State Net Capitol Journal Spotlight: Last Year's Hot Issues Likely To Keep Smoldering In States

In part II of our legislative preview, we take a look at a few more issues likely to occupy state lawmakers' attention in 2014. The majority were hot issues in the states last year and even before, but they have only been stoked by recent Supreme Court decisions, continued Congressional inaction and next fall's elections.

PENSION REFORM: Pension reform has clearly been a hot issue in the states in recent years. Legislation pertaining to state pensions was introduced in every state but six in 2012 and enacted in 33, according to State Net's Hot Issues database. The pace fell off somewhat this year, with State Net's database showing enactments in just 17 states — although legislation was still pending in 9 states — as of last week.

But with states facing a collective unfunded pension liability estimated at $2.9 trillion, according to a recent report by The States Project, a joint venture of Harvard University's Institute of Politics, the University of Pennsylvania's Fels Institute of Government, and the American Education Foundation, pension reform is an issue that isn't likely to go away any time soon. And the headlines generated this month by Illinois' passage of a plan to erase its largest-in-the-nation, $100-billion pension shortfall is apt to place the issue at the forefront of lawmakers' minds in other states with similar — though less sizeable — problems.

A major new wrinkle was added to the issue this month with the surprising ruling by the federal bankruptcy court judge presiding over the bankruptcy case in Detroit that the city's public pensions are not off the table even though they are expressly protected under Michigan's Constitution. That decision challenges the widely held belief that public pensions are untouchable, and it is likely to resonate in cities across the country where rising pension costs are crowding out spending for education, public safety and other services. Experts said the ruling is unlikely to prompt a rush of municipal bankruptcy filings, but it could encourage cities to negotiate more aggressively on pensions before entering into bankruptcy.

VOTER ID: Voter ID is another issue that has occupied a lot of lawmakers' attention in recent years. But many of the voter ID bills introduced in at least 30 states this year, by the National Conference of State Legislature's count, were put on hold while the U.S. Supreme Court deliberated on Shelby County v. Holder, dealing with Section 5 of the Voting Rights Act, requiring sixteen states with a history of racial discrimination to obtain federal preclearance before making any changes to their voting laws. With the court having effectively nullified that provision in June, several states formerly subject to it, including Alabama, Mississippi and Texas, have gone ahead with implementation of new voter ID restrictions.

The U.S. Justice Department, however, has filed lawsuits challenging the new restrictions in Texas and North Carolina under parts of the Voting Rights Act not considered in Shelby: Section 2, barring discriminatory voting rules anywhere, and Section 3, requiring evidence of intentional discrimination to subject a jurisdiction to pre-clearance rather than merely a history of discrimination as with Section 5. Voter ID laws recently passed in Pennsylvania and Wisconsin are also facing legal challenges.

But with the entire U.S. House and a majority of the nation's legislative seats up for grabs in the 2014 midterm elections, the issue is likely to continue to simmer, even despite indications that the more restrictive voter ID laws have actually spurred minority voter turnout, which Democrats and voting rights groups have contended those laws were designed to suppress.

GAY MARRIAGE: The pair of U.S. Supreme Court rulings in June striking down the provision of the federal Defense of Marriage Act limiting spousal benefits to heterosexual couples (United States v. Windsor) and effectively invalidating California's voter-approved same-sex marriage ban, Proposition 8, on technical grounds (Perry v. Hollingsworth) fueled the fire that the issue of gay marriage caught last year when a state's voters approved a citizen initiative legalizing same-sex marriage for the first time, Maine's Question 1.

Days after the high court's decisions, the American Civil Liberties Union filed a lawsuit challenging Pennsylvania's ban on same-sex marriage. And just last month, Hawaii and Illinois became the 15th and 16th states, respectively, to legalize same-sex marriage.

But with Illinois Gov. Pat Quinn's (D) signing of SB 10, opponents of gay marriage say advocates "have run out of easy targets," with none of the 34 states where same-sex marriage remains illegal wholly dominated by Democrats, except for West Virginia, which has a tradition of social conservatism. Supporters, however, say they plan to be active in several states next year, including Indiana and Oregon.

Recent headlines suggest a potential new front in that upcoming battle: gay divorce. As the number of legal same-sex marriages has risen, so too has the number of those that haven't worked out. And cases have been reported in at least two states — Mississippi and Missouri — where legally wed same-sex couples have been denied a divorce because their state of residence doesn't recognize their marriage.

TRANSPORTATION/INFRASTRUCTURE FUNDING: Last year Congress passed a long-term transportation bill for the first time since 2005. Although the measure did more than just extend federal transportation funding at current levels — as Congress had done nine times since the last long-term transportation bill expired in 2009 — it still relies mainly on revenue from the federal gas tax, which has remained at 18.4 cents per gallon since 1993 and has been projected to fall between $85 billion and $115 billion short of states' needs by 2021 at current spending levels.

Congressional inaction on transportation funding had spurred more than half of the states to take on the issue themselves before the passage of last year's federal bill, including Illinois, which passed a $1.6 billion transportation funding package shortly before Congress finally did act. Last month Pennsylvania Gov. Tom Corbett (R) signed HB 1060, which will gradually increase that state's gas taxes and motorist fees over the next five years to provide at least $2.3 billion more for transportation projects each year. And the ever-widening gap between the demand of states' aging transportation systems and the supply of federal dollars under the current funding system is likely to spur other states to take similar action next year and beyond.

INTERNET SALES TAX: The U.S. Supreme Court refused this month to review a New York appeals court decision requiring online retailers like Amazon.com to collect sales taxes in states where they have affiliates that promote their products. With states standing to lose $23 billion a year in uncollected taxes on online, phone and catalog purchases, according to a recent NCSL estimate, the 37 that don't already have "affiliate nexus tax" laws — commonly referred to as "Amazon taxes" — may be more eager to impose them now. Internet sales tax bills are, in fact, still pending in 13 states, according to State Net's Hot Issues database.

It will be more difficult for states to get their full share of the multi-billion pot via affiliate nexus laws, however, because many non-brick-and-mortar retailers have cut their ties with affiliates to reduce their tax exposure. Congress could settle the issue by passing the Marketplace Fairness Act, which would allow each state to impose sales and use taxes on online retailers with at least $1 million in sales in the state, regardless of whether or not the retailers have a physical presence there. The measure has already been passed by the Democrat-controlled Senate but is hung up in the Republican-led House.

E-CIGARETTES: Electronic cigarettes, or e-cigarettes, battery-powered devices that provide a dose of nicotine, flavorings and other additives in vapor form, have been around for over a decade, but their sales have boomed in recent years. The Centers for Disease Control has reported that e-cigarette use among U.S. adults doubled to about one in five between 2010 and 2011, and use among middle school and high school students doubled to about one in 10 between 2011 and 2012.

A rule from the Food and Drug Administration, potentially classifying e-cigarettes as "tobacco products" and thereby restricting how they can be advertised as well as barring their sale to minors, is expected any time. But that would still leave states, still recovering from the recession and facing declining revenues from traditional tobacco taxes, free to tax the devices. Currently, Minnesota is the only state that subjects them to a levy — a charge of 95 percent of their wholesale price — beyond just a general sales tax. But the state could have a lot more company in that regard next year.

— Compiled by KOREY CLARK

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