What’s on the horizon for state regulatory advocacy this year

If you watch the news, you understand 2024 is a big year — there is a presidential election, and control of Congress for the next two years will be decided in November. Federal activity is not the only thing you should watch. Our profession continues to be impacted by legislative and regulatory activity in all 50 states. Here are a few things to keep an eye on as we close out the second half of this year.

Balanced budgets 

Unlike the federal government, states must have balanced budgets yearly. 2024 is the final year to use pandemic-related funds, and we are already seeing the impact. In 2023, 46 states saw an increase in revenue, but in 2024, 37 states said they expected to see a decrease. California and New York are already citing deficits in the range of tens of billions of dollars.

It isn’t only blue states that will be struggling to balance the books, though — many red states used COVID-19 relief dollars to reduce taxes for the public and incentivize business investment. If those tax cuts don’t pay off, states of all political leanings must make tough budget decisions or find revenue as they exit 2024 and enter 2025.

What are the tax threats?   

Wealth taxes aren’t only a federal concern. In 2024, six states introduced legislation assessing income tax on unrealized capital gains and net worth. So far, governors are generally resistant to these proposals because they would put their states at a competitive disadvantage over neighboring states.

Standards of conduct  

The talk of the town is the latest from the Department of Labor and its recently finalized Fiduciary 3.0, but standards of conduct continue to be a topic of conversation and activity at the state level. 

Thanks to Finseca’s advocacy work in conjunction with our joint trades, 46 states have adopted the National Association of Insurance Commissioners’ Best Interest for Annuity Standard. This adoption is bipartisan in nature and demonstrates the ability to create regulations that protect consumers while ensuring their continued access to a broad range of financial advice. Missouri, Nevada, New Jersey and the District of Columbia have legislation in progress, with expected adoption within the following year.

Long-term care

States are introducing and talking about long-term care more than ever. Medicaid spending in the U.S. is more than $800 billion per year, and 32% of that is spent on long-term care. Medicaid remains the single largest line item in every state budget. You hear talk of activity on funding long-term care in states such as California, New York, Minnesota, Massachusetts and more. However, in all those states, legislation was either not introduced or was introduced but never moved in the legislative process.

We will end this year with all eyes on Washington state. Washington remains the only state that has instituted a state-funded long-term care program (significantly easier to pass because of the lack of income tax in the state). However, a ballot initiative in the November election, if passed, would make the program optional and, essentially, defunct. Tens of millions of dollars will be spent on both sides of this campaign, and the result will likely trigger or hold off proposals in other states similar to Washington.

What will decide our opportunities and threats in 2025? You guessed it — the election. While the Biden-Trump battle rages on, 11 governors and more than 5,700 state legislators will be elected this November. 

If you are a member of Finseca, you have heard me speak many times about trifectas in the states. A trifecta is when the same party controls the house/assembly, senate and governor’s office. In all scenarios, regardless of the party in control, trifectas generally pass legislation quickly and without the debate and consideration that is typically part and parcel of a divided government. 

This year, we have 40 states that are trifectas — more than ever. Further, 20 of those states have veto-proof majorities — so even a more moderate governor will have no leverage or control of a legislature that decides it wants to move forward with an initiative that could harm the profession or our clients.

The road forward 

Finseca will continue to build out and advocate for the profession at the state level and keep our members apprised of any legislative or regulatory activity that will impact their ability to serve clients. Leading up to and following the November election, members will get essential insights about what to expect in new leaders, upcoming issues and how to prepare for 2025.

Melissa Bova joined the Finseca government affairs team in November 2021 as its first vice president of state affairs. She may be contacted at [email protected].