State lawmakers' business focus

Nation's Business, Feb, 1998 by David Warner

States are expected to consider numerous bills this year that would affect business, including legislation dealing with electricutility deregulation, tax cuts, health-care reform, and privatization of government services.

About 210,000 bills -- many related to business -- are introduced in state legislatures in a typical two-year cycle, according to Stateside Associates, a company in Arlington, Va., that tracks state legislation. Increasingly, state lawmakers are taking the lead over their counterparts in Congress on a host of issues.

One of the areas where the states have been out front is product-liability reform. Starting in the mid-1980s, several states reformed their product-liability laws, placing caps on awards for damages and limiting liability. States took action, say professionals who monitor state legislation, when state officials grew tired of waiting for Congress to approve a uniform, federal liability statute. (Although Congress has made progress toward passing a product-liability law, lawmakers are still debating the merits of doing so.)

On welfare reform, too, the states took the legislative lead. For example, in the 1980s -- years before Congress passed the landmark welfare-reform legislation of 1996 -- Wisconsin, under Republican Gov. Tommy G. Thompson, began making changes in its welfare system.

"The trend is still toward the states wanting to grab things, wanting to do more things, not being willing to wait for the feds," says Paul Hallman, president of MultiState Associates, an Alexandria, Va., firm that tracks state legislation.

States have been seizing the initiative on issues particularly since 1995, when Republicans took control of Congress and 32 GOP governors took office -- up from 18 in 1994 -- says Constance Campanella, president of Stateside Associates. Republican congressional leaders pledged to give the states more power over various policies, she says, and for the most part they have followed through.

"The Republican governors, working together with the Republican-led Congress, have been extraordinary," says Campanella. "They've had the willingness to get out there and take more responsibility on a whole array of areas, and Congress has let them."

Electricity And Health

One of several issues important to business and likely to come up for consideration in many state legislatures this year is deregulation of the electric-power industry. Congress began debating the matter in 1997 and is expected to continue doing so this year, but a federal deregulation bill is not likely to pass in 1998.

In contrast, more than a dozen states have passed legislation to encourage competition among power companies to reduce consumer costs by allowing any electricity generator to sell in their states. The legislatures in more than a dozen other states are expected to consider deregulation measures.

Health-care legislation also is expected to be considered in several states this year. Among the most prominent proposals are measures to regulate health-maintenance organizations. A number of proposals would mandate that HMOs provide certain minimum levels of care for patients.

California, frequently a legislative trendsetter for the states, might consider several proposals to rein in managed-care groups. Among bills expected to be considered are requirements that HMOs pay for emergency-room services deemed necessary by any "reasonable person." Since 1996, 110 bills concerning managed care have been introduced in the California Legislature, though none has been enacted.

California lawmakers might take up legislation to require that employers cover certain illnesses and to expand medical-malpractice liability to health-insurance providers, says Alan Zaremberg, president of the California Chamber of Commerce in Sacramento. "There will be a lot of activity" in the health-care area, he says.

Also, states that want to gain federal funding for expanding health care for children will have to develop specific plans for spending that money before the U.S. Department of Health and Human Services will consider their requests. The plans must be submitted to the department's Health Care Financing Administration by June 30.

Tax Modification

Tax changes are almost always on state legislatures' agendas. In the past few years, a number of states have cut taxes. Arizona, Iowa, Michigan, Nebraska, New Jersey, and New York have reduced income-tax rates, for example.

Property taxes, whether on real estate or on personal possessions such as cars and boats, have been limited by a number of state legislatures recently even though such taxes generally have been the province of local governments. In 1997, more than a dozen states -- including Indiana, New York, and Texas among the most populous -- enacted some type of property-tax relief

Michael Flynn, director of tax and fiscal policy at the American Legislative Exchange Council, an organization that represents fiscally conservative state lawmakers, says the tax-cut trend likely will continue in 1998.