States Get Ready to Rumble
Here’s What You Need to Know
As of today, 18 state legislatures have already convened their 2023 sessions, and all but five state legislatures will have assembled within the next two weeks. That means life is going to come fast for state-focused government affairs professionals, who will find a dramatically different and even more sharply divided legislative landscape this year.
Shaped by one of the largest waves of freshmen legislators in years, many of whom were swept into office by the twin tides of populism and progressivism, and with increased one-party rule across more states, 2023 legislative sessions will prove challenging for a range of industries.
Public affairs professionals who have not already built their post-election playbook are starting 2023 behind. Here is what you need to know to stay ahead of this year’s key legislative debates.
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2023 State Legislatures Bring Newer, More Polarized Landscapes
More than one in four of the nearly 6,300 state legislators elected last November will be freshmen, thanks to the largest number of open seats in six election cycles and the highest number of primary defeats for incumbents in five election cycles. That shake up will extend to chamber leaders as well – about one-third of them will be new.
Many of these new faces will only fuel what has already been a long march towards more polarized legislatures. In 2023, single party control of states will reach a new high, with 140 million Americans living under Democratic control and nearly as many under Republican control:
- 48 of 50 state legislatures will feature one-party control across chambers
- 40 of those states will have trifecta control with a governor from the same party (though in both cases, Alaska’s inclusion is with a caveat)
- And a new high of 26 state legislatures will feature veto-proof majorities
Such domination by one party in state government mean fewer checks on partisan excesses, straining businesses’ ability to straddle the growing policy gap between red and blue states on a broadening range of issues.
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That Polarized Landscape Will Pressure Key Industries from Both Sides
From Fossil Fuel Divestment to Building and Vehicle Electrification and Beyond, States Will Clash Over the Energy Transition Even as They Leverage Federal Funds to Advance It. With billions flowing toward transitioning America towards net zero, expect plenty of clashes at the state level, including whether state pension funds should use their shareholder status to pressure fossil fuel companies to increase climate commitments or divest from fossil fuel entirely, which other states view as an unfair economic boycott. Similarly, building electrification initiatives in the Inflation Reduction Act (IRA) could lead to more legislative bans on natural gas hookups in newly constructed buildings – though some may update building codes to enforce these changes instead. With federal funding to build electric vehicle (EV) charging infrastructure heading to states, more states will consider following California’s lead in banning the sale of new gasoline-powered automobiles, even as other states push back. Other incentives in both the IRA and infrastructure law will encourage states to embrace more renewable energy development, including wind, solar, hydrogen, and nuclear, as well as measures to develop carbon capture, utilization, and storage. Bringing these renewables online will also require states to seek upgrades to the nation’s aging transmission network. Lastly, expect more progressive states to adopt new laws aimed at addressing environmental justice.
States Find Alignment on Tackling Healthcare Cost and Access, Diverge on Reproductive Health, With Many Firms Caught In Between. While the federal government prepares to negotiate prescription drug prices for Medicare participants, 22 states have adopted caps on co-payments for insulin and many others have introduced legislation as part of a broader push cracking down on prescription drug prices. Red and blue states also are finding common ground expanding access to telehealth, though the Supreme Court’s Dobbs decision could drive a wedge on such initiatives as red states restrict access and blue states expand access to abortion pills and procedures. Even for companies outside the health sector, this debate could impact their interests, as some red states look to penalize companies that aid employees skirting their state’s restrictions and blue states expect firms to defy other states’ restrictions.
States Have Big Tech and China in Their Crosshairs – But Their Actions Could Impact Firms Outside the Sector Too. There may be harmony between red and blue states on antitrust legislation targeting Big Tech over content moderation, app stores, and “right to repair”, but businesses outside the sector also could be caught in the middle as some states look to enact digital taxes or other measures that impact a wide array of firms, such as consumer data privacy rights. Closely tied to technology concerns is growing skepticism among state lawmakers regarding China’s presence in their states. At least five states have enacted laws limiting or prohibiting usage of technology products from Huawei and other Chinese makers, and others are considering such laws. Maryland recently became the latest state to ban the use of TikTok and other Chinese platforms on state government devices. These restrictions have gone beyond tech, with six states banning foreign ownership of farmland and others looking to regulate Chinese agricultural land purchases.
Financial Institutions Will Face Greater Pressure from Both Sides of the ESG Debate. 2022 witnessed a surge in red states divesting from banks and asset managers making environmental, social, and governance (ESG) commitments, and this trend will certainly continue into 2023. 19 states are considering such measures, following the lead of Texas, West Virginia, Oklahoma, and most recently Florida. Such actions have influenced Vanguard, the world’s largest mutual fund issuer, to leave the Net Zero Asset Managers (NZAM) initiative, but the state skepticism reaches well beyond the climate debate. Missouri, for example, is leading a 19-state investigation of whether Morningstar’s ESG assessments violate state consumer-protection laws, while Texas and others have launched a similar investigation into S&P Global. Meanwhile, blue states are calling on financial firms to be even more vigilant in enforcing climate goals and arguing for more ESG commitments.
FTX Crash Shifted Crypto Boosting to Crypto Busting. In 2022, a number of states boosted cryptocurrency with legislation often crafted by the industry itself, but FTX’s collapse has shifted support to skepticism as states line up to enact their own laws regulating the burgeoning industry in 2023. In addition to consumer protections and other rules specifically targeted at addressing FTX-like concerns, state legislators are likely to address environmental impact and energy consumption, usage as a form of legal tender, decentralized autonomous organizations (DAOs), property rights, tax structure and compliance, and cybersecurity.
Public Affairs Professionals Must Be Prepared to Navigate These Pressures
With state legislators rolling up their sleeves to enact a slew of policies that will significantly impact a range of businesses and industries, public affairs professionals cannot afford to wait to prepare for the battles that lie ahead. To anticipate these challenges, mitigate the risks, and leverage the opportunities, public affairs professionals will need a playbook to stay ahead. Here at Delve, we are already helping public affairs professionals build their playbooks to ensure they are ready to engage smartly and proactively in 2023 and beyond.