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2018: A Year of Living Dangerously

 The shadow of President Donald Trump and the Republican tax bill will hover over state governing bodies in 2018, a year of midterm elections that Tim Storey, political analyst for the National Conference of State Legislatures, says will be “a referendum on the president.”


Long before these elections, states will need to address a host of issues affected by changes in federal policy or congressional inaction. Among them are the persistent opioid epidemic, the growing costs of Medicaid, the financing of the Children’s Health Insurance Program (CHIP) on which Congress continues to drag its feet, as well as decisions on energy policy, the environment, voting procedures and immigration. States will need to show fiscal restraint in dealing with these issues. Although the economy is booming, an analysis by Pew Charitable Trusts found that slow revenue growth has left many states “with little or no wiggle room in their budgets.”


The new annual report of the National Association of State Budget Officers (NASBO) was slightly more optimistic. It found that state spending grew moderately in fiscal 2017 following a slowdown the previous year. Total estimated state spending from all fund sources reached nearly $2 trillion in 2017, a 5.2 increase from fiscal 2016. But the NASBO outlook echoed Pew’s. “State spending in the near future will likely remain modest as states contend with sluggish revenue collections and modest growth in the national economy,” the report said.


States will also be impacted by the pending tax bill, which Republicans describe as significant tax reform and Democrats call a giveaway to corporations and wealthy individuals. A Gallup Poll this month found only 29 percent public support for the tax bill.


In a last-minute compromise intended to appease Republican members of Congress from wealthy coastal states, House and Senate conferees allowed a federal income tax deduction of up to $10,000 for state and local income and property taxes. The original bill had eliminated the income tax deductions entirely and had an outsize impact on New York, California, Connecticut, New Jersey and five other states with the highest state and local income taxes, all of them were carried by Hillary Clinton in the 2016 election. Democratic governors claimed that eliminating the deductions was political payback, with New York Gov. Andrew Cuomo tweeting that they would “destroy New York.”


Conservative economists welcome the new rules, however, which probably would make it more difficult for Democratic-leaning states to raise taxes. Writing in Forbes, economist Adam Millsap said that “state and local governments with high tax burdens may have to reevaluate spending priorities and shift to more user fees.”


Meanwhile, withdrawing from the North American Free Trade Agreement (NAFTA), as President Trump has proposed, could harm agricultural and auto-producing states, Republican governors warned Vice President Mike Pence at a November meeting in Austin, TX. At Trump’s insistence the United States is involved in negotiations with Canada and Mexico to modify the accord, but the talks have made little progress.


The meeting at which GOP governors delivered their warning to Pence occurred on the heels of Democratic victories in the Virginia and New Jersey gubernatorial elections. The big surprise of the elections was a powerful Democratic surge in contests for the Virginia House of Delegates, which Republicans had controlled by a 66-34 majority. In their best showing in three decades, Democrats picked up 15 seats, leaving the GOP in slender 51-49 control. Two narrowly won GOP-held seats are under challenge in federal court because of ballot irregularities.


Virginia may be a special case. Through ambitious, some would say greedy, gerrymanders, Virginia Republicans had become so thinly stretched that 17 districts carried by Clinton in 2016 were represented by Republicans in the House of Delegates. Most of these districts are now in Democratic hands. Nicholas Stephanopoulos, a University of Chicago law professor who specializes in election law, wrote in the Los Angeles Times that a similar showing in 2018 in Wisconsin would net Democrats a gain of only four seats in the Wisconsin Assembly.


Nevertheless, the Wisconsin Assembly, in which Republicans hold a 65-33 edge with one vacancy, is sufficiently gerrymandered to become the basis of a lawsuit challenging partisan redistricting. The case, Gill vs. Whitford, is now before the Supreme Court.


Harbinger or not, Tennessee Gov. Bill Haslam, the new chairman of the Republican Governors Association, told the New York Times the Virginia election was a “wake-up call” for Republicans. An even louder wake-up call occurred Tuesday when Democrat Doug Jones upset Republican Roy Moore in a U.S. Senate special election in Alabama, one of the nation’s reddest states.


“Democrats have the tail wind and Republicans the head wind in 2018,” NCSL’s Tim Storey said in an interview. “Democrats had a good head start in Virginia and New Jersey. They are energized. They are winning the message battle on the tax bill. The Democratic problem is that they are in such a deep hole they may not be able to get out of it in one election. They need a tidal wave. The normal surge that parties out of power usually get won’t be enough.”


Digging on this “deep hole” began in the 2010 midterms when backlash against President Barack Obama and the Affordable Care Act he’d pushed through Congress on a party-line vote fueled a Republican landslide in which the GOP gained 63 House seats and seized control of Congress. Beginning in 2010 and continuing in subsequent elections during the Obama presidency, Republicans gained 910 state legislative seats and took control of a majority of chambers.


When Democrat Phil Murphy replaces Republican Chris Christie as New Jersey governor in January, Democrats will hold the governorship and both legislative chambers in seven states. Republicans have such unified control in 25 states plus functional control in Nebraska, which has a unicameral and nominally non-partisan legislature.


Control is divided in 17 states. These include New York state, where Democrats have unified control on paper, but the State Senate is run by a coalition of Republicans and maverick Democrats. Similarly, the Alaska House is officially Republican but run by a coalition of Democrats and moderate Republicans.


Republicans will have a 33-16 lead in governorships once Murphy takes office. Alaska Gov. Bill Walker is an independent. Of the 36 governorships that will be decided next year, Republicans hold 26, with Democrats holding nine. Walker is also facing re-election.


An analysis by Louis Jacobson of Governing magazine found that a dozen of the governorships now held by Republicans are vulnerable compared to five for the Democrats. The most vulnerable GOP-held governorships are open seats in Maine and New Mexico plus Illinois, where embattled Gov. Bruce Rauner is seeking reelection.


Democrats are given a chance by Jacobson to contest open governorships now held by Republicans in Florida, Iowa, Kansas, Michigan, Nevada, and Ohio. Republican incumbents seeking reelection face challenges in Maryland, New Hampshire and Wisconsin. Democrats have vulnerable incumbents in Pennsylvania and Rhode Island and in Democratic-held open seats in Colorado, Connecticut and Minnesota.


Democrats also are eying legislative takeovers, including the Connecticut Senate, which is now tied. They hope to win state senates in Colorado and Maine, each of which Republicans now control by a single vote. More ambitiously, Democrats are also targeting the Iowa Senate and both chambers in Arizona, Michigan, and New Mexico in which Republicans now have seemingly comfortable leads.


The Democrats have history in their corner, as the party out of power usually does well in a president’s first midterm. Every president since World War II with an approval rating below 50 percent at midterm time lost a double-digit number of House seats and a corresponding number of legislative seats. With slightly more than 10 months to go before the 2018 midterms Trump’s approval rating is 37.4 percent in the RealClearPolitics average of polls, lower than any president since the advent of modern polling.


Legislative elections matter. While Congress has been gridlocked for the past six years on many issues, Republican dominance in statehouses produced a number of conservative accomplishments, including restrictions on voting rights and abortion, expansion of gun rights, weakening of labor unions and a greater use of school vouchers. Democratic-controlled states expanded health care, took major strides toward greater use of alternative energy and in some states eased restrictions on unauthorized immigrants.


Most of the governors and more than 880 of the legislators elected in 2018 will be in office when the next redrawing of congressional and legislative districts occurs in 2021. The coming midterms are a referendum on President Trump, to be sure, but they also are the beginning of a political blueprint on the nation’s future.