What Everyone Should Know about Their State’s Budget, 2017

MAR/APR 2018 | CAPITOL IDEAS

“Looking at teacher-student ratios by themselves, some people may say, ‘We ought to have smaller class sizes!’ They may also look at salaries and say, ‘We’re not paying enough!’ But the (data) shows it’s tough to have high staffing ratios (smaller class sizes) and higher salaries (cost per teacher) unless you make up the difference somewhere else (fewer school aged kids),” Gordon said.

funding the future

FEDERAL GOVERNMENT

SHUTDOWNS

by Courtney Daniel

Government shutdowns, the closure of nonessential government offices due to lack of approval on the federal budget, aren’t new. To date, there have been 20 government shutdowns since 1976 ranging in duration from a few hours to 21 days. Two years after an 18-day shutdown in 1978, former President Jimmy Carter asked Attorney General Benjamin Civiletti to issue an opinion that would clarify how the government would operate if Congress failed to pass a budget. In his opinion, Civiletti states that if a budget wasn’t passed, funds could only be spent that are “necessary to bring about the orderly termination of an agency’s functions.” Until this point, the federal government would use credit during a funding gap and receive retroactive funds after

a budget was passed. According to the Congressional Research Service, or CRS, six of the eight lengthiest funding gaps, lasting between eight and 17 days, occurred between fiscal year 1977 and fiscal year 1980— before the Civiletti opinion. After the ruling the length of funding gaps shortened with two exceptions: A 21-day shutdown under the Clinton administration from Dec. 16, 1995, to Jan. 5, 1996, and a 16-day shutdown under the Obama administration from Oct. 1 to Oct. 16, 2013.

Shutdown Timeline

1976

1977

1978

1979

1981

1982

1983

1984

10 Days Oct. 1–10

12 Days Oct. 1–12

17 Days Oct. 1–17

11 Days Oct. 1–11

2 Days Nov. 21–22

1 Day Oct. 1

3 Days Nov. 11–13

2 Days Oct. 1–2

8 Days Nov. 1–8

3 Days Dec. 18–20

1986 1987 1 Day Oct. 17

1990

1995

2013

2018

3 Days Oct. 6–8

5 Days Nov. 14–18

16 Days Oct. 1–16

3 Days Jan. 20–22

1 Day Dec. 19

1 Day Oct. 4

21 Days Dec. 16–Jan. 5

1 Day Feb. 9

8 Days Dec. 1–8 Source: Congressional Research Service.

Definitions

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Exempted Employee Paid with non-appropriated funds and is “exempted” from furloughs

Excepted Employee Performs work deemed essential and is “excepted” from furloughs Discretionary Spending Governed by annual appropriations under control of the House and Senate Appropriations Committees, and is potentially affected by a funding gap Mandatory Spending Governed by statutes, not an annually approved budget, and includes Social Security, Medicare, Medicaid, and student loans

Planning for a Shutdown Federal agencies are required to submit plans in the case of a shutdown to the Office of Management and Budget, or OMB. The plans vary greatly from different agencies based on the services they provide and how recently the plan has been updated. The OMB requires the plans to include: What agency activities are excepted or legally authorized to continue. Two plans, one for a short lapse (under five days), and the other for a longer lapse (over five days). A summary of agency activities that will continue and those that won’t. An estimate of the time to complete the shutdown (the time necessary to lock and close buildings, send home employees). Total number of employees. Total number of employees to be retained (not furloughed). Source: OMB Circular A-11, Section 124.

government shutdown 101

State Impacts Many states, at differing levels, receive money from the federal government in the form of federal grants. According to the CRS, the fiscal year 2015 budget proposed by the Obama administration provided $641.8 billion in federal aid to state and local governments. If federal funds aren’t distributed due to a shutdown, state and local leaders would face decisions including whether to cover gaps in federal funding with state or local funds—risking the possibility of not being reimbursed—or even potentially furloughing employees paid for by these funds. According to the Federal Funds Information for States, in some instances it’s possible for state programs to continue using federal funds depending on the type of funding, if funds were appropriated in prior years and if funds are available. Federal grants are distributed as discretionary or mandatory funds. A federal government shutdown can affect funds distributed to states depending on which category the funds fall into.

DISCRETIONARY GRANT PROGRAMS PROVIDING FUNDS TO STATE AND LOCAL GOVERNMENT: Department of Agriculture: Special Supplement Nutrition Program for Women, Infants, and Children (WIC)

National Security Implications Agency heads must develop plans for a shutdown in the event of a lapse in appropriations. Up-to-date plans must be on file with OMB. The 2018 Department of Defense plan outlines what would happen in a government shutdown. The department will continue to prosecute the war in Afghanistan and ongoing operations against al-Qaeda and the Islamic State of Iraq and Syria, including preparation of forces for deployment into those conflicts. All military personnel performing active duty will continue in a normal duty status regardless of the affiliation with excepted or non-excepted activities. Military personnel will not be paid until such time as Congress makes appropriated funds available to compensate them for the period of service. Civilian personnel who are necessary to carry out or support excepted activities will also continue in normal duty status and also will not be paid until such time as Congress makes appropriated funds available. Civilian employees paid from lapsed appropriations and who are not necessary to carry out or support excepted activities will be furloughed. Source: Department of Defense Agency Contingency Plan.

Department of Education: Education Improvement Programs; State Fiscal Stabilization Fund (Recovery Act); Special Education and Adult Education Department of Health and Human Services: Children and Families Services Program; Aging and Disability Services Programs; Substance Abuse and Mental Health Services Department of Homeland Security: State and Local Preparedness Programs Department of Justice: State and Local Law Enforcement Assistance Department of Labor: Training and Employment Services Department of Veterans Affairs: Medical Services Federal Highway Administration: Emergency Relief Program; Federal-aid Highways MANDATORY GRANT PROGRAMS PROVIDING FUNDS TO STATE AND LOCAL GOVERNMENT: Department of Agriculture: Funds for Strengthening Markets, Income, and Supply; Supplemental Nutrition Assistance Program (SNAP); Child Nutrition Programs Department of Education: American Jobs Act; Innovation and Instructional Teams; Rehabilitation Services and Disability Research

Financial Impacts to States According to Governing, a media and research group, the federal government employs about 2.8 million full-time employees, including Postal Service workers. The majority of all federal employees, about 79 percent, work outside the Washington, D.C., region. That means a government shutdown has a widespread impact for workers in every state. During the 2013 shutdown, about 800,000 employees nationwide, out of about 2.1 million, were furloughed. A report issued by Wallethub earlier this year compared the impact on states of the three-day government shutdown in January across six metrics including share of federal jobs, social programs and federal contracts. They found Washington, D.C.; Maryland; Virginia; Alaska and Hawaii had the highest impact and Minnesota, Michigan, Indiana, Delaware and Ohio had the lowest.

Highest Washington, D.C. Washington, D.C. California

Department of Transportation: Immediate Transportation Investments

Lowest

Source: Congressional Research Service, Federal Aid to State and Local Governments: Select Issues Raised by a Federal Government Shutdown, 2014.

Share of Federal Jobs

Wisconsin

Federal Contract per Capita

Arkansas

% Children under CHIP

Minnesota

Source: Wallethub, 2018 Government Shutdown Report: Most & Least Affected States.

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Department of Health and Human Services: Social Services Block Grant; Affordable Insurance Exchange Grants; Grants to States for Medicaid; Children’s Health Insurance Fund; Payments to States for Child Support Enforcement and Family Support Programs; Payments for Foster Care and Permanency; Temporary Assistance for Needy Families (TANF)

funding the future

TA X P L A N OPENS DOOR

TO NEW

M T S ENTS E V N I by Courtney Daniel

Attracting new business and creating jobs are two of the most important issues for many state leaders. And now, with the newly passed tax plan by the Trump administration, states will have another tool to bring businesses from companies outside the U.S. to their states. Previously, the U.S. had one of the highest corporate tax rates among major economies at 35 percent, but the new tax law reduces the rate to 21 percent. Only 11 countries in the Organization for Economic Cooperation and Development, a group of 35 countries with advanced economies, had a lower corporate tax rate in 2017.

MAR/APR 2018 | CAPITOL IDEAS

“For years the United States has had one of the highest corporate tax rates in the world,” said Andy Karellas, CSG director of federal affairs. “On a global level, lowering the corporate tax rate can help us even the playing field and showcase our unique advantages as it comes to workforce, infrastructure, resources and quality of life.”

Every company is looking for something different when it comes to settling in a U.S. state. Factors that are often considered include a skilled workforce, energy, infrastructure, access to high speed internet, demographics, geography and taxes. Karellas said governors have become more active in the last several years engaging with state trade and economic development offices to bring in new business. “Governors are the best salespeople for bringing business to their state,” Karellas said. “They are the facilitator and introducer and share demographics, capacity and regulations. They understand what their key assets are and resources and they’re going to be the ones to make the deal.”

bringing new business prints. We believe the tax cut will also incentivize major Florida companies to expand in Florida.”

NATIONWIDE

6.8 million $79,000/yr U.S. WORKERS WERE EMPLOYED

THE AVERAGE YEARLY SALARY

BY U.S. AFFILIATES OF MAJORITY FOREIGN-OWNED FIRMS IN 2015

FOR U.S. WORKERS AT MAJORITY FOREIGN-OWNED FIRMS IN 2015

IN TENNESSEE 970 FOREIGN-OWNED COMPANIES $12+ BILLION CAPITAL INVESTED 50,000+ JOBS CREATED

New business means new jobs and an economic boost to states, but the advantage of new business goes beyond jobs directly created by these foreign or domestic companies. Local businesses such as gas stations, restaurants, hotels and suppliers can also grow in response to more people and more money being spent in the community. “It can be hard to quantify what foreign direct investment means to the states when considering the indirect impacts. My family had a restaurant in a small town in the middle of Missouri that was supported by both domestic and international factories,” Karellas said. “We relied on those factories for our customers, and our restaurant ended up supporting over 40 employees.”

“The tax cuts, and particularly the much more competitive corporate income tax rate, gives the U.S. an excellent comparative advantage against other developed economies,” Mencia said.

2011

ON A GLOBAL LEVEL,

LOWERING THE CORPORATE TAX RATE

CAN HELP US EVEN THE PLAYING FIELD

AND SHOWCASE OUR UNIQUE ADVANTAGES

AS IT COMES TO

WORKFORCE, INFRASTRUCTURE,

RESOURCES AND QUALITY OF LIFE.” » Andy Karellas, CSG director of federal affairs “Florida will leverage the tax cuts together with our outstanding state business climate and low taxes to aggressively target foreign companies and U.S. companies with major overseas foot-

“The Delaware Prosperity Partnership will showcase Delaware’s advantages to the world,” said David Mathe, the Delaware export trade director and president of the State International Development Organizations. “In Delaware, we proactively work with our small and medium-sized businesses to enter and compete in the global marketplace. To the extent that the federal tax changes will give Delaware businesses more opportunity to expand, we want to ensure that we continue to assist them in maximizing their international sales efforts and widening their global footprint.” According to Mathe, it’s too early to tell what the tax law changes will mean for companies in Delaware, but he said the public-private partnership will play a key role in making a case for more investment in Delaware. Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development, agrees that it’s still too early to consider the impacts the changes have made on foreign direct investment in his state, but said the new tax plan will help companies in Tennessee and across the country be more competitive. “We have seen an influx in foreign direct investment over the last several years. Tennessee is currently home to 970 foreign-owned companies located across our state,” Rolfe said. “Since 2011, foreign-owned companies have committed to creating more than 50,000 jobs and invested more than $12 billion in capital.” SelectUSA, a U.S. government program led by the U.S. Department of Commerce, found there were 6.8 million U.S. workers employed by U.S. affiliates of majority foreign-owned firms in 2015. Their data also shows the average yearly pay for U.S. workers at foreign-owned firms is $79,000. The United States is the largest recipient of foreign direct investment in the world, followed by the U.K. and China. The U.K. has a corporate tax rate of 19 percent and China, while not a member of the OECD, but a key partner, has a corporate tax rate of 25 percent. “The tax plan moves the U.S. closer to the bottom of the list of OECD countries and should make more foreign direct investments in our states a possibility,” Karellas said. “While there are other provisions in the tax plan to consider, like changes to state and local income and property taxes, lowering the corporate tax rate can bring a much-needed economic boost to many areas in our country.”

MAR/APR 2018 | CAPITOL IDEAS

Many states have established initiatives—often as public-private partnerships—to bring in new domestic and international businesses, and the new tax cuts could give these partnerships a boost. Enterprise Florida, a public-private partnership between business and government leaders, is working to bring new businesses to the state. Manny Mencia, senior vice president for international trade and development at Enterprise Florida, said the tax cut will be a catalyst for expanded foreign investment as well as for the repatriation of manufacturing operations from Asia and other regions.

SINCE

Florida isn’t the only state using public-private partnerships to bring in new business. Delaware Gov. John Carney spearheaded an economic development initiative in 2017 called the Delaware Prosperity Partnership.

funding the future

As large-scale natural disasters become more frequent and costly, states are looking at infrastructure spending as an investment in emergency preparedness. by Lisa McKinney

MAR/APR 2018 | CAPITOL IDEAS

The price tag attached to U.S. weather disasters in 2017 was $306 billion—a record high. The previous record of $215 billion was set in 2005. The U.S. had 16 weather-related disasters last year that resulted in damage exceeding a billion dollars each, according to data kept by the National Oceanic and Atmospheric Administration. NOAA has recorded the inflation-adjusted costs associated with billion-dollar weather disasters since 1980.

Three of the five most expensive hurricanes in U.S. history struck in 2017. The most expensive was Hurricane Harvey’s $125 billion, second to 2005’s Katrina, while Maria was the third most expensive, costing $90 billion. Irma cost $50 billion, making it the fifth most expensive hurricane. Wildfires in the western U.S. cost $18 billion in damage, triple the previous U.S. wildfire record. In the midst of the escalating costs of disaster response and repair, the federal government is investing in disaster mitigation while looking to states to play a larger role in post-disaster relief. The Trump administration proposed a budget in February that included a record $85 billion for disaster aid while the Federal Emergency Management Agency, or FEMA, announced it wants to quadruple its investment in disaster mitigation by 2022 using aid money. (Photo © AP Photo / LM Otero)

$306 BILLION Record High Cost of 2017 U.S. Weather Disasters

2017 Hurricanes 3 of 5 Most Expensive in U.S. History

HARVEY

MARIA

IRMA

Most Costly

3rd

5th

$125 BILLION

$90 BILLION

$50 BILLION

cost of natural disasters

U.S. 2017 BILLION-DOLLAR WEATHER AND CLIMATE DISASTERS (Map reproduced from original NOAA map at www.ncdc.noaa.gov/billions/overview and denotes the approximate location of each 2017 event.) Minnesota Hail Storm & Upper Midwest Severe Weather June 9–11

North Dakota, South Dakota & Montana Drought Spring–Fall 2017

Midwest Tornado Outbreak March 6–8

Western Wildfires Summer–Fall 2017

California Flooding February 8–12

Central/Southeast Tornado Outbreak February 28–March 1

Colorado Hail Storm & Central Severe Weather May 8–11

Missouri & Arkansas Flooding & Central Severe Weather April 25–May 7 Southeast Freeze March 14–16

Midwest Severe Weather June 27–29 Midwest Severe Weather June 12–16

Hurricane Harvey August 25–31 South/Southeast Severe Weather

March 26–28 “Adequately funding disaster preparedness and mitigation is a challenge, from having enough resources to do all that needs to be done to ensuring we are prioritizing the right investments “This creates a network of roads, bridges and of limited funds,” said Andrew Phelps, director tunnels that likely could not withstand the inof the Oregon Office of Emergency Management. tense shaking that would be expected from a 9.0 earthquake, creating areas cut off from one Oregon has a very diverse hazard profile with another from the I-5 corridor to the Oregon the primary naturally occurring hazards being coast,” Phelps said. “Add to this our fragile elecwildfires— the state’s most frequent natural trical infrastructure, limited liquid fuel storage disaster—and floods, the most costly, Phelps said. in Oregon, and our reliance on our communiThe state has experienced several federally decation infrastructure and it isn’t difficult to see clared disasters in the past few years, including severe winter storms, high winds and landslides.

Much of the fiscal cost of natural disasters in the states stems from repairing infrastructure after the fact and making sure infrastructure is adequate to withstand future natural disasters.

Much of Oregon’s transportation infrastructure was built long before the seismic threat to Oregon was known or understood. The Cascadia Subduction Zone, a fault line that runs through the state, is capable of a magnitude 9.0 quake triggering tsunamis along the Oregon coast of up to 50 feet high, an event that occurs on average every 250–350 years—the last one occurred 318 years ago.

Hurricane Irma September 6–12

Hurricane Maria September 19–21

Oregon published a state resilience plan, which prioritizes a number of investments to infrastructure over the next 50 years. “But we know that Cascadia may not wait that long, so a huge part of our work is to educate

Oregon has spent hundreds of millions of dollars to seismically retrofit critical facilities like schools and fire and police stations, but more work is still needed, and additional retrofits are needed across infrastructure sectors.” » Andrew Phelps, director of the Oregon Office of Emergency Management how connected these sectors are and that if one is impacted, they all are. This will severely hamper our ability to get help everywhere it is needed, especially during the first two weeks or so following a Cascadia quake.” The state’s strategy is to leverage their bonding authority to fund projects through the Oregon Seismic Rehabilitation Grant Program. In 2013,

Oregonians about what they can expect following a magnitude 9.0 Cascadia quake and that they may be on their own for two weeks or longer,” Phelps said. Phelps also noted that local, state and federal spending isn’t going to solve all of these challenges, given that much of the state’s critical infrastructure is privately owned.

MAR/APR 2018 | CAPITOL IDEAS

“Oregon has spent hundreds of millions of dollars to seismically retrofit critical facilities like schools and fire and police stations, but more work is still needed, and additional retrofits are needed across infrastructure sectors,” Phelps said.

Southern Tornado Outbreak January 20–22

funding the future

Natural disaster readiness is increasingly becoming part of the conversation around infrastructure investment in other states as well, particularly in those that are most at risk for expensive weather- related disasters.

“Inadequate infrastructure can see more frequent damage from weather events, which

TROPICAL

CYCLONE

LOSSES DOMINATED

U.S. BILLION-DOLLAR

DISASTERS TROPICAL CYCLONES CAUSED THE MOST DAMAGE

$850.5 BILLION AND

“I think it is increasingly becoming something state policymakers are looking at in the wake of extreme weather events in the last few years,” said Sean Slone, CSG director of transportation and infrastructure policy. “Whether it’s reconfiguring highway projects to provide more and better evacuation routes and reduce flooding, looking at moving electrical wires underground or placing new requirements on localities, utilities and businesses, there are numerous strategies they can deploy to increase preparedness as they are investing in infrastructure.”

FROM 1980 TO 2017

HAVE THE HIGHEST AVERAGE COST PER EVENT

$22.4 BILLION

compounds the costs of those vulnerabilities over time.”

RECORD-BREAKING COST OF

$306.2 BILLION $214.8 BILLION

MAR/APR 2018 | CAPITOL IDEAS

Engineers, insurers and others tell us it’s more difficult for aging and inadequate infrastructure to withstand the effects of natural disasters, Slone said. Subpar infrastructure can also see more frequent damage from weather events, which compounds the costs of those vulnerabilities over time.

“That has a huge impact on the livelihoods of communities and the people who live in them as well as their potential to experience the benefits of improved economic conditions,” Slone said. It is no longer enough for infrastructure simply to be resilient. It also has to be adaptive because changes in the frequency and intensity of climate and weather extremes are occurring and the future magnitudes of natural disasters have become increasingly difficult to predict, Slone said.

2017 U.S. WEATHER &

CLIMATE DISASTERS

PREVIOUS RECORD SET IN 2005

SEVERE STORMS CAUSED THE HIGHEST NUMBER OF BILLION-DOLLAR DISASTERS BUT RESULTED IN THE LOWEST

AVERAGE COST PER EVENT

EVENTS

cost of natural disasters

THE STATE OF “One big example of inadequate infrastructure intensifying the fiscal and human impact of a natural disaster we saw last year when Hurricane Harvey slammed into Houston,” he said. “The hurricane claimed more than 75 lives and 200,000 homes but also an untold number of flooded-out cars in perhaps the nation’s most car-dependent city. Houston’s return to normal was slowed because many residents had significant challenges figuring out how to get to work. That city has enormous highways but isn’t particularly known for its mass transit options.” Some states are looking to technology to help strengthen their infrastructure. In 2017, the American Society of Civil Engineers released their Infrastructure Report Card, which included a number of examples of game-changing technologies that are aiding the creation of more resilient infrastructure. For example, the San Francisco Airport used advances in engineering technology to build a new air traffic control tower that can withstand a 7.5 magnitude earthquake. Elsewhere, communities are deploying high-tech building materials, innovative flood and stormwater planning, temperature sensors, cameras to monitor weather conditions and guide snowplows and a variety of other technologies, Slone said.

“Drones are increasingly being used by transportation departments and others around the country to assess the structural integrity of infrastructure …”

D+

CUMULATIVE GRADE ON

INFRASTRUCTURE

THE AMERICAN SOCIETY OF CIVIL ENGINEERS’

2017 INFRASTRUCTURE REPORT CARD AVIATION

PARKS & RECREATION

D+

BRIDGES

C+

PORTS

C+

DAMS

RAIL

DRINKING WATER

ROADS

ENERGY

D+

SCHOOLS

D+

HAZARDOUS WASTE

D+

SOLID WASTE

C+

INLAND WATERWAYS

TRANSIT

D−

LEVEES

WASTEWATER

D+

THE AMERICAN SOCIETY OF CIVIL ENGINEERS’

TIPS FOR RESILIENT INFRASTRUCTURE Develop active community resilience programs for severe weather and seismic events to establish communications systems and recovery plans to reduce impacts on the local economy, quality of life, and environment. Consider emerging technologies and shifting social and economic trends—such as autonomous vehicles, distributed power generation and storage, and larger ships— when building new infrastructure, to assure long-term utility. Improve land use planning at the local level to consider the function of existing and new infrastructure, the balance between the built and natural environments, and population trends in communities of all sizes, now and into the future.

Support research and development into innovative new materials, technologies, and processes to modernize and extend the life of infrastructure, expedite repairs or replacement, and promote cost savings.

Source: The American Society of Civil Engineers, infrastructurereportcard.org.

MAR/APR 2018 | CAPITOL IDEAS

“Drones are increasingly being used by transportation departments and others around the country to assess the structural integrity of infrastructure and to quickly examine damage in areas where it may be too dangerous for people to go into in the immediate aftermath of a natural disaster,” he said.

U.S. Infrastructure

funding the future

SE LL I N G YOU R STAT E by Shawntaye Hopkins

A common challenge among all state leaders is how to differentiate their state from other states and, therefore, attract new residents and businesses. State policies and special programs can help infuse a workforce with needed talent, lure major companies or retain graduates. Here, we look at two strategies intended to provide a targeted audience with reasons to love a particular state.

WISCONSIN

MAR/APR 2018 | CAPITOL IDEAS

More Than Cheese & Football

The Wisconsin Economic Development Corporation, or WEDC, has a message for young professionals in Chicago—several messages, actually. Tired of long commutes? In Wisconsin, the average commute is less than 22 minutes. Want more space? In Milwaukee, rent is 42 percent less than in Chicago. Tired of eating cheap ramen? Milwaukee’s cost of living is 22 percent less than Chicago’s, meaning residents can go out on the town and eat authentic ramen.

the state were tapped to help WEDC shape its message and develop an outreach strategy.

opportunities that align with their degree or experience or interests.”

“We wanted to make sure that we had a message … that resonated with the target audience within the state before we targeted externally,” said Kelly Lietz, WEDC’s vice president of marketing and communications.

Although changing perceptions and luring people to Wisconsin will take some time, traffic has picked up on WEDC’s website and people are searching the site for available jobs.

Advertisements containing these messages and others were placed on social media platforms, including YouTube and Facebook, as part of a $1 million marketing campaign that WEDC launched in January. The ads attempt to lure millennials to Wisconsin with a message of, “Wisconsin. It’s more you.”

“Individuals who live outside of Wisconsin had a very limited view of the state,” Braun said. “They didn’t realize it was a great place for career

The campaign, which runs through June 30, was developed as a proactive step to attract new talent as baby boomers age out of the workforce and the population begins to grow at a slower pace, said Tricia Braun, WEDC’s deputy secretary. In the years it took to develop the campaign, millennials and young professionals within

A large part of the campaign is about changing perceptions and making people aware that Wisconsin is about more than beer, cheese, football and agriculture.

A proposed initiative that is part of Wisconsin Gov. Scott Walker’s Workforce Agenda would add millions of dollars to expand the program to reach other metro areas, Wisconsin alumni and veterans. “We’re really excited about this opportunity to shine a new light on Wisconsin,” Lietz said.

Individuals who live outside of Wisconsin had a very limited view of the state. They didn’t realize it was a great place for career opportunities that align with their degree or experience or interests.” —Tricia Braun, deputy secretary, Wisconsin Economic Development Corporation

selling your state

TENNESSEE

Becoming No. 1 for Startups A public-private partnership that fosters entrepreneurship is working hard to make Tennessee the most startup-friendly state in the country by 2022. Launch Tennessee, which celebrated its fifth anniversary in June 2017, helps entrepreneurs start and build successful companies in Tennessee and, therefore, create new jobs. The organization was conceived to support Gov. Bill Haslam’s Jobs4TN initiative to support and encourage new and existing businesses. Launch Tennessee took over an organization that had operated as the Tennessee Technology Development Corp. since the late-1990s.

Goals for the next five years include growing invested capital, strengthening market access and commercialization, building the talent pool, and focusing on enactment of policies that make it easier to start and grow businesses. “When mapping out our five-year plan, we looked at our maturing startup ecosystem and saw a major opportunity for Tennessee to become the most startup-friendly state in the nation,” said Charlie Brock, CEO of Launch Tennessee. “We know that achieving this vision will be a statewide effort, requiring the support and initiative of all our partners, from corporations to government and everyone in between.”

The public-private partnership “affords a unique entry point to this diverse stakeholder group,” Kay said. “We’re a conduit between the public and private sectors, where the public has a tremendous amount of capability to support the private but they don’t speak the same language.”

Six big tech companies have added corporate offices in the state, and three Fortune 500 companies are involved in their startup ecosystem, Brock said. In addition, “we’ve had nearly 70 exits since 2011, and our state had the second-highest growth in capital invested in the entire Southeast.”

Companies receiving support from Launch Tennessee’s statewide network of entrepreneur centers have created more than 1,750 new

Kay said Launch Tennessee has begun to advocate for policies that directly impact entrepreneurs. The organization received a Kauffman

Tennessee is gaining national awareness as a friendly destination for startups.” —Tennessee Gov. Bill Haslam

Foundation grant to help Launch Tennessee make its voice heard at the state level. Launch Tennessee has an employee who focuses solely on government relations. Rise of the Rest, a bus tour that has traveled the country since 2014, putting a spotlight on emerging startup ecosystems and investing in local startups, will visit two Tennessee cities— Chattanooga and Memphis—in May. This will be the first time the tour has stopped in two cities in the same state. In addition, the tour stopped in Nashville in 2014. “We think it validates us as the startup-friendly environment that Launch Tennessee has worked so hard to build,” Haslam said in a video message following the bus tour announcement. “Tennessee is gaining national awareness as a friendly destination for startups.”

MAR/APR 2018 | CAPITOL IDEAS

“Launch Tennessee creates collaboration among diverse stakeholder groups, including entrepreneurs, the private sector, capital sources, institutions and government in order to offer entrepreneurs what they need to succeed,” said Jennifer Kay, Launch Tennessee’s marketing director.

jobs. In addition, Launch Tennessee has helped boost capital investment in the state. The state saw a 65 percent increase in early-stage capital investment from $251 million in 2012 to $413 million in 2016.

final facts

All About the

The

Benjamins

The Penny CO STS

1.5¢ to make For more than a decade, the cost to make a penny has been higher than face value.

by Shawntaye Hopkins Cheddar. Dough. Moola. No matter what you call it, money drives our personal, business and policy decisions. Money is everywhere. But how much do you know about the coins and bills in your wallet?

$100,000 gold certificate

was the largest note ever printed by the U.S. Department of the Treasury.

It was used for official transactions between Federal Reserve Banks.

U.S. PAPER CURRENCY IS MADE OF

75 p er c e n t c o t to n

The motto

a n d 25 pe r cent linen.

“In God We Trust”

T h e e s t i m at e d l i f e s pa n o f a $1 0 b i l l i s 4 . 5 y e a r s .

first appeared on $1 SILVER CERTIFICATES in 1957 following a 1955 law requiring the phrase on all currency.

A $100 bill has an estimated lifespan of 15 years.

Symbolism of The Great Seal AMERICAN BALD EAGLE

U.S. national emblem ESCUTCHEON (SHIELD)

MAR/APR 2018 | CAPITOL IDEAS

THE DOLLAR

IS STRONGEST IN COLUMBIA, N E W Z E A L A N D, ARGENTINA, N O R W AY, AZERBAIJAN, INDONESIA A N D M E X I C O.

13 stripes // Original States Top bar // Congress uniting the states E PLURIBUS UNUM

Out of many, one OLIVE BRANCH + 13 ARROWS

The power of peace and war CONSTELLATION OF STARS

A new State taking its place and rank among other sovereign powers

More than 100

strains of bacteria were found on dollar bills circulating in New York City, including some known to cause acne.

CSG 2018 POLICY ACADEMY SCHEDULE The hallmark of The Council of State Governments is its ability to foster the exchange of insights and ideas to help state officials shape public policy through national and regional forums. We hope that you can join us at one of our policy academies this year!

M E D I C A I D LE A DE R SH I P Sept. 26–28 | Washington, D.C.

E N E RGY S TAT E S O F A M E R I C A Sept. 26-28 | Washington, D.C.

T H E FI SC A L S TAT E

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