Having trouble readjusting to the new year? It's 2017. Not 2016. Check out this year's issues to watch.

Budget Battles

(AP)

The 2015 legislative year was marked in most states by fiscal partisanship, unpredictable revenues and continued pressure to lower taxes. The new year is unlikely to be any different. More than a dozen states were too deeply split to meet their formal budget deadlines in 2015, and many of those will miss them again. More than a third of the states are now splitting power between the parties. By early December, two of those split states, Illinois and Pennsylvania, had gone deep into the 2016 fiscal year without a budget being enacted.

In some states, the drop in oil and natural gas prices will continue to put pressure on budgets, as in Alaska and Oklahoma, which are dependent on energy revenues. Both are likely to face spending cuts, higher taxes or both. But a more enduring problem for many states is systemic financial imbalance. In these states, legislatures have tended to paper over prior budget shortfalls with one-time fixes; now, as revenue shortages persist, lawmakers are left with a list of increasingly unappealing choices. If 2015 was any indication, legislatures will wait until the last minute before settling on the best of their bad options.

Kansas has had trouble balancing its budget ever since lawmakers enacted massive income tax cuts in 2012 and 2013 without any plan to make up for the lost dollars. Louisiana also is taking a hit from slowing income tax revenues, largely a result of tax cuts and tax credits approved during a business and development boom in the middle of the last decade. The state closed 2015 with a $117 million shortfall, adding to a projected $700 million hole in the budget for the current fiscal year. In Kentucky and New Jersey, which have a long history of underfunding their public employee retirement systems, the debate over raising taxes to fund pension liabilities will continue.

In many other states, demands to reduce income taxes will compete against pressure to keep revenues stable. Expanding state sales taxes to additional areas of economic activity would help solve the political and fiscal logjam in many places, but so far states have succeeded only in modestly increasing sales taxes that already exist. That is unlikely to change anytime soon in most states. -- Liz Farmer

Worker Pay

(AP)

The national debate over income inequality is turning worker pay and benefits into potent political issues in the states. While presidential candidates talk about proposals to close the gap between the wealthiest Americans and everyone else, some states have already taken action. In the past two years, 13 states and the District of Columbia have enacted minimum-wage increases. Last year, New York approved the first $15 state minimum wage for fast-food workers in what may be a precursor to broader wage boosts across much of the country. In at least half a dozen states, lawmakers have already drafted legislation calling for a $15 minimum wage for all workers. California and Oregon voters will consider ballot measures later this year providing for a $15 minimum, and advocates in Maine, Missouri and Ohio are trying to get a minimum-wage hike on the 2016 ballot.

States are also taking up equal pay legislation, which seeks to eliminate the gender gap in compensation. Many of the bills strengthen laws that already require equal pay for equivalent work. California and New York have adopted some of the strongest equal pay provisions, while Connecticut, New Hampshire and Oregon have addressed laws against salary secrecy.

Paid family leave laws are getting more attention in legislatures as studies have shown such laws to be financially beneficial for lower-income families, particularly minority women. Only 12 percent of U.S. private-sector workers have access to paid family leave through their employers, but recent grants from the U.S. Department of Labor have been spurring more governments to research ways to create and fund a family leave program. One of those governments, Rhode Island, became the third state to establish a paid leave program in 2014.

Most of the family leave proposals under current discussion expand state disability leave, and are funded by raising a small tax on worker paychecks. Some add an employer tax. The District of Columbia is expected to take action on a paid leave bill early this year. Significantly, it would be the first to establish a separate family leave fund and would likely be a model for several other states currently studying the issue. -- Liz Farmer

Preemption Battles

(AP)

Two years ago, when Denton became the first city in Texas to ban hydraulic fracturing, state lawmakers took notice. They responded by passing legislation that preempts localities from regulating drilling-related activities. The legislature has also taken up dozens of other preemption bills, covering everything from plastic bag ordinances to gun restrictions.

Modern preemption laws date back to the 1980s, when states started prohibiting jurisdictions from enacting anti-smoking laws. In general, states enjoy broad authority over localities. Some preemption laws, such as those relating to zoning ordinances, may require changes to a state’s constitution. But instances of preemption have proliferated in recent years, escalating tensions between state legislatures and localities on a number of key issues. Many stem from lobbying efforts by industry groups and trade associations. Threatened by public broadband ownership at the municipal level, Internet service providers have backed bills preempting the publicly owned networks from expanding. The oil and gas industry has similarly pushed state laws aimed at counteracting local fracking bans.

“By any metric, preemption has intensified and broadened radically,” says Mark Pertschuk, director of the public health advocacy group Grassroots Change. A wide range of industries will be joining the preemption club in upcoming legislative sessions. “They’re very concerned and frightened of what subdivisions of the state can do if their authority is not abdicated,” Pertschuk says.

Many of the more prominent preemption fights in recent years have reflected the increasingly sharp partisan divide between cities and states. Big-city Democratic mayors and labor groups have backed mandatory paid sick leave and minimum-wage increases, directly challenging the views of Republican lawmakers who control both legislative chambers in 30 states. That ideological conflict came to a head last year when Michigan GOP Gov. Rick Snyder signed a bill that stops localities from raising their minimum wage or requiring mandatory paid sick days. Similarly, Republican Gov. Asa Hutchinson of Arkansas signed a law overriding five local ordinances that established discrimination protections for lesbian, gay, bisexual and transgender workers.

Preemption battles don’t always follow clear blue-red fault lines, though. State and local lawmakers are further divided among themselves on how to handle issues created by emerging technologies, such as where to prohibit e-cigarettes and how to regulate ride-hailing companies. In Wisconsin, the legislature replaced cities’ relatively strict regulation of Uber and Lyft with looser statewide rules. The issue could play out elsewhere as those companies expand their reach.

Gun laws are certain to cause friction in a number of states as well. Last year, Nevada and North Carolina expanded existing bans on local gun control ordinances. Pennsylvania lawmakers may revisit the same issue now that a judge has overturned a law that had made it easier for gun-rights advocates to sue cities over their local gun control regulations. -- Mike Maciag

School Choice

(Shutterstock)

Proponents of school choice are enjoying tremendous momentum at the state level. In 2015, at least one chamber in half the states passed bills offering support to private schools or other competitors to traditional public education. Given shorter legislative sessions in most states, 2016 won’t be quite as busy, but numerous proposals will receive consideration, particularly in the South.

A majority of states now offer vouchers, which allow parents to use public funds to pay tuition at private schools. Most of those apply to relatively limited populations, such as children with special needs or students at failing schools within a specified geographic area. But many of the programs are slowly expanding over time, as has been the case in Arizona. Voucher supporters in Tennessee are hoping to break a logjam there that has kept a school choice bill tied up in committee.

Last year, Nevada passed first-of-its-kind legislation creating an alternative to vouchers: education savings accounts, or ESAs. Nevada’s ESA law applies throughout the state, regardless of family income, and the savings accounts differ from vouchers in that money can be used not only for tuition but for other expenses, such as tutoring, books and laptops. Some 3,500 families have signed up, making Nevada a potential new model for other states. About 15 states considered ESA legislation last year, and some of them, notably Alabama, Georgia and Oklahoma, might take another swing.

Other financing proposals that promote school choice but stop short of taking money away from public school districts are also gaining traction. The bluer states of Colorado, Illinois and New York are likely to consider scholarship tax credit programs. These allow individuals and businesses to direct a portion of their state taxes toward scholarships for qualified students to use at private schools or schools outside their home districts. Such programs already exist in more than a dozen states.

Advocates of increased school choice did well in the relatively few elections held last fall. Several state legislators in Mississippi who were opposed to charter schools went down to defeat. Republican Matt Bevin, the new governor of Kentucky, ran on support for school choice, raising hopes that the state will join the ranks of those allowing charters.

On education, as on every other issue, elections matter. “As long as the states continue to be governed by Republicans, which is the case in two-thirds of the states, you’re going to see legislation to expand choice in public education,” says Michael Petrilli, president of the Fordham Institute, a conservative education think tank. -- Alan Greenblatt

Pay for Success

(AP)

Last year was an eventful one for social impact bonds. The financing tool, which many have begun referring to instead as “pay for success” programs, allows governments to tap into outside funds to pay for promising social interventions with a high upfront price tag. The first social impact bond created in the United States was at Rikers Island in New York. It was aimed at reducing recidivism among juvenile detainees, but it ended prematurely last year when the private investor, Goldman Sachs, didn’t see enough progress.

Part of the appeal of these deals is that taxpayers aren’t on the hook for trying something new and risky, and public officials still get to experiment with different ways to address social ills. But it’s preferable if the risky investment pays off. Salt Lake County announced in October that its social impact bond on early learning programs had resulted in fewer elementary school students needing special education. A month later, The New York Times threw cold water on the results, pointing to several methodological problems that inflated the effect of Utah’s preschool programs.

The results from the initial U.S. projects will likely influence who invests in future initiatives, and what programs they’re willing to fund. At least seven projects in six states are underway. Last year’s mixed results won’t kill social impact bonds, but they may make future projects less ambitious.

For example, Santa Clara County, Calif., launched a pay for success pilot in September that combines several strategies for housing the homeless, each of which has been found to be effective in prior studies. Such evidence-based policies are excellent candidates for outside financing because they appear to pose less risk. The question is whether another category of projects -- less rooted in prior research -- could also emerge. If so, there would be greater risk for investors focused on seeing financial returns. -- J.B. Wogan

State Prison Reform

(AP)

Between 2004 and 2013, Utah’s state prison population grew by 18 percent -- six times faster than the national average. Without changes, the state projected that an additional 2,700 people would end up in state prison over the next 20 years, increasing incarceration costs by $500 million. So Utah enacted a long list of reforms aimed at curbing the number of people in state prison without harming public safety. The state downgraded first- and second-time drug possessions from felonies to misdemeanors, and also reduced 241 misdemeanors to citations that wouldn’t be subject to arrests or jail time.

In all, 30 states have passed laws similar to the one in Utah in an attempt to save money and reduce recidivism. Many of the others are expected to consider the issue in 2016. While the most common provisions across states focus on bringing punishments closer to fitting the crime, other proposals address performance incentive funding. In this approach, states offer to pay local probation and parole departments about half the savings accrued from avoiding re-incarceration for technical violations. The idea is to reduce the incentive for local law enforcement personnel to deal with difficult probationers simply by returning them to custody.

There are 10 states that currently use performance incentive funding; Alabama and Utah included it in laws they passed last year. Results from California may lead others to join the pack. In 2009, about 40 percent of new prison admissions came from revoked probation. After the state instituted performance incentive funding, revocations declined 23 percent, saving California roughly $920 million, of which $450 million went to counties. Alaska, Maryland and Rhode Island currently have working groups to study and recommend legislative changes to their prison systems for next year. One of them, Maryland, is considering performance incentive funding. -- J.B. Wogan

Police Accountability

(AP)

The recent string of black civilian deaths at the hands of police officers has sparked a national debate about excessive use of force and racial bias in law enforcement. While big cities and their police departments are at the center of the controversy, state legislatures have responded to constituent concern that officers are killing young black men without just cause. Legislation has taken many forms, including new requirements on racial bias training for officers and the collection of statistics about police-involved deaths. Lawmakers are also looking to place limits on the use of chokeholds during arrests and support the expanded use of body-worn cameras by officers.

Even though 35 states already have laws requiring some kind of bias training, legislatures in at least 14 states considered bills last year that would add to or expand upon those requirements. After the death of Eric Garner from a chokehold in New York, lawmakers in at least five states sought to limit the use of chokeholds during arrests. (Nevada, Tennessee and the District of Columbia already have regulations in place clarifying when a chokehold is appropriate.) Both Colorado and Maryland have enacted laws requiring police departments and sheriff’s offices to report every officer-involved death to a state agency.

Bills governing the use of body cameras to record police activity came up in at least 34 states last year, with six enacting new laws. The trend in 2015 was for lawmakers to provide guidance on when to share footage, when to stop filming and how to store the data. Some states provided funding to local departments for this purpose. -- J.B. Wogan

Opioid Addiction

(AP)

Around 2010, opioid use began spreading through middle-class, mostly white communities in the Northeast, causing a surge in overdose-related deaths. The epidemic is still ravaging parts of the East Coast, but now it is decimating communities in the Rust Belt, too. More than 8,200 people died from opioid use in 2013, quadruple the number from 2000.

Rampant drug use is usually associated with large cities and certain low-income neighborhoods. But the current crisis cuts across economic classes and is forcing lawmakers to rethink their approach to regulating drugs. Conservatives who traditionally have maintained a hardline stance on drug offenders are adopting a more forgiving attitude. This past year, 11 states enacted Good Samaritan laws that exclude people from negative consequences if they call 911 to report an overdose. The scope of this new approach varies among the states, but essentially it means fewer people will be charged for low-level drug possession. In Lee County, Ill., a heroin hotbed southwest of Chicago, more than two dozen people have taken up the offer since the program was implemented in August. Ohio, another state particularly ravaged by the outbreak, is still considering a Samaritan law that advocates are hoping will pass in the coming months.

The White House has also gotten involved, committing $5 million to reduce trafficking, distributing and use of heroin. Most notably, the effort will hire 15 drug intelligence officers and 15 health policy analysts to collect data and find patterns that will help local law enforcement on the ground.

The epidemic is beginning to have an effect on other public health issues. In Scott County, Ind., more than 150 cases of HIV were reported last May because of needle-sharing. At the height of the AIDS epidemic in the ’80s, conservatives vehemently opposed needle exchange programs, reasoning that they condoned drug use. Now Republicans in the Indiana and Kentucky legislatures are supporting bills that allow for exchanges in high-risk areas. Just last month, Miami-Dade County in Florida kicked off a needle exchange pilot program to curb an HIV outbreak; the program needed approval from the state’s Republican-controlled House Judiciary Committee before it could move forward. As more people overdose on opioids, more states are likely to respond by adopting needle exchange programs and Good Samaritan laws. -- Mattie Quinn

Medicaid Expansion

(AP)

When the Supreme Court ruled in 2012 that states could decide on their own whether to expand Medicaid, the assumption was that red states would overwhelmingly decide not to. This is still largely the case, but attitudes toward the health-care law are starting to soften at the state level.

The best example is the Medicaid expansion waiver. The U.S. Centers for Medicare and Medicaid Services (CMS) can waive certain provisions in the Affordable Care Act in order to allow state pilot programs that promote the “overall objectives of Medicaid.” Arkansas and Iowa led the way in 2013 by getting approval from CMS to use Medicaid funds for newly qualified recipients to purchase private plans. In the next two years, Indiana, Michigan and Pennsylvania followed with their own Medicaid expansion plans through the same waiver.

The states currently proposing waivers include Tennessee and Utah, both of which went heavily Republican in 2012. “It’s become a debate within the Republican Party -- the establishment versus the Tea Party -- on how to move forward, or not,” says Matt Salo, executive director of the National Association of Medicaid Directors.

Many lawmakers in Republican states are willing to expand Medicaid on the condition that the new beneficiaries meet work requirements. The Obama administration has remained steadfast against tying health coverage to work mandates -- Utah had a work requirement provision shut down by CMS last year -- but some legislatures may find a middle ground in the coming year. Both Utah and New Hampshire, for example, have proposed offering job assistance to unemployed beneficiaries, but not as a condition of remaining eligible for Medicaid. “We will likely see work requirements in a different form,” Salo says, “used more as a carrot rather than a stick.” -- Mattie Quinn

Environmental Regulation

(AP)

Arcane environmental regulations aren’t often front-page news. But two new initiatives by the Obama administration are so potentially sweeping that they stirred up huge controversies before they even took effect. One tries to settle long-running disputes about how far-reaching the federal Clean Water Act should be. Another pushes states toward adopting cap-and-trade systems for carbon dioxide emissions from power plants. States are fighting over both.

Forty-five of the 50 states have taken sides in a court battle over the power plant rule. They are split along political lines, with Democratic states largely backing the U.S. Environmental Protection Agency’s Clean Power Plan and Republican states trying to block it.

While the legal case plays out, states are still required under the rule to submit a plan by September detailing how they will reduce air pollution from their power plants. Nationwide, the rule is designed to lower carbon dioxide emissions from power plants by 32 percent by 2030 (compared to 2005 levels).

The deadline of September will come less than a year after the Environmental Protection Agency (EPA) finalized its regulations. In preparation for it, several states are already holding hearings and gathering public input on how they will meet the federally imposed CO2 caps. But most states will likely ask the EPA for a two-year extension, as developing the plans could take a long time and there’s no downside to seeking an extension. There is a cost for inaction, though: States that simply refuse to meet the deadline could end up with a pollution-reduction plan drawn up by the federal government.

Meanwhile, more than half of the states are also fighting the new regulation clarifying what qualifies as “waters of the U.S.” The designation is important because such waterways are regulated by the federal Clean Water Act. Farmers, homebuilders and counties oppose the Obama administration’s new definition, out of fear that it could impose onerous regulations on drainage ditches and other small bodies of water. Environmentalists and some cities back the rule, hoping it will improve water quality in rivers, lakes and other bodies of water downstream.

A federal court blocked the new water rules from taking effect while litigation over them continues. The case could eventually reach the U.S. Supreme Court, but it was the high court’s inability to define federal waters in a previous case that left the question to the EPA. -- Daniel C. Vock

Road Money

(AP)

The demand for new money to build and repair transportation infrastructure is so widespread that 18 states are already working on transportation funding proposals. Chances are only a few will get serious consideration, especially in this election year, but the broad interest underscores how widespread the needs are.

Despite major strides made in 2015, funding for roads and other transportation projects remains a top concern. Late last year, Congress passed a long-term transportation law to replace the one that expired more than six years earlier. States, like the federal government, have struggled to find enough funding to keep up with the need for repairs and new projects. Per-gallon fuel taxes, the main source of transportation funding, do not increase to match inflation. Meanwhile, increased fuel efficiency and changed driving habits are cutting into the buying power of gas taxes.

But lawmakers are starting to pay attention to growing infrastructure needs. Eight states decided to raise their fuel taxes last year, and a handful of others shored up their transportation spending by other methods, such as raising hotel taxes (Georgia), hiking sales taxes (Michigan) or dedicating future revenues toward transportation (Michigan and Texas).

The fact that so many states increased gas taxes last year is striking, because for many years governors and lawmakers have tried to avoid touching the politically unpopular issue. But with gas prices low, lawmakers in several states concluded it was the most practical approach. Other options, such as a vehicle-miles-traveled tax being tested in Oregon, are still a long way from common use.

In many states, lawmakers are working to ensure that money raised for transportation -- usually through the gas tax -- is no longer siphoned off for other expenses, such as schools or state police. Indeed, while once-flush state transportation funds used to be tempting targets for lawmakers who needed money for other priorities, today transportation funds are increasingly being shored up with general funds. -- Daniel C. Vock

Shared Economy

(Uber)

In Uber’s early years as a shared economy pioneer, its competitors and regulators scrambled to figure out which -- if any -- transportation rules applied to the ride-hailing service. But now that Uber has emerged as a major political and business player, courts and government officials increasingly are scrutinizing whether the company’s business model depends on skirting labor laws. Their decisions could determine whether Uber, and other businesses that deliver on-demand services, can continue to rely on legions of nonemployees to deliver their services.

The central question is whether Uber drivers are independent contractors, as the company claims, or employees, as many of its critics argue. Treating its drivers as independent contractors, Uber does not give them health benefits, retirement plans or services -- such as unemployment insurance -- funded through payroll taxes.

Uber claims it is only a technology company that links its drivers with potential customers. But labor commissioners in California and Oregon determined last year that Uber’s drivers are actually employees, not independent contractors. They found that Uber determines how its drivers perform their jobs and depends on them to deliver the company’s core services. A class-action lawsuit brought by Uber drivers in San Francisco raises many of the same arguments.

As the poster child for the shared economy, Uber attracts widespread attention for its controversial business practices. But many businesses -- from personal shoppers to call centers to FedEx -- also rely on outsourcing their core functions to contractors. As scrutiny on those businesses increases, state lawmakers and regulators may get caught up in the disputes. Many companies argue that the employment rules are outdated, and it could be up to states to rewrite employment laws if they want to encourage companies such as Uber to continue using their approach. -- Daniel C. Vock

TRENDING: 5 More Issues to Keep an Eye on in 2016

Mental Health Funding

Two years ago, when a package of gun control bills failed in Congress after the Sandy Hook shooting, it became clear that new regulation was off the table in most states for the foreseeable future. So lawmakers who want to attack gun violence, especially in states controlled by Republicans, have turned to mental health legislation as a way to address mass shootings without touching guns.

In the last few years, state mental health spending has been on the upswing, according to a 2014 report from the National Alliance on Mental Illness. But states still have a long way to go to return to the relative generosity of a decade ago. Between 2009 and 2012, states cut $4.35 billion in mental health spending, and even with recent increases, few have restored their funding to what it was at the end of the recession. And they may never: In 2014, 29 states and the District of Columbia increased funding for mental health services, but that was down from 36 the year before. In fact, some states instituted further cuts. -- Mattie Quinn

Centralizing Cybersecurity

For years, cybersecurity experts worried that state government agencies didn’t have enough safeguards to prevent a hack of citizens’ private data. Then it happened: In 2012, someone accessed more than 6 million taxpayer records from South Carolina’s Revenue Department. “In the cybersecurity world, it was the Titanic,” says Doug Robinson, the executive director of the National Association of State Chief Information Officers.

Since then, Michigan, Oklahoma, Pennsylvania and Virginia have all responded by passing laws to prevent a similar data breach. But perhaps the most interesting state to watch is South Carolina itself. In recent sessions, the legislature there found funding to support agencies’ preventive measures, such as dual-password programs and laptop encryption. Now lawmakers are considering a bill that would centralize cybersecurity in an office under the governor. Many states still allow individual agencies to develop their own security protocols, but South Carolina’s initiative would allow an information security director to oversee and enforce statewide standards. -- J.B. Wogan

Marijuana

In November, Ohio voters rejected a ballot measure that would have legalized the use of marijuana for recreational purposes, in part out of concern that it would create a monopoly system for growers and sellers. Pot proponents are undaunted by the defeat. Ballot measures covering legalization or medical use have been proposed in as many as 17 states for 2016. A legalization initiative has already qualified for the November ballot in Nevada, while measures are being filed and money is being raised in Arizona, California, Maine, Massachusetts and Michigan.

So far, the movement toward legalizing marijuana or allowing its use for medicinal purposes has focused almost exclusively on the ballot initiative process. This might be the year that starts to change. In Vermont, Democratic Gov. Peter Shumlin favors a legislative proposal to tax and regulate pot, as do the top leaders in both chambers. "If Vermont does this, it's likely to be a dam break for other states," says Allen St. Pierre, executive director of NORML, a marijuana legalization advocacy group. -- Alan Greenblatt

Labor Law

Wisconsin Gov. Scott Walker is no longer running for president, but his efforts to eliminate labor protections for state employees continue to attract attention in other states. Walker recently introduced new proposals to make hiring and firing of state workers easier, more like in the private sector. The standard collective bargaining rights afforded to state workers, Walker argues, hurt economic growth and make it difficult for the state to balance its budget.

While some 25 states already have laws that say unions can’t require workers to join and pay dues as a condition of employment, more efforts in this direction are possible. Last year, Illinois Gov. Bruce Rauner signed an executive order to prevent public-sector unions from collecting mandatory dues from employees who don’t want to be members, Rauner also pitched right-to-work legislation to the entire state. That effort didn’t go very far, but it may come up in more conservative states where Republicans are in control.

Meanwhile, GOP governors in Indiana and Michigan are working on strategies that rely on executive power. They are, in part, reacting to what happened in Ohio in 2012, when voters overturned a tough anti-union law. Republican governors know that submitting anti-labor laws to a public vote is a risky proposition. Executive orders are less vulnerable to challenge. -- Daniel Luzer

Religious Freedom

In light of the Supreme Court ruling that created a universal right to same-sex marriage, more states are going to look at laws that seek a balance between that right and religious freedom. A total of 21 states have laws that protect people from having their religious beliefs burdened by the government. Two such laws enacted last year, in Arkansas and Indiana, generated considerable pushback from progressives and corporate employers who saw them as opening the door to discrimination against gay people.

A religious freedom bill passed the Georgia Senate last spring but died in the face of such opposition. Legislators there are expected to try again in 2016. Other states may take an approach that isn't as broad, offering specific protections to people who refuse on religious grounds to issue a marriage certificate or perform weddings for same-sex couples. The Florida Legislature will consider a bill that would provide legal protections to businesses, including adoption agencies and health providers, that choose not to provide products or services that violate the religious beliefs of their owners or employees. -- Alan Greenblatt