State lawmakers' business focus

Nation's Business, Feb, 1998 by David Warner

One development that could temper the states' tax-cutting plans, however, is their recent penchant for increases in spending. "Even in a time when you're seeing a lot of tax cuts, you're also seeing fairly large increases in state budgets," observes Stephen Moore, director of fiscal-policy studies for the Cato Institute, a public-policy research organization in Washington, D.C. "The cuts aren't coming at the expense of government programs; states are spending and cutting taxes."

That's a potentially dangerous mix, Moore says. If the U.S. economy or those states' economies should falter, the states could be in trouble, he says. States get a majority of their revenues from taxes on consumption, which usually increases in good economic times and declines during slack periods.

Contracting And Labor

In seeking to shrink government spending, many states are considering turning traditional government functions and services -- such as constructing prisons and operating liquor stores -- over to private companies. "Privatization is clearly a trend," says MultiState's Hallman.

Most moves to privatize, however, draw heated opposition from public-sector unions whose rank-and-file members are employed -- often at above-market wages -- in state government jobs.

Unions also can be expected to weigh in on the top labor issue likely to be considered in several states -- the so-called living wage.

According to Stateside's Campanella, unions have already succeeded in encouraging some local governments to adopt living-wage provisions, which require government vendors to give their employees at least a specified minimum package of wages and benefits.

Regulation

Citing another trend, Campanella notes that states are implementing regulations, primarily environmental rules, that are flexible and voluntary and that contain incentives rather than mandates. "On issues like environmental remediation, where the old command-and-control, stick-without-the-carrot characterized past approaches, the states have led the effort to create new systems using incentives to encourage companies to clean up abandoned sites," she says.

Thirty-five states, for example, have adopted programs that provide liability protection to firms that clean contaminated sites voluntarily. Twenty-three other states recently passed laws that encourage companies to conduct environmental self-audits.

Other matters expected to top the legislative agendas of many states are education, including funding and reform issues; telecommunications deregulation; and issues related to the Internet, such as taxation of online sales.

Politics, however, may cloud the legislative picture in many states in 1998. Thirty-six governorships and the seats of hundreds of state lawmakers will be contested this year. This is likely to make it harder to get cooperation between the parties in the statehouses and between legislatures and governors to enact legislation.

"If I were to make predictions," says David Nice, a professor of political science at Washington State University in Pullman, "I'd say we're going to have this acrimonious climate ... in quite a few state legislatures. I'm not hopeful as far as a real productive [legislative] environment."