Ten Issues to Watch in States This Year

Editor's Note: This article appears in Governing's Winter 2025 magazine. You can subscribe here.

State policymakers face a challenging year. Budgets have gotten tighter and federal aid will decline. Much remains unknown about the policy turns Washington will take under full Republican control, but the incoming Trump administration has signaled its intent to send more authority to states in areas such as education and health. Meanwhile, governors and legislators already have a full plate of issues to deal with at home in sessions this year.

CRIME

Crime rates have come down after spiking during the pandemic, particularly for violent crimes. Still, many citizens don’t feel safe. Even in a blue state like California, voters last November approved stiffer penalties for theft and drug crimes, while turning out mayors and prosecutors viewed as too lenient. After years of so-called reform efforts meant to reduce incarceration, the pendulum is swinging back toward more punitive approaches.

AI

States tried to get ahead of artificial intelligence last year but mainly fell short. Tons of bills were introduced — every state that was in session saw bills, except one — but most newly enacted laws were minor, such as creating study commissions or requiring labeling of deepfake political ads. This year, more states may try to emulate Colorado’s more comprehensive approach that protects consumers from discrimination and AI-generated risks in a variety of economic and educational areas. More positively, policymakers will be pushing agencies to unlock potential AI uses.

EDUCATION

Reading and math scores remain anemic, while chronic absenteeism has taken root in too many young lives, leading policymakers to seek new interventions. In recent sessions, vouchers and other private school choice proposals have had tremendous momentum in red states. That’s not likely to stop. Look for a massive proposal in Texas, where GOP Gov. Greg Abbott helped unseat 15 legislators in primaries after they’d opposed a voucher bill. But there are clearly costs involved. Last November, voters in three states rejected school choice ballot measures, while half of all new spending in Arkansas Republican Gov. Sarah Huckabee Sanders’ proposed state budget would be devoted to vouchers.

BUDGETS

Budgets are growing more austere with the end of federal aid through the American Rescue Plan Act and other COVID-era programs. With revenues slowing in many cases, particularly in sales taxes, states from Washington to Maryland are facing significant shortfalls. In the current fiscal year, general fund spending will be flat compared with last year, according to the National Association of State Budget Officers. The days of increasing spending while cutting taxes are over, leaving lawmakers to face tougher choices.

HOUSING

It’s a top-of-mind issue in every state. Across the country, nearly 6 million new homes have been built over the past four years, but that’s barely made a dent in demand. The nation still needs nearly 4 million more homes. Across partisan lines, state lawmakers are pushing ideas to make construction happen by easing permitting rules for builders and overriding localities on zoning issues. Pushback from local governments remains strong.

PFAS

PFAS is an acronym describing a large group of “forever chemicals” that can cause harm to humans and other animals, making them one of the rare areas of environmental concern where there’s bipartisan agreement. These synthetics are widely used in both consumer products and industry. Numerous states have banned them from textiles, packaging and firefighting foam, but going one by one through various product categories has not effectively phased them out. States may pursue broader approaches on restrictions or labeling.

SOCIAL MEDIA

Growing concerns that social media platforms have contributed to depression and anxiety among young people has led some school districts to ban their use. A few states have enacted parental consent laws for younger teens to open accounts, while others have called for increased content moderation. Others have sought to ban platforms from algorithmically targeting children or at least protect them from exposure to harmful content. Essentially all of these approaches have run afoul of courts that find they violate First Amendment rights, but lawmakers will keep trying.

TAXES

Congress is looking to extend or expand tax cuts enacted in 2017. Depending on how that plays out, states may have a lot of work to do in changing their own codes to conform with federal law. Regardless, taxes remain a paramount topic in many states. Rising home prices have states looking for ways to insulate homeowners from substantial property tax increases. And, despite a tightening budget environment, there’s still an appetite for income tax cuts. A couple of new governors elected last year would like to abolish income taxes altogether, while Louisiana approved a 3 percent flat income tax rate as recently as November.

MEDICAID

Medicaid has been in expansion mode in recent years, increasing both enrollments and payments to providers. All that is coming to a halt. The pandemic-era increase in federal matching funds is already a memory. Washington is expected to cut Medicaid funding substantially this year, to help offset the cost of tax cuts. Whether that takes the form of serious changes to funding formulas or enrollment limits, or more modest de facto cuts through work requirements, remains unknown. With most legislative sessions ending before federal action will be complete, legislators will be flying a bit blind but they remain cautious, knowing that cuts are coming.

INSURANCE

States have always regulated insurance but difficulties in, well, ensuring that residents have access to reasonably priced homeowners insurance has emerged as an enormous problem. A spike in billion-dollar weather disasters, as well as less costly storms and wildfires, has caused insurance companies to pull out of some states entirely. States can create risk pools as a last resort but these are costly and coverage isn’t as robust as traditional private insurance. Lawmakers will be looking for ways to stabilize their markets but they won’t come easy or cheap.