Erin:

Collin, Gabriel, I know you are both on the ground working with groups in the states so it’s great to sit down with you and hear about what you see in store for 2023. 

As you both know, SPN has been doing monthly polling to better understand the concerns of the American people. We have been tracking education over the past year. Voters consistently believe parents should have more input on what is taught in public schools (70% agree), families should have more options when it comes to public education (79% agree) and there should be more transparency in how public schools spend taxpayer funds (84% agree), but education didn’t get much attention in the midterm elections.  What are you expecting to see on education in 2023?

Collin:

There wasn’t a great deal of talk about education in the federal midterm election coverage because nearly all the meaningful policy happens at the state level. Following the most intense part of the pandemic, 18 states took action in 2021 to expand school choice and empower parents.  That momentum continued in 2022. Arizona and West Virginia passed the two largest Educational Savings Account (ESA) programs in the country. There was additional progress in Alabama, Kansas, Kentucky, and South Dakota. Reason has a great summary of what happened in 2022.  And we expect to see the same high level of activity on school choice and education reform in 2023 in states like Arkansas and Iowa. The school choice expansion in recent years proves that parents are still hungry for reform and improvement. And when a good idea sparks in the states, it can quickly become an unstoppable movement.

Gabriel:

SPN is partnering with several organizations as they move forward on education reforms. Alaska Policy Forum is working to launch the Alaska Center for Educational Empowerment, a one-stop education resource center for families that explains the options and opportunities available. Alaska has a broad collection of educational choice options, but they are unfamiliar to many parents and under-utilized. By simply informing parents of their options, APF can help bring school choice to more Alaskan families.

Empower Mississippi and Mississippi Center for Public Policy want to help their state follow the progress Tennessee made last year in overhauling its archaic funding formula to deliver state education dollars where they are most needed and ensure greater funding transparency.

In Utah, Iowa, Florida, and Ohio, work is being done to establish or expand Education Savings Accounts, providing families more choice on how their children are educated.

There continues to be a lot of excitement and energy around the possibilities in education reform.

Erin:

Perhaps one of the reasons we didn’t hear much about education during the midterms is that the economy has taken center stage. Polling tells us that economic concerns have jumped up to the most important issue for a significant majority of Americans. SPN’s data shows that nearly 80% of Americans are making cuts to their household budget due to economic concerns, and 35% describe the cutbacks as “major.”  What are states doing to address the economic challenges Americans are facing?

Gabriel:

Although the economy isn’t great, many states still have budget surpluses from a flood of federal aid that went to the states through the American Rescue Plan Act (ARPA), as well as from stimulus checks and greater unemployment benefits – both of which are taxed and added to state revenue.

As the economy continues to put pressure on Americans, and especially if a recession materializes as expected, we are going to see different approaches and actions among red and blue states. In red states, a budget surplus will cause legislatures to look at tax relief, including permanent cuts or other ways of giving money back to the people.  In Idaho for example, the legislature passed the Empowering Parents Grant Program using ARPA money. It provides $1,000 per student, up to $3,000 per family to cover education expenses such as technology equipment, testing fees and other educational services.  In blue states we expect to see the surpluses spent on additional government programs and benefits.

Regardless of approach, all states need to realize that the budget surpluses from COVID relief funds are temporary and do long-term budget forecasting for any policy changes made under the current fiscal situation.

Collin:

SPN’s Economic Policy Working Group has been hard at work over the last few months preparing to help develop a bold policy agenda for 2023 legislative sessions. The group has come up with economic policies like inflation adjusting tax brackets and deductions so they match the changes in the value of a dollar, capping property taxes to ensure that skyrocketing home prices do not lead to unfair or overly burdensome property taxes, and full expensing for businesses which would allow the immediate write-off of the cost of new investments instead of amortizing them over 20 years. These changes would encourage investment in the US and reduce some inflationary pressures for businesses.

Members of the working group and SPN Network affiliates are now working to advance these solutions in the states.

Erin:

Economic conditions obviously spill over into a number of different policy areas. As of December 2022, over half of Americans say crime is a significant problem in their community and seven-out-of-ten perceive crime in the US to have risen overall.

Collin:

Yes, challenges with increased crime are something states and particularly localities are aware of and will need to find a way to address in the coming year. Drug and addiction issues are also in that category–high drug use and dealing are also linked to poor opportunities. The crisis that states face on that front increased during the pandemic and is exacerbated by a soft economy. There doesn’t seem to be one idea or state taking the lead on these issues, but the situation is ripe for someone to lead here, creating and testing model policies that could be replicated across the nation.

Erin:

What other policy areas will be impacted by the current economic conditions?

Gabriel:

Housing is another area that will be in focus in 2023. This policy is likely going to gain the most traction not at the federal or even state level, but in local jurisdictions. Given the state of the economy, rent control is a very real possibility, especially in bluer areas. Another policy that is gaining traction is a limit on corporate ownership and vacation rentals which, in theory, would free up more housing for year-round residents, addressing affordability and availability of housing.

Erin:

Yes, our polling shows that 72% of voters believe housing affordability is an issue in their communities.

Collin:

Energy is another issue in focus with current economic conditions. The price of gas has dropped from its summer 2022 highs but is still significantly higher than it was in the pre-pandemic America. There is still a lot of uncertainty in global energy markets and many economists expect the prices to rise again in 2023.

States with oil resources will continue to push the federal government for additional leases and drilling permits but that is an issue a minority of states face. As Gabriel said, we expect blue states to use some of their budget surplus to help consumers with energy prices. This seems especially likely if there is a winter spike in prices that makes heating homes during cold spells financially difficult. This assistance could come as a one-time tax rebate or price setting with credits to industry to make up the difference.

Erin:

SPN’s December State Voices polling shows that nearly four-in-ten Americans anticipate needing to cut other parts of their budget in order to heat their homes this winter. And that is with energy prices leveling off at the end of 2022 – I expect that number would go up significantly if prices were to start climbing again or the winter is particularly cold.

Gabriel:

Another issue related to energy is grid modernization. Infrastructure updates are gaining traction in the states. We have seen increasing numbers of blackouts and other grid problems and many state governments are working to address the shortcomings.

Erin:

It sounds like there are some great plans and strong momentum in place for 2023 in the states.  What about Washington, DC? What will be happening at the federal level that might impact states?

Collin:

The general consensus is that not much will happen in Congress because of the split party control between the House and the Senate, the slim margins in each house, and conflicts within each party. Republicans in the House will dig in with investigations. And the debt ceiling will likely become a major flashpoint. In part because the Biden Administration can expect very little help from Congress, we believe there will be a bigger push to achieve the President’s agenda through executive order and executive agency regulation.

Gabriel:

There are some significant cases that will be decided at the Supreme Court as well. National Pork Producers Council v. Ross deals with the dormant commerce clause and the plaintiffs are asking the Court to curtail the ability of individual states to dictate out-of-state production methods via sale prohibitions. If successful, it would significantly limit the ability of large states, like California, to make rules that impact how business in conducted nationwide.

There has been a lot of attention paid to the Biden Administration’s student loan forgiveness plan which is temporarily on hold pending Supreme Court review. One key consideration in the case is the “major questions” doctrine or the idea that if Congress wants to give an administrative agency the power to make “decisions of vast economic and political significance” it must clearly say so. A decision reinforcing the major questions doctrine would limit what federal agencies can do outside of Congressional approval and help reestablish a strong separation of powers.

Collin:

Another broader trend to watch is Democrats, specifically in blue states, emboldened by better-than-expected results in the 2022 midterms. As action at the federal level slows down even further, we expect to see bold pushes forward on progressive agendas.

For example, in Michigan Democrats are planning a full campaign to repeal right-to-work laws in the state. It’s reasonable to expect Democrats in blue, or in purple states where Democrats had good midterm results, to try and tackle issues that were complete non-starters before the shifts of the 2022 elections.

Erin:

In December, our State Voices polling showed that Americans are more optimistic about themselves (65% optimistic) then their state, and more optimistic about their state’s future (60%) than the nation as a whole (49% optimistic). Trust in the federal government has consistently been lower than faith in state and local governments over the last several years. 

Do people believe more can be done at the state level? Can we use that to make significant progress toward a revitalized federalist system?

Gabriel:

During the pandemic, and particularly because states varied so much on how they wanted to approach things like school closures, masks, and vaccine requirements, we have seen more states taking the lead on policy instead of waiting for the federal government to give direction. There seems to be continued enthusiasm for this approach and SPN is investing heavily in helping it along.

In 2023, SPN is planning to educate state legislators and agency officials to better understand the critical role they play in government oversight—something that gives states added power to create an environment of good governance not coming from Washington, D.C.

Erin:

It seems there is a lot to be optimistic for in 2023. Collin, Gabriel, thank you so much for your time and best of luck in enacting effective, solutions-oriented policy in the states this year.