dentons.com 43 US Policy Scan I 2017 years, Congressional partisanship and the concerns of many about the size of both the federal budget and the deficit have made the subject of increasing the debt limit a highly controversial one. Many Congressional Republicans have used the need for a debt ceiling increase as a platform to argue for reduced domestic discretionary spending and lower taxes, while some Congressional Democrats have used the debt ceiling platform to make the case for a reduction in deficit spending and greater fiscal responsibility through higher taxes and less defense spending. Far fewer members of the House and Senate seem willing to make the case for deficit reduction and balanced budgets as a matter of fiscal responsibility and intergenerational fairness. Thus, when the debt ceiling fight finally arrives, in March 2017, it may provide an early indication of whether the public has a greater interest in maintaining the creditworthiness of the federal government than do those the public has elected to represent them. US Policy Scan I 2017 Financial Services and Banking 44 dentons.com dentons.com 45 US Policy Scan I 2017 While financial regulation reform is clearly a priority for the Trump White House, it appears that repeal of the Affordable Care Act and starting the process toward achieving comprehensive tax reform will receive earlier attention. How soon in 2017, if at all, President Trump will turn his attention to financial regulation reform remains to be determined, and will depend heavily on whether President Trump and Senate majority leader Mitch McConnell (R-KY) are persuaded to adopt the view of Senator Pat Toomey (R-PA) that repeal of substantial portions of Dodd-Frank should be pursued this spring through budget reconciliation and a FY 2018 budget resolution, a process that would allow Senate Republicans to pass changes to Dodd-Frank with 50 votes and avoid the need to obtain Democratic votes to meet the 60 vote cloture threshold. In 2017, there will be several changes among the key players with respect to financial regulation. Although his confirmation process is likely to be contentious, Mr. Trump’s nominee for Treasury secretary, Steven Mnuchin, a veteran Goldman Sachs alumnus, hedge fund investor and Hollywood film producer who served as the Trump campaign’s national finance chairman, is expected eventually to be approved. While President-elect Trump has not set forth his views on financial services regulation in a comprehensive manner and did not often speak about financial services issues during the recently concluded campaign, he has been very clear that he views the Dodd-Frank Act as a “disaster” that has increased cost of operations due to greater regulatory oversight, stunted economic growth and interfered with lending–without any corresponding benefits for consumers. For these reasons, he believes that, ideally, the law should be repealed and the Consumer Financial Protection Bureau (CFPB) it created should be “dismantled.” Given the ability of an incoming President to nominate his own team to fill key positions at both the Treasury Department and the financial regulators, the expectation is that the Trump administration will pursue and implement a regulatory agenda that differs in fundamental ways from that of President Obama and most Congressional Democrats. The greatest uncertainty currently concerns not whether this shift will happen, but, like plans to repeal Obamacare and enact tax cuts, the speed with which it will occur. 46 dentons.com US Policy Scan I 2017 (Senate Finance Committee Chairman Orrin Hatch (R-UT) says that the committee will take up Mr. Mnuchin’s nomination in January.) Mr. Mnuchin’s nomination has been criticized by several key Democratic senators and representatives, including Senator Elizabeth Warren (D-MA) and Congresswoman Maxine Waters (D-CA), along with certain community advocacy organizations opposed to predatory lending and to home foreclosures who consider Mr. Mnuchin a “Wall Street insider” who got rich off the foreclosure crisis and who have promised to vigorously oppose his nomination. They also argue that Mr. Mnuchin’s selection contrasts sharply with, and calls into question the sincerity of, President-elect Trump’s attacks on the financial industry during the campaign. Until resigning after his nomination was announced, Mr. Mnuchin served on the Board of Directors of Sears Holding Corp. with Bruce Berkowitz, one of the leaders of the groups of Fannie Mae and Freddie Mac investors (the GSE shareholders) that have sued the federal government over the socalled “net worth sweep” agreement that requires Fannie and Freddie to funnel all of their net proceeds from their operations to the federal government, thereby depriving the GSE shareholders of any return on their investment. On November 30, after accepting his nomination to become Treasury secretary, Mr. Mnuchin said: “We’ve got to get Fannie and Freddie out of government ownership. It makes no sense that these are owned by the government and have been controlled by the government for as long as they have.” The prospect of Mr. Mnuchin becoming Treasury secretary is fueling the hopes of GSE shareholders that a favorable settlement with the federal government that adds value to their interests while achieving housing finance reform, may be more achievable. House Financial Services Committee Chairman Jeb Hensarling (R-TX), who interviewed with Mr. Trump for the Treasury Secretary position before Mr. Mnuchin was named, will lead the Trump administration’s efforts to “dismantle” the DoddFrank Act. (Congresswoman Maxine Waters (D-CA) will continue as the Committee’s ranking member.) With the retirement of Congressman Randy Neugebauer (R-TX) and the November election defeat of Congressman Scott Garrett (R-NJ), there will be new leadership on at least two key Financial Services subcommittees: Capital Markets and Housing and Insurance. Shortly after the next Congress convenes on January 3, 2017, there will also be new leadership of the Senate Banking Committee. Senator Mike Crapo (R-ID) will become the new chairman as current Chairman Senator Richard Shelby (R-AL) is term-limited. Senator Sherrod Brown (R-OH), the Committee’s ranking member in the 114th Congress, will continue in that role. When Senator Crapo served as the Banking Committee’s ranking member in the 113th Congress, he and then Chairman Tim Johnson (D-SD) offered housing finance reform legislation that differed sharply from the approach of Jeb Hensarling (RTX), who currently chairs the House Financial Services Committee. While Chairman Crapo has expressed interest in making housing finance reform legislation a priority, it’s currently unclear whether he is interested in offering legislation similar to the Johnson-Crapo bill from the 113th Congress or whether he is prepared, now that there will be a Republican president in the White House, to move closer to Chairman Hensarling’s approach. In the last Congress, Chairman Hensarling introduced his Financial Choice Act, a comprehensive wish list of changes that Mr. Hensarling would make to the Dodd-Frank Act and various related financial services issues. These changes include the repeal of the Volcker rule, the Durbin amendment on interchange fees that caps the fees that banks may charge for debit card transactions, the Dodd-Frank Orderly Liquidation provisions and the Department of Labor’s “fiduciary” rule for investment advisers; the elimination of the Office of Financial Research; the repeal of risk retention for securities backed by assets other than home loans; various changes to the CFPB, including making the bureau subject to the congressional appropriations process; constraints on the negotiation and adoption of international standards for capital or insurance; reduced prudential regulation of banks in exchange for heightened capital requirements such as maintaining an adjusted leverage ratio of at least 10%; prohibiting the CFPB from restricting the use of arbitration agreements; and making all rulemaking by independent financial regulators subject to rigorous cost-benefit analysis. Chairman Hensarling says that the bill is designed to restore market discipline instead of relying upon bureaucrats attempting to micromanage the economy. dentons.com 47 US Policy Scan I 2017 Under the Financial Choice Act, except for the Federal Reserve’s conduct of monetary policy, all financial regulatory agencies, including the CFPB, would be on budget and made subject to the federal appropriations process. Every financial regulatory agency presently headed by single directors—the CFPB, the Office of Comptroller of the Currency, and the Federal Housing Finance Agency— would be converted into bipartisan commissions. Moreover, the Act would require all major financial regulations to first be approved by Congress before they can take effect. Chairman Hensarling intends to introduce, early on in the 115th Congress, what he has termed his “Financial Choice Act 2.0”; since the election, he has convened meetings with many of the major financial services trade associations to get their input on changes they would like to see made to the updated Financial Choice Act before it is introduced. Mr. Trump is expected to pursue the longstanding agenda of Chairman Hensarling and many Congressional Republicans that the CFPB should be eliminated or, at a minimum, substantially reformed. While seeking the complete dismantling of the CFPB, Mr. Trump can be expected, at a minimum and using the Financial Choice Act as a template, to support Chairman Hensarling’s position that the CFPB’s single-director structure (as well as all single-director financial regulators) should be replaced by a five-member bipartisan commission and that the CFPB, rather than being funded through the Federal Reserve, should be funded solely through the federal appropriations process, where the Bureau would have to compete for resources with other agencies and other priorities. Mr. Trump has also expressed concerns about the Financial Stability Oversight Council (FSOC) and its process for designating financial institutions as systemically important (SIFIs). The President-elect says he shares Mr. Hensarling’s belief that the FSOC does not add value to the economy. (While it’s not clear that Mr. Mnuchin shares Chairman Hensarling’s passion for repealing Dodd-Frank, he has said that he would “strip back” Dodd-Frank because the law is “too complicated” and “cuts back on lending”). For many years, Chairman Hensarling has decried the DoddFrank Act’s failure to do anything about ending Fannie Mae and Freddie Mac’s conservatorships. Chairman Hensarling is supportive of an eventual renewed effort to move forward with legislation that would wind down Fannie Mae and Freddie Mac and take a more free market approach to housing finance. Howerver, he has called this a “very heavy lift” that looks to require a longer-term process than some of his other priorities. Moreover, Chairman Hensarling’s focus to date has been much more on reforming the GSEs and achieving housing finance reform than on creating remedies for GSE shareholders. In contrast, Senator Crapo said that he is looking to advance housing finance reform after he becomes the Banking Committee chairman and that overhauling the GSEs is “not at all” too big of a lift. Given the tremendous costs associated with recapitalizing Fannie Mae and Freddie Mac as well as the potential impact that changes to the housing finance system will have on the cost and availability of the 48 dentons.com US Policy Scan I 2017 30-year mortgage, it seems clear that housing finance reform will take a good amount of time to achieve even if promptly and aggressively pursued. Whether and how quickly Chairman Crapo, Chairman Hensarling and the White House can get on the same page with respect to these issues will be the key factors in determining whether and how GSE reform is achieved. Also certain to be on the agenda of the Financial Services and Banking Committees in 2017 is reauthorization of the National Flood Insurance Program, as the program’s authorization expires in September. To that end, Congressman Blaine Luetkemeyer (R-MO), Chairman of the Financial Services Committee’s Housing and Insurance Subcommittee for the 114th Congress, in early December 2016 circulated a set of principles that he hopes will guide the debate on reauthorizing the program and on how best to strengthen the private flood insurance market. Throughout the campaign, Mr. Trump emphasized a desire to reduce the amount and scope of federal regulations, even indicating that he believes two regulations should be eliminated for every new one that is adopted. Thus, Mr. Trump surely can be expected to nominate financial regulators who share his view about the costs imposed by excessive regulation. These nominees, if and when confirmed, can be expected to view their regulatory and enforcement responsibilities very narrowly. Moreover, given the recent decision by a panel of the US Court of Appeals for the DC Circuit that the CFPB is unconstitutionally structured and that its director must be terminable at will and removable by the president without cause, Mr. Trump is highly likely to remove CFPB Director Richard Cordray and to nominate a replacement who shares his views on financial regulation. (Obviously, separate from Mr. Cordray’s status, how soon Mr. Trump can nominate persons to assume financial regulatory positions will depend upon whether those banking regulators whose terms extend beyond President Obama’s January 20, 2017, departure can be persuaded to resign their positions and leave early.) Given the changes in the White House and in the composition of the new Congress, the prospects are strong that Mr. Trump will be willing to sign bills providing regulatory relief to credit unions and community banks and increasing the minimum dollar threshold for potential SIFI designation. However, with 60 votes still needed to break filibusters and if Senate Democrats are willing to stand their ground, it may remain difficult, unless financial regulatory reform is pursued through the reconciliation process, for the Senate to pass, and Mr. Trump to sign, anything except truly noncontroversial financial services legislation. dentons.com 49 US Policy Scan I 2017 Health Care dentons.com 50 dentons.com US Policy Scan I 2017 President-elect Donald Trump has repeatedly promised to repeal and replace President Obama’s signature legislation, the Affordable Care Act (ACA), and with the Republican Party’s continuing majorities in both chambers of Congress, the law’s future is certainly in serious question. We expect the 115th Congress to grapple with the several questions below that will affect the timing and content of a legislative alternative. 1. Will Congress completely repeal the ACA on day one? Not possible. Simply put, the entire ACA cannot be repealed on day one because it cannot be undone by unilateral action on the part of the Trump administration. A repeal of the entire ACA would require an act of Congress, which means that at least 60 votes would have to be secured in the Senate to overcome an expected Democratic filibuster of such a repeal bill. Republicans can, however, undo much of the ACA without Democratic support using an arcane “budget reconciliation” procedure that requires only 51 votes to pass in the Senate. 2. How much of the ACA can be repealed? Can vs. will. How much of the ACA Congress can immediately repeal is vastly different from what, in all likelihood, Congress will immediately repeal. The budget reconciliation rules are insanely complicated but congressional Republicans can use them to take a giant bite out of the ACA early in 2017. The process has two key features: (i) it allows Congress to make changes that impact certain mandatory federal spending that is outside the annual appropriations process; and (ii) legislative policy must have a direct budgetary impact. The current question is how much of the ACA Congress will repeal using this maneuver. Since the 114th Congress did not pass a budget for the current fiscal year (FY 2017), when the next Congress convenes in January, it appears Republicans are poised to introduce and pass a budget for this fiscal year with reconciliation instructions that would allow for Republicans to pass legislation that would repeal parts of the ACA. Certain parts of the ACA, such as those which provide insurance coverage for children to age 26 and prohibit denials based on preexisting conditions enjoy bipartisan support and therefore are unlikely to be included in reconciliation legislation. The million dollar question currently facing the Republican leadership in both chambers is whether they have the simple majority needed to pass a reconciliation bill that repeals parts of the ACA without putting an alternative in place. 3. What is the timing of the ACA repeal? Two possibilities. Since election night, the healthcare community has debated how much of the ACA will be repealed and how quickly. There are two options. The current strategy among Republican leaders in Washington is to begin in early 2017 with a budget resolution that would lead to a vote on reconciliation legislation that would repeal parts of the ACA, with some provisions getting a two- or three-year transition period until actual repeal. This “repeal and delay” strategy would accomplish a political win with a quick vote on repealing the ACA, but the actual effective date of those repeal provisions would be years in the future. Some centrist Republicans and a group of conservatives seek to include pieces of an ACA replacement in the bill that will repeal the legislation. While this “repeal now” perspective runs counter to GOP leadership, it has gained currency as some members of Congress who fear “repeal and delay” may disrupt insurance markets. If Republicans choose to pursue the January reconciliation strategy, repealing and replacing the ACA will be a two-step process, with the possibility of a substantial amount of time transpiring between the two steps. However, if consensus builds that the two steps should be done in sync, Republicans could use the FY 2018 budget process, which would give them time to build a consensus around a proposal to replace the ACA. dentons.com 51 US Policy Scan I 2017 4. What will the Republican replacement look like? Republican proposals that have been introduced since 2010 can serve as indicators of what provisions currently enjoy bicameral consensus. The reconciliation bill vetoed by President Obama in January 2016 could be the blueprint Republicans follow in dismantling the ACA. Also, this past summer, the House Republican Conference, led by Speaker Ryan, set out the “Better Way,” a series of proposals on key issues, including healthcare, and when comparing the Better Way roadmap with some of the proposals introduced in the Senate in recent years, some consistent themes emerge: • Tax credits and portable coverage. Bicameral proposals all make tax credits available for the purchase of insurance. The Better Way proposal envisions a universal advanceable and refundable tax credit to all individual and families who do not have an offer of health coverage. The credit would not vary based on income level. • Insurance reforms. Many reforms from ACA remain, including continuous coverage, expanded purchasing options, and statebased high-risk pools. • Strengthened consumerdirected health. Current rules governing consumer-directed health plans, such as health savings accounts (HSAs) and flexible spending accounts (FSAs), would be modified. • Capping the employer exclusion. Bicameral proposals cap the tax deductibility of employer-based health coverage in order to cover the cost of the tax credits they offer. • Medical malpractice reform. Based on successful state laws in California and Texas, proposals include caps on non-economic damages, limitations on attorney’s fees, as well as incentives for states to adopt additional solutions to settle disputes. 5. What is the future of Medicaid reform? Additional permission for state flexibility in Medicaid (including additional requirements to be imposed on Medicaid beneficiaries) is a near certainty from the Trump administration. CMS distributed almost $350 billion in Medicaid payments to states in 2015. Trump’s pick for CMS Administrator, Seema Verma, believes in state flexibility and was the architect of Medicaid reform initiatives in several states. Common components of those plans included small cost-sharing contributions from Medicaid recipients so they would have some “skin in the game,” plus high-deductible plans and health savings accounts. The Medicaid expansion that was included in the ACA is likely tied to the fate of the ACA repeal efforts. It is possible that ACA repeal efforts or other legislative efforts could also provide more dramatic Medicaid reform. The Better Way proposal would also have offered states a choice between per capita caps and state block grants as a way to reform the program and limit future growth. However, more dramatic Medicaid reform would need to be able to pass a closely divided Senate where Medicaid limits could cause a food fight that does not break on party lines. 6. Its harder than it looks. Confronting the financial, programmatic and political complexities and implications of fashioning a replacement for a repealed ACA will challenge the capabilities of the new Administration on Congressional leaders of both parties. Already, the hospital industry has expressed its alarm that it will loose more than $160 billion in revenues if the ACA if repealed. Should federal subsidies end for lower income people purchasing coverage through health insurance marketplaces, many industry experts project an overall collapse of the private insurance market for individuals. Recent improvements in care quality and efficiency could be lost if value-based reimbursement models, like accountable care organizations, are eliminated. The health care sector has integrated the ACA policies in ways that make eliminating those policies exceptionally difficult. How the Trump Administration and its allies in Congress replace the ACA without inflicting damage on the system or the people it serves and employs will be perhaps the first major domestic policy test for the new government. Homeland Security 52 dentons.com President-elect Trump spent much of his campaign assuring the American electorate that US national security would be a key focus of his presidency. In particular, he expressed a steadfast commitment to eradicating domestic terrorism. Soon after his election, Trump named former Defense Intelligence Agency Director and retired US Army Lieutenant General Michael Flynn as his national security adviser, and former National Security Council staff member K.T. McFarland as Flynn’s deputy. Although Flynn’s selection was met with a mix of support and opposition on Capitol Hill not easily divisible along party lines, there’s no arguing with his depth of knowledge and experience in counterintelligence and counterterrorism. Trump has also tapped retired US Marine Corps General John Kelly to serve as secretary of homeland security. As the former commander of US Southern Command, which oversees US military operations and activities throughout Central and South America, Kelly interfaced regularly with Department of Homeland Security (DHS) and intelligence community leadership. The experience also afforded him a unique understanding of the people, policies and processes involved in facilitating—and countering— the trafficking of drugs and other contraband, as well as humans, across the US-Mexican border. Like Trump, Kelly is an outspoken proponent of securing America’s southern border, referring to the flow of drugs, weapons and undocumented immigrants as posing an existential threat to our nation. In appearing before Congress in 2014, he emphasized that US border security operations are underfunded and warned of a burgeoning “crime-terror convergence.” Despite the strong rhetoric, Kelly is considered to hold positions on many homeland security issues that are more moderate and pragmatic than those held by others who will serve in key posts in the Trump administration. Kelly has also commanded Marines in Iraq as part of the War on Terror and is the highest-ranking member of the US armed services to have lost a child in combat in the region. One of his sons, a Marine lieutenant, was killed in action in Afghanistan. Yet those who have served with him insist that his moderate and openminded views on Islam vis-à-vis the West have remained unchanged. Many Republicans and Democrats on Capitol Hill have privately said that they hope and expect that Kelly, who has frequently expressed informed and nuanced views on some of the more contentious policy issues that have bedeviled the DHS, will serve as a check on the more ideologicallydriven members of the Trump administration. Kelly’s confirmation will be a top priority for the Senate Homeland Security and Governmental Affairs Committee in early 2017. Chairman Ron Johnson (R-WI) has expressed strong support for Kelly, as has his House counterpart, Chairman Mike McCaul (R-TX 10th). Both have indicated an eagerness to work with Kelly and new DHS leadership to implement policies to better secure America’s borders, enforce immigration laws and protect the US from the now persistent threat of terrorist attacks. dentons.com 53 US Policy Scan I 2017 In the wake of well-founded allegations of Russian hacking of the US presidential election and a host of other crippling cyber attacks in 2016, the DHS committees will use their oversight and policymaking functions to make cyber security policy another major priority in 2017. With progressively more sophisticated cyber attack capabilities enabling even small nations and non-state actors to hack individual, corporate and government information systems, Congress is expected to focus in particular on protecting critical federal infrastructure from potentially devastating cyber attacks. Guided by general agreement on a core set of policy objectives, it is likely that key Congressional lawmakers will work effectively with Kelly and his staff to shape, perhaps temper and, ultimately, implement many of Trump’s homeland security policy priorities in 2017. 54 dentons.com US Policy Scan I 2017 dentons.com 55 US Policy Scan I 2017 Immigration dentons.com 56 dentons.com US Policy Scan I 2017 While the debate over our nation’s immigration policy played a large role in the in the 2016 presidential campaign, Congress took no significant steps during the past session to consider comprehensive reform. Executive action from President Obama provided some protections to children of undocumented immigrants, but only after differences between Republican members and their constituencies regarding how to address—if at all—a pathway to citizenship for the undocumented put the issue on hold. But the end of the Obama presidency and, more important, the surprise victory of Donald Trump, whose aggressive rhetoric concerning border security, mass deportations and visa restrictions became a centerpiece of his campaign, virtually ensure its place at the forefront in the upcoming 115th Congress. Under the Obama administration, despite an historic number of deportations, there was an understanding by members of the undocumented community as to what groups within the community would be subject to action by the federal government. With the election of Mr. Trump, the undocumented community awaits more clarity from the President-elect as to how he intends to implement his campaign promises, such as a border wall paid for by Mexico and a freeze on the emigration of refugees from countries where there is widespread terrorist activity. While there is currently little in the way of specific policy proposals, Mr. Trump’s nomination of Senator Jeff Sessions (R-AL) as US Attorney General provides some insight into his thinking. Senator Sessions was a leading opponent of the last two major immigration battles in the Congress, viewing both measures as amnesty proposals that limited enforcement measures and softened temporary worker procedures, adversely impacting lower wage earners domestically. While the Senator hope to be moving to the Justice Department—several Republican members of the House and Senate who were key to the attempts to move immigration reform in years past will now be in position to craft new measures. House Judiciary Committee Chairman Bob Goodlatte (R-VA), a former immigration attorney, will have jurisdiction over any legislation that is considered by the House. Rep. Goodlatte has favored prioritizing border security measures but is also seen as open to providing undocumented immigrants already in the country with some form of protected status. Hardliners in the House will want to move quickly on the security front, but they will have to contend with Republican reformers who will be pressing for a more comprehensive approach. The latter have vowed to make the development of a pathway for undocumented aliens already here key to any bill that seeks to deal with border security. In the Senate, Marco Rubio (R-FL), who returns following his failed presidential campaign, will be integral to the Trump administration’s efforts to pass legislation. Senator Jeff Flake (R-AZ), dentons.com 57 US Policy Scan I 2017 a member of the Senate Judiciary Committee and from a state that has endured major controversies over border security laws, will also be key to immigration reform. Senator Flake has joined with Senator Lindsey Graham (R-SC) to support legislation that would provide an extension of the protections currently in place to the children of undocumented workers until Congress can move to consider comprehensive reform. The refugee crisis in Europe and the terrorist attacks that have plagued France, Belgium and, most recently, Germany, will also weigh heavily on the policy debate. While efforts aimed at securing our nation’s southern border will involve different policy proposals, there will be an effort by the White House to persuade Congress to consider limiting or suspending visas with respect to individuals coming from countries with heavy terrorist activity or without adequate vetting protocols in place. As Europeans increasingly are questioning the wisdom of open-border policies which, while allowing individuals with legitimate refugee status to escape Syria and other war-torn states have also provided ISIS and other terrorist organizations with a means of infiltrating the west, the United States is confronting similar concerns. International Relations 58 dentons.com With the potential for significant shifts in US foreign policy under the Trump administration, politically charged debates over US involvement in conflicts, humanitarian crises, trade deals, and strategic alliances are expected to take place on Capitol Hill in the coming year. The President-elect’s foreign policy platform is continuing to be defined, and he has lauded the “element of surprise” and being “unpredictable” in the international relations arena. Once he is in office however, it is likely that his foreign policy objectives will begin to take shape, with guidance from both his inner circle within the Administration and from key Republican lawmakers on Capitol Hill, including Senate Foreign Relations Committee and House Foreign Affairs Committee Chairmen Bob Corker (R-TN) and Ed Royce (R-CA 39th). Congressional Republicans will have more leverage in 2017 as they not only will continue to control both the House and Senate, but will also now have a Republican president to collaborate with on policymaking priorities. Trump has nominated ExxonMobil Chairman and CEO Rex Tillerson to serve as secretary of state. His confirmation hearing will be a top priority in January for the Senate Foreign Relations Committee. Although he has no public sector experience, Tillerson has, for a decade, helmed a company with virtually unrivaled global dealings, interests and influence. If ExxonMobil were a country, its annual revenue would make it the 41st largest economy in the world. According to Robert McNally, the former senior director for international energy on the National Security Council under President George W. Bush, “the closest thing [the United States has] to a secretary of state outside government is the CEO of Exxon.” Tillerson’s confirmation proceedings have the potential to be tense. Of most concern to Senate GOP defense and foreign policy hawks, and many Democrats as well, are his reportedly close relationships with Russian President Vladimir Putin and members of Mr. Putin’s inner circle. ExxonMobil has extensive interests in Russia and the Caspian Sea region, which Tillerson oversaw directly at one point during his decades-long career at the oil and gas giant. Nevertheless, his Congressional supporters include Senate Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX), and Corker, the last of whom will lead Tillerson’s confirmation hearing and was himself on the President-elect’s short list for secretary of state. Corker has described the ExxonMobil leader as “a very impressive individual” who has “an extraordinary working dentons.com 59 US Policy Scan I 2017 knowledge of the world.” In addition, outspoken Putin opponents, including Senators Lindsey Graham (R-SC) and John McCain (R-AZ), have indicated an openness to supporting Tillerson’s confirmation as they continue to learn more about his background, relationships abroad and positions on global policy matters. Although there is little margin for Republican opposition, Tillerson is expected to emerge from the confirmation proceedings as the next secretary of state. Trump has stated that he plans to be more assertive with US military power in the fight against the Islamic State of Iraq and Syria (ISIS) than Obama was, and also more proactive in engaging American allies throughout the Middle East. The President-elect will likely garner strong, and perhaps bipartisan, support on Capitol Hill for more aggressive action against ISIS. Additionally, as the US likely begins to redefine some existing alliances with foreign governments, Congressional foreign affairs lawmakers will likely exercise oversight and policymaking authority over new defense and trade deals, while debating the validity of, or at least certain terms within, existing trade deals, such as the Trans-Atlantic Trade and Investment Partnership (T-TIP), theTrans-Pacific Partnership (TPP) and the North America Free Trade Agreement (NAFTA). Further, Congress will again debate and review sanctions against Iran, Cuba and Russia in 2017, with a particular focus on the Joint Comprehensive Plan of Action (aka the Iran Nuclear Deal). Debate on US relations with Cuba is likely to pit the pro-commerce wing of the Republican party against the antiCuban Government wing of the party, with most Democrats continuing to support the easing of sanctions against Cuba to help secure this legacy item for President Obama. Trump’s selections of Tillerson for secretary of state and retired Lieutenant General Michael Flynn to serve as national security advisor could be indicative of his interest in a reset of US-Russia relations. The President-elect has expressed a willingness to work with Russia in the fight against ISIS, and Flynn is believed to support an improvement in US-Russia relations as well. Leading Congressional Republican foreign policy hawks, and many Congressional Democrats, are loathe to embrace Putin as an ally and have indicated that they would resist attempts to accommodate Russia, including by easing sanctions imposed on the country as a result of its incursion into Ukraine. As a result, the future of US relations with Russia is a key foreign policy position over which Congressional Republicans and the President-elect may be very much at odds in 2017. The President-elect has made strong statements against China, often referring to the nation during his campaign as one of the US’ leading economic enemies. He has said he plans to toughen rules against the theft of intellectual property, combat subsidies China provides to boost exports and oppose the proposed TPP, the trade agreement that includes the US, Japan and 10 other countries. Key Congressional Republicans are likely to support a tougher diplomatic and policy posture toward China and will have an opportunity to assist in the shaping of the Trump Administration’s China policy in 2017. Also in the coming year, the House Foreign Affairs and Senate Foreign Relations Committees will continue to exercise oversight and policymaking authority over a host of other vital foreign policy matters, including: • The ever-expanding fight against ISIS and other extremist groups in Syria, Iraq, Libya and elsewhere • Ongoing US military activities in Afghanistan • The US alliance with Israel, and the stalled Palestinian-Israeli peace process • US involvement in NATO In 2017, the Trump administration is likely to undertake a wholesale country-by-country reassessment of US foreign aid and existing trade agreements. The Republicancontrolled Congress is likely to play a major role in this process—shaping and, at times, moderating, an anticipated shift in the geopolitical worldview from 1600 Pennsylvania Avenue. 60 dentons.com US Policy Scan I 2017 Supreme Court dentons.com 61 62 dentons.com US Policy Scan I 2017 After Justice Scalia passed away in mid-February 2016, President Obama nominated, on March 16, DC Appeals Court Judge Merrick Garland. The Republican Senate decided not to give Judge Garland a hearing or a floor vote and instead to wait until after the election when there was a chance that a new Republican President would be able to nominate Scalia’s replacement. President Obama and Congressional Democrats vigorously protested what they considered an unprecedented act of political obstructionism and dereliction of the Senate’s constitutional duty. A handful of Senate Republicans also favored hearings on Judge Garland. But they never happened and the Senate GOP gambit paid off when Donald Trump was elected President on November 8. In 2013, then Majority Leader Harry Reid (D-NV) used a rare parliamentary tactic to lower the filibuster threshold for all nominees from 60 votes to 50, thus clearing the way for confirmation of many of President Obama’s nominees who were awaiting full Senate consideration. Exhibiting an uncanny prescience, Reid decided to exempt Supreme Court nominations from the new 50-vote threshold. This means that Democrats may have the ability to block any new Trump nominee if 41 Senate Democrats oppose ending a filibuster to consider Scalia’s replacement. In short, the Senate process for confirming all judges, but especially SCOTUS nominees, has descended into partisan dysfunction that has left the chamber bitterly divided. Democrats blame Republicans for this mess and Republicans blame Democrats. But whoever’s responsible, the Senate will likely head into uncharted waters during its consideration of the next SCOTUS nominee. Democrats seeking revenge for the GOP’s blocking of Judge Garland may consider filibustering any new SCOTUS nominee, no matter his or her qualifications and background. If this happens, Senate Majority Leader Mitch McConnell (R-KY) may use the same procedure Reid used in 2013 to lower the filibuster threshold from 60 to 50. If he does not do this, it is possible that President Trump’s new nominee could be delayed indefinitely. In September, candidate Trump released a list of names that he would consider for Supreme Court appointments should he be elected. The Trump campaign did not share how it settled on the names, but Mr. Trump had previously said that he was seeking guidance from conservative groups such as the Federalist Society and the Heritage Foundation. It is also not clear whether the list was definitive or merely indicative of the types of candidates he would select. It included the following names: Name Bio Keith Blackwell Position: State Supreme Court, Georgia Prior to the Georgia Supreme Court, Blackwell served on the state’s Court of Appeals. He spent much of his career at private law firms as an associate and partner. Charles Canady Position: State Supreme Court, Florida Canady was general counsel to Florida Gov. Jeb Bush before Bush appointed him to the state’s Court of Appeals. Steven Colloton Position: 8th Circuit Court of Appeals Colloton’s name has been floated for the SCOTUS bench before. Colloton is a reliable conservative who has upheld a law banning unauthorized immigrants from renting apartments and expressed support for single-sex college student organizations. Allison Eid Position: State Supreme Court, Colorado Eid is a conservative, having clerked for Clarence Thomas, with respect from her peers. More than 90% of Colorado attorneys and judges said that Eid should stay on the Colorado bench when she was up for reelection. Neil Gorsuch Position: 10th Circuit Court of Appeal Gorsuch was appointed by President George W. Bush in 2006. He previously served as a deputy associate attorney general. Raymond Gruender Position: 8th Circuit Court of Appeal Gruender has consistently ruled on the pro-life side of abortion cases, once upholding a law that requires abortion seekers to be told that they are terminating a human being. He also wrote an opinion arguing that employers shouldn’t be required to include contraceptives in health care coverage. Thomas Hardiman Position: 3rd Circuit Court of Appeals Hardiman has consistently sided with law enforcement officials against defendants and inmates. He wrote a dissenting opinion that the First Amendment does not give citizens the right to tape police. Raymond Kethldge Position: 6th Court of Appeals Raymond ordered the IRS to turn over information in a case involving its alleged persecution of conservative groups. In his confirmation hearings in 2003, Kethledge talked of his pro bono work with criminal defendants and low-income residents trying to keep their homes. Joan Larsen Position: State Supreme Court, Michigan Larsen worked in the Office of Legal Counsel during the second Bush administration, and wrote one of the legal memos on which Bush based his administration activities in the early days of the war on terror. Mike Lee Position: Senator from Utah The senator previously clerked for the US District Court in Utah and the Third Circuit Court of Appeals. Thomas Lee Position: State Supreme Court, Utah Lee filed a concurrence agreeing that fetuses should count as “minor children” for the purposes of wrongful death suits. A strict originalist, he also argued that the constitution has no basis for the principle that evidence from unlawful searches cannot be used in trial. dentons.com 63 US Policy Scan I 2017 Name Bio Edward Mansfield Position: State Supreme Court, Iowa Mansfield is an adjunct law professor at Drake University. Frederico Moreno Position: State District Court, Southern District of Florida Prior to serving as a judge, Moreno worked in the private sector and was a federal public defender. Moreno was nominated to his position by President George H.W. Bush and was unanimously confirmed by the Senate in 1990. William Pryor Position: 11th Circuit Court of Appeals Pryor called Roe v. Wade “the worst abomination in the history of constitutional law,” which he said has led to “the slaughter of millions of innocent unborn children.” He also wrote an amicus brief supporting laws banning sodomy, and equated homosexuality to necrophilia, bestiality, incest and pedophilia. Margaret Ryan Position: Armed Forces Court of Appeals Appointed by President George W. Bush, Ryan is the only military judge on Trump’s list. She clerked for Justice Clarence Thomas and served on active duty in the Marines for 11 years. David Stras Position: State Supreme Court, Minnesota Stras’s campaign site emphasized his view that judges should not include their own political leanings in decisions. He hasn’t openly expressed many controversial opinions as a judge. Diane Sykes Position: 7th Court of Appeals Sykes ruled against Chicago’s ban on firing ranges on Second Amendment grounds, gave a decision barring enforcement of the Obamacare birth control mandate, ruled in favor of Wisconsin’s restrictive voter ID law, and decided that student organizations that ban gay members have a constitutional right to funding from public universities. Amul Thapar Position: State District Court, Eastern District of Kentucky Thapar put an 84-year-old anti-nuclear activist nun in prison for bursting into a Tennessee nuclear facility. He was nominated by President George W. Bush and was the first Indian American judge named to the federal judiciary. Timothy Tymkovich Position: 10th Circuit Court of Appeals Tymkovich, appointed by President George W. Bush, wrote the majority in a Ninth Circuit decision in Burrell v. Hobby Lobby. He found for-profit corporations like Hobby Lobby to be exempt from a law if the corporation’s owners religiously object to it and there is a less restrictive way to promote the law’s interest. As solicitor general in Colorado, Tymkovich unsuccessfully supported a state constitutional amendment preventing protected status based on sexuality. Don Willett Position: State Supreme Court, Texas Willet worked for George W. Bush’s presidential campaign and administration. He supports striking down economic regulations like minimum wage and child labor laws using the 14th Amendment, saying the measures violated “freedom of contract.” Willet is also an outspoken critic of Trump. Robert Young Position: State Supreme Court, Michigan Young wrote an advisory opinion that a photo identification requirement for voting was a “reasonable nondiscriminatory” requirement. 64 dentons.com US Policy Scan I 2017 dentons.com 65 US Policy Scan I 2017 Tax dentons.com 66 dentons.com US Policy Scan I 2017 Tax legislation will be a major focus of Congress and the Trump Administration in 2017. They must, for example, deal with taxrelated provisions in their planned changes to the Affordable Care Act. In addition, an infrastructure package and other high-priority legislation will likely have tax components as well. But tax issues will really move to the front and center when Congress takes up tax reform. The scope and timing of tax reform depend on the ambitions of President Trump and Congress. Comprehensive tax reform that would rewrite the individual income tax, corporate income tax and estate-and-gift tax rules would likely consume the entire legislative year and much of 2018 as well. On the other hand, reform limited to certain areas of the Internal Revenue Code (e.g., international or corporate tax reform) could be enacted more quickly. However, reforming the tax rules for some types of taxpayers but not others—even if part of a staged approach—could raise significant problems. How the Trump administration decides to proceed with tax reform will drive the effort’s scope, content and speed. President Trump could identify specific requirements that tax reform must meet and major components that it must include, and then leave it to Congress to develop the details of such a tax reform plan. On the other hand, he could present or endorse a specific tax reform plan and demand that Congress pass it by a certain deadline. In any case, for President Trump to be directly involved in the development of a tax reform plan, he will need to quickly staff his tax and economic policy team so that they can develop or react to a detailed tax reform proposal. In the absence of either a detailed plan from President Trump or his endorsement of a specific congressional plan, the House is expected to proceed with fleshing out and drafting the tax reform provisions set forth in the so-called House Republican Blueprint released on June 24, 2016. Ways and Means Committee Chairman Kevin Brady (R-TX) and the rest of the committee members met in December to discuss the path forward, and they expect to move quickly in the new Congress. Due to the complexity and, in some cases, novelty of the ideas in the House Republican Blueprint, legislative language, whether in draft form or as introduced bills, is expected early in 2017 to elicit comment and feedback. Of particular interest will be the “border adjustable” feature of the House Republican Blueprint that effectively imposes a tax on imports and an exemption on exports. The jury is still out on whether this feature would be the solution to tax reform (e.g., because it would permit a greater corporate tax rate reduction than would otherwise be possible due to the revenue it raises) or its demise (e.g., if it caused the retail industry and other large importers to oppose tax reform). The Senate Finance Committee will be focusing on tax reform as well. Unlike Ways and Means, the Finance dentons.com 67 US Policy Scan I 2017 Committee has no blueprint before it, although it has a lot of previously prepared material on tax reform. Chairman Hatch is expected to follow the traditional Finance Committee approach of seeking a bipartisan and broadly supported proposal. The feasibility of this inclusive process is tied, however, to political and procedural decisions that will be made by House and Senate leadership, such as whether to proceed under Budget Reconciliation and whether tax reform will be revenue neutral (and, if so, how revenue neutrality will be measured). Still, developing a tax reform package that will pass both the House and the Senate will be difficult, even with Republicans in control of both the House and Senate. President Trump and congressional Republicans must agree not just on a tax reform proposal but also how best to enact it. Some will argue that the process will be easier if tax reform is done in stages (e.g., international tax reform first, or corporate tax reform before individual tax reform). Others will argue that such a piecemeal approach is politically infeasible or presents technical and revenue-estimating problems due to the interaction of tax provisions. In any case, both President Trump’s campaign proposal and the House Republican Blueprint have created expectations of comprehensive tax reform, making it difficult for Republicans to be seen as delivering on that promise if they enact more limited tax reform. In the end, though, political support for a tax reform package will not be enough—the public must support it as well. Chairman Brady, Speaker Ryan, Chairman Hatch and Republican Leader McConnell not only have to sell the tax reform proposal they create to their colleagues, they have to sell its broad-based benefits to the public as well. Tax reform will be a mixed bag for everyone, and it will inevitably stall if companies and members of the public focus too much on particular components that they dislike and not enough on the legislation’s overall effect and benefits. US Policy Scan I 2017 Telecommunications 68 dentons.com dentons.com 69 US Policy Scan I 2017 When the 115th Congress and President-elect Trump are sworn in come January 20, the Federal Communications Commission (FCC) will look remarkably different. Current FCC Chairman Tom Wheeler has announced that he will be stepping down on that day and, while no interim chairman has been announced, it is likely that current FCC Commissioner Ajit Pai will take the helm, at least on an interim basis. Democratic Commissioner Jessica Rosenworcel, who was not reconfirmed prior to the end of the 114th Congress, will be forced to leave, as her term expired at the end of the year. Thus, in the early days of the 115th Congress, the FCC will be a 2-1 Republican majority, with Republican Mike O’Rielly and Democrat Mignon Clyburn rounding out the agency’s leadership. It remains to be seen who Trump may tap to chair the FCC and who he will nominate to replace Commissioner Rosenworcel, but Jeffrey Eisenach, a visiting scholar at AEI and the FCC transition team leader, will play a key role in determining who the new faces are at the Commission. The FCC transition team also includes Mark Jamison and Roslyn Layton, both of whom are also visiting fellows at AEI as well and outspoken conservative advocates. Despite not having a full complement of Commissioners, it is expected that the agency’s Republicans will move quickly undo several Obama legacy regulations, with the FCC’s Open Internet Order 2010, a set of regulations that move towards the establishment of the “net neutrality” concept, a prime target. In the Order, the FCC reclassified broadband under Title II of the Communications Act and regulated the internet under its common carrier provisions as a public utility. The Republican commissioners have already stated they would not enforce certain provisions of the net neutrality order and that they plan to “revisit” the Title II proceeding “as soon as possible.” The Republicancontrolled Congress may also, early on, seek to dismantle net neutrality by advancing new legislation to overturn the reclassification of broadband internet service as a common carrier service under Title II. Finally, President-elect Trump could also issue an executive order to reverse net neutrality, which he has referred to as a “top-down power grab.” In short, net neutrality could be targeted through 70 dentons.com US Policy Scan I 2017 any one or a combination of these avenues and will no doubt be a top priority for the FCC’s Republicans and the Republican-led Congress in 2017. Also in the 115th Congress, expect a continued and heightened focus on spectrum policy, which, at the macro level, enjoys bipartisan support for increasing the amount of spectrum available for commercial use. The ongoing incentive auction is well underway, with Stage 4 recommencing on January 3. After completion of Stage 4, there will be another stage of the forward auction at a date to be determined. Generally, the Republican-controlled White House and Congress will target such spectrum auctions to raise funds, as well as seek ways to pry more government spectrum away for commercial use. In fact, FCC transition team member Roslyn Layton is on the record as advocating that federally held spectrum should be sourced to meet the evergrowing demand, especially in the new Internet of Things world. Commissioner Pai has also been an outspoken advocate for facilitating the rollout of 5G, and has set forth a 5G regulatory framework that calls for freeing up more spectrum, removing barriers to infrastructure deployment and encouraging innovation and investment in the network and mobile technologies. We can expect a continued push to accelerate 5G deployment on Capitol Hill as well, as Senate Commerce Committee Chairman John Thune (R-SD) will likely renew his push to get his MOBILE NOW Act (S. 2555), which would free up more spectrum for both commercial licensed and unlicensed use and also improve broadband infrastructure deployment, over the finish line. Infrastructure spending will also be a key focus in the 115th Congress as President-elect Trump has proposed to spend a trillion dollars on infrastructure over the next 10 years. The heads of 17 tech and telecom trade groups have already written the President-elect urging him to make tech infrastructure upgrades a key element of his planned infrastructure investments. The Trump administration will also be forced to address a number of pending industry transactions right out of the inauguration gate, the largest one being the AT&TTime Warner deal. As a candidate, President-elect Trump weighed in on the proposed transaction, explicitly stating that his administration would not approve the merger. After the deal was announced, he called the deal “an example of the power structure I’m fighting” and said it was “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.” That said, and while it remains to be seen whether the FCC will even have a role in the formal merger review process, it’s worth noting that all of Mr. Trump’s Department of Justice (DOJ) and FCC transition team advisors have a history of being very pro-industry and antiregulation, particularly when it comes to mergers. Finally, both the House and the Senate Commerce Committees will likely explore various paths to rewrite the Communications Act. Current House Commerce Committee Chairman Greg Walden (R-OR) is likely to build upon a series of white papers that he requested from industry beginning in 2014 as chairman of the Telecommunications Subcommittee. Senate Commerce Committee Chairman John Thune (R-SD) is also on the record as saying that an update is needed. dentons.com 71 US Policy Scan I 2017 Trade dentons.com 72 dentons.com US Policy Scan I 2017 International trade was a significant issue during the presidential campaign and one which President-elect Trump returned to often on the trail. First, he promised that trade agreements would come under much greater scrutiny in his administration and that trade enforcement efforts would increase. In addition, he stated, repeatedly, that his administration would pull out of the Trans-Pacific Partnership (TPP) agreement and would renegotiate the North America Free Trade Agreement (NAFTA). TPP It can be expected that soon after Mr. Trump’s swearing in on January 20, he will sign an executive order withdrawing the United States from the TPP. While the US has signed an agreement signifying its intention to implement the TPP agreement, the agreement has not been sent to Congress and it has not been ratified by the required number of countries for it to go into effect. With significant Democratic and Republican congressional opposition, passage of the TPP, while supported by many in the business community, was never a foregone conclusion so withdrawing from it will have little or no immediate impact on the US economy. The bigger issue with TPP is what happens next. The remaining eleven countries may ratify the agreement without the United States. Alternatively, smaller subgroups—some involving China— may form. There will be future Pacific Rim trade agreements and the issue will be whether the US is part of those negotiations. NAFTA Trump spent much of his time on the campaign trail, especially in the Midwestern “rust belt” states, expressing his dissatisfaction with NAFTA. He promised that his administration would renegotiate the agreement to make it a better deal for US businesses and employees. While it is certainly an option for him to sign an executive order right away withdrawing from NAFTA, that would cause significant problems because many business models—including the location of manufacturing facilities—have been designed with the understanding that NAFTA was here to stay. Withdrawing suddenly from NAFTA would disrupt supply chains and could put manufacturers located in North America at a disadvantage compared to foreign producers, particularly from China. In addition, withdrawal from NAFTA would require Congress to pass legislation to address the implementing statutes it put in place after NAFTA was signed and ratified. Congress is poised to repeal and replace the Affordable Care Act (ACA) as well to pass comprehensive tax reform in 2017, both of which will demand the attention of the same congressional committees that have jurisdiction over trade, limiting their ability to deal with an immediate withdrawal from NAFTA. However, both the Mexican and Canadian governments have agreed to reopen the NAFTA negotiations and have indicated the priority issues that they would want to discuss. Therefore, since it does appear that the parties are willing to renegotiate, Presidentelect Trump may decide to spend time early in his administration beginning conversations with Mexico and Canada regarding his priorities for renegotiation. dentons.com 73 US Policy Scan I 2017 Other trade priorities As to other positions taken by President Trump, such as a 45 percent tariff on goods from China, there is a good chance that the new administration will ultimately back off of these policies. Imposing an across-the-board tariff increase— questionable legality aside—would be like using an axe where only a scalpel is needed, as many products imported from China are not produced in the United States and the additional tariff would simply be a large tax increase on the American people. That said, the focus on China will not go away. The more likely policy approach would be the use of existing trade laws to protect sensitive industries such as steel. There is already discussion of a Section 201 petition for import relief involving steel, and a similar action, to address issues of overcapacity in aluminum, could also be taken. Overall, the Trump administration could turn out to be more focused on managed trade as opposed to the traditional Republican free trade position. The other issue of focus of the new administration will be enforcement. While not as sexy as trade agreements (negotiating/withdrawing from), enforcement gets to the primary issue raised during the campaign: that existing trade agreements are not always working for America. The perception is that this is so because they are not being enforced properly, and many in the business community, including those that support free trade, argue that the immediate focus, before negotiating more agreements, should be on enforcement of the agreements and laws already on the books. Greater enforcement, however, means more resources dedicated to enforcement by the Department of Commerce, Customs and Border Protection and the Office of the United States Trade Representative. Each of these agencies currently has limited resources available to address issues of transshipment, origination, undervaluation, and market access, among others. The issue for the new administration will be whether—given competing demands on the public purse—they can target sufficient resources to the issue of enforcement. The best trade agreement with the strongest enforcement mechanisms is useless without the manpower and resources to carry out their mission. US Policy Scan I 2017 Transportation and Infrastructure 74 dentons.com dentons.com 75 US Policy Scan I 2017 On November 29, President-elect Trump nominated for secretary of transportation Elaine Chao, former secretary of labor under President George W. Bush. The wife of Senate Majority Leader Mitch McConnell, Ms. Chao is well versed in transportation policy, having also served as the deputy secretary of transportation under President George H.W. Bush, and her nomination should move swiftly through the Senate. In the nomination questionnaire she submitted to the Senate Committee on Commerce, Science and Transportation, Ms. Chao listed her top priorities and biggest challenges if she were to be confirmed for the position. Her top priorities included the effective enforcement of safety measures, improvements in the DOT’s planning and acquisition practices and preparing for the future by considering new infrastructure technologies. Echoing the President-elect’s calls for investments in infrastructure and regulatory relief, she stated,”[G]iven the nation’s need to improve critical infrastructure. It is important to find ways to expedite the process of making repairs and building new constructions and decreasing the regulatory burdens where appropriate.” When confirmed, transportation stakeholders will be watching what aspects of the previous Administration’s priorities remain intact and which are reversed or modified. On December 14, the House Freedom Caucus released a report entitled “First 100 Days: Rules, Regulations, and Executive Orders to Examine, Revoke and Issue.” The report provides a roadmap for some of the initial actions that may come out of the DOT under the Trump administration. The most high-profile proposals include changes to and/or repeal of the FAA’s Small Unmanned Aircraft System (sUAS) Registration Service and to trucking industry rules governing electronic logging devices and hours of service, but the report also includes a proposal to “Make Sonic Boom Again” by reconsidering the ban on overland supersonic flight. Immediately following the election, the primary focus in transportation and infrastructure policy was on President-elect Trump’s infrastructure plan. However, it appears that repeal of the Affordable Care Act and tax reform have pushed a broad infrastructure package to later in the legislative calendar. Initially Trump planned to unveil within his first 100 days legislation intended to spur $1 trillion in infrastructure spending 76 dentons.com US Policy Scan I 2017 over the next decade. Details on this plan are sparse but early reports indicate that it will not contain direct government spending but instead will rely upon tax incentives to spur private investment in infrastructure. This type of proposal could be beneficial for revenue-generating projects, such as toll roads, bridges, seaports and airports, that may be attractive for public-private partnerships, but it may not be as helpful for proposed projects in rural areas that may not be capable of producing a revenue stream. The key for movement on this proposal will be to provide a fiscally responsible plan to satisfy conservatives and avoid the criticism of many Republicans that followed President Obama’s American Recovery and Reinvestment Act of 2009. While Democrats on Capitol Hill have welcomed increased infrastructure spending, they have voiced concerns that this proposal would merely be a tax break for large corporations. In Congress, one of the early transportation priorities will be the reauthorization of the Federal Aviation Administration (FAA), which is currently operating under a temporary extension that expires on September 30, 2017. While the Senate passed a bipartisan, comprehensive FAA reauthorization bill in April 2016, efforts to pass a bill in the House stalled, resulting in a temporary extension of FAA funding through September 2017. House efforts to pass a bill came to a halt in large part due to a proposal in Chairman Bill Shuster’s bill that would have privatized air traffic control operations in a non-profit corporation. It has been reported that the chairman has been lobbying the incoming Trump administration, as well as Ms. Chao, to support this proposal in order to secure passage of his bill next Congress. The temporary FAA extension did contain limited policy provisions, including provisions to prohibit the unauthorized flights of unmanned aircraft systems (UAS) over critical infrastructure and pilot projects for counter -UAS technology and UAS traffic management. The need to reauthorize funding for the FAA, as well as proposals to regulate drone use and to streamline certification of new general aviation aircraft mean that Congress will seek to move this legislation early in the session. dentons.com 77 US Policy Scan I 2017 Tribal Affairs dentons.com 78 dentons.com US Policy Scan I 2017 The 115th Congress will bring new leadership throughout the federal government on Indian Country issues, including key positions at the Department of the Interior (DOI), the Department of Health and Human Services (HHS), the Senate Committee on Indian Affairs and the White House. Congress recently created a new Under Secretary for Indian Affairs at DOI through the Indian Trust Asset Reform Act, and it is not yet clear precisely how this leadership position will overlap with the duties of the existing Assistant Secretary of Indian Affairs in guiding the direction of Indian policy for the Trump administration. Additional executive branch appointments will include the Director of the Indian Health Service (IHS) and, potentially, a Special Assistant to the President for Native American Affairs in the White House Domestic Policy Council. At this point, the President-elect has not indicated who he will ask to serve in these positions. While Mr. Trump has not discussed his priorities for Indian Country, members of his Native American Coalition indicated that easing the regulatory burden for tribes to develop their natural resources will be a priority. “In working with the incoming administration, I am confident that we can improve the land trusts and allow the tribes to be independent in determining their own use of resources and land. It is time to end the overreaching paternalism that has held American Indians back from being the drivers of their own destiny,” said Representative Markwayne Mullin (Cherokee), the chair of President-elect Trump’s Native American Coalition. These sentiments were reiterated by New Mexico State Representative Sharon Clahchischilliage (Navajo), another member of the President-elect’s Native American Coalition, who stated that “the Trump Administration will ease restrictions on American energy reserves worth trillions of dollars. Together we will block the bureaucrats holding Native American businesses back and bring new jobs into our communities.” Interior Department President-elect Trump’s nominee for Interior Secretary, Representative Ryan Zinke (R-MT), appears to share similar priorities regarding the development of natural resources on tribal lands. Accepting the nomination, he stated, “I will work tirelessly to ensure our public lands are managed and preserved in a way that benefits everyone for generations to come. Most important, our sovereign Indian Nations and territories must have the respect and freedom they deserve.” While in Congress, Representative Zinke dentons.com 79 US Policy Scan I 2017 introduced the Certainty for States and Tribes Act, which sought to roll back the Obama Administration’s final regulations related to the valuation and revenue collection process for coal, oil and gas production on federal and tribal lands. Congressman Zinke also introduced a bill that would make the Indian Coal Production Tax Credit permanent, stating a desire to “create as few economic burdens as possible, especially since tribal lands are subject to greater regulatory hurdles compared to private, state, or federal projects.” Health and Human Services Department Representative Tom Price (R-GA), a leading proponent of repealing the Affordable Care Act (ACA), is President-elect Trump’s nominee to lead HHS. President-elect Trump has repeatedly stated that repealing ACA is one of his top priorities, a position that has raised questions in Indian Country given that a key component of the ACA is to provide funding for the Indian Health Service through the Indian Health Care Improvement Act (IHCIA). In the 115th Congress, Indian Country will work to ensure that the IHCIA survives the repeal of the ACA’s more controversial sections. Senate Committee on Indian Affairs In the 115th Congress, the Senate Committee on Indian Affairs is expected to be led by existing members Chairman John Hoeven (R-ND) and Vice Chair Tom Udall (D-NM). While Senator Hoeven is not yet officially the chairman (Senate Republicans are scheduled to officially name committee chairmanship positions in January), Senator Udall was officially named vice chair in November 2016, at which time he indicated that he would “fight to improve our government-togovernment relationship and for progress on responsible energy development, environmental protection, health care, education and many other important issues.” Chairman Hoeven is expected to advance a tribal agenda focused on tribal energy development and infrastructure, similar to that of former Chairman Barrasso (R-WY). House Committee on Natural Resources The leadership of the House Committee on Natural Resources will remain the same in the 115th Congress, with Representative Rob Bishop (R-UT) serving as chairman and Representative Raul Grijalava (D-AZ) serving as ranking member. Before being considered by the full Committee, tribal bills are first reviewed by the Subcommittee on Indian, Insular and Alaska Native Affairs. The leadership of this subcommittee has not yet been determined. Chairman Bishop is expected to reintroduce his lone tribal bill from the 114th Congress, the Tribal Recognition Act, which would repeal revisions to the 1990s-era regulations governing the formal federal acknowledgment of Indian tribes, and which would require petitioning tribes to instead obtain congressional approval. Ranking Member Grijalva is likely to continue advocating for his RESPECT Act, which would establish legal guidelines for executive departments and agencies to follow when consulting with tribes. A comprehensive tribal energy bill is also likely to work its way through the Committee to the full House for consideration. 2017 Dentons 50 State Policy Scan 80 dentons.com dentons.com 81 US Policy Scan I 2017 State Attorneys general During the eight years of the Obama administration, Republican state attorneys general (AGs) actively opposed what they described as the president’s “federal overreach” in a variety of areas, including environmental regulation, immigration policy and health insurance law. Certain lawsuits filed by Republican AGs during this time were successful and, looking back, the political fortunes of a number of the AGs likely benefited from the litigation. Now, with the Trump administration taking the reins and Congress firmly in Republican control, we expect the AG litigation landscape to shift in the opposite direction, with Democratic AGs using the power of their offices as well as the same tactics employed by their Republican counterparts in opposing President Obama, to counter President Trump. In addition to challenging the Trump administration with lawsuits, Democratic AGs are expected to seek to fill any regulatory voids created by the administration in areas such as antitrust, environmental and financial services oversight. State AGs have a well-established record of conducting multistate antitrust investigations, including in connection with proposed corporate mergers. With regard to financial services regulation, Democratic AGs have a strong working relationship with their former colleague and current Director of the Consumer Financial Protection Bureau, Rich Cordray. On the electoral front, Republicans will have an immediate opportunity to challenge Virginia Democratic AG Mark Herring, who is on the ballot in 2017. However, the 2018 political cycle appears to be more favorable to the Democrats, with open seats in battleground states such as Florida, Ohio and Michigan. And Colorado AG Cynthia Coffman and Nevada AG Adam Laxalt are two Republicans who must defend their seats in states that went for Hillary Clinton. We will also see new AGs in a number of states where existing AGs are expected to run for higher office. Alabama Budget challenges/taxes: Alabama is unique as one of the few—if not only—states with two budgets. An Education Trust Fund (ETF) provides funding from pre-K through higher education while a General Fund (GF) provides funding for all other functions of state government. The ETF is in relatively good shape, with reliable, earmarked funding from the state’s sales and income taxes. However, the GF has limped along for decades, as it is funded by a patchwork of fees, licenses, interest from state accounts and other, less dynamic revenue sources. At the same time, key GFfunded agencies have seen explosive growth to the point that the Alabama Medicaid Agency and the Department of Corrections alone account for more than 60 percent of the GF budget—and their share is growing. In addition to reform efforts (discussed below), we expect to see, once again, additional revenue measures proposed this session. Some of the more prominent proposals of the past that will likely re-emerge include a state lottery, a gaming compact with the Poarch Band of Creek Indians, codification of Mandatory Unitary Combined Reporting for corporate taxpayers, and a digital goods tax for online streaming content. Medicaid: In addition to the funding issues noted above, Alabama Medicaid is in the midst of implementing a managed care reform initiative known as Regional Care Organizations (RCOs). In an effort to control costs and growth trends and improve health outcomes for the Medicaid population, the RCO program, as statutorily designed, is intended to authorize provider-led manage care entities to form in five regions of the state . The program is supposed to go live in July 2017 and many expect that the provider groups leading the various RCOs (primarily hospitals) will introduce legislation in the upcoming session to tweak, and perhaps make substantial changes to, the reform effort as the launch date approaches. The provider community has also advocated for Medicaid expansion, but for the time being that does not appear to have political support of any magnitude. Highway Funding: The Alabama Road Builders Association, along with several allies, are once again expected to introduce a gas tax increase of $0.06 per gallon, with the funds designated for road construction and maintenance. Last session’s proposal called for the tax to be adjusted in 2019, 2023 and 2027, according to the average taxes in Florida, Georgia, Mississippi and Tennessee. The Legislature last raised Alabama’s gasoline tax in 1992. Drivers pay $0.18 per gallon in state tax, including a $0.02 inspection. The Alabama Department of Transportation supports the legislation. Prison construction: Governor Robert Bentley and the Alabama Department of Corrections will once again introduce a bond issue to build new prisons in the state. The bond issue proposed in the 2016 82 dentons.com US Policy Scan I 2017 session was priced at $800 million to cover the cost of four new facilities. Alabama’s prison system is at nearly 180% of design capacity and facing several lawsuits for inadequacy of conditions. The innovative proposal of the Governor and the Alabama Department of Corrections would shutter several outdated facilities and pay the debt service on the bonds with the funds that would have been spent on their repair and maintenance. A key component of the proposal is to use design-build for the new prison implementation. In 2016, the prison bond issue proposal was opposed by independent contracting firms and by the communities where the facilities that are likely candidates for closure are located. Impeachment: An overarching political issue that could substantially disrupt the course of the 2017 legislative session is the ongoing impeachment process facing Gov. Robert Bentley (R). Currently in his second term after being overwhelmingly re-elected in 2014, Gov. Bentley’s administration was faced with scandal soon after his second inauguration when, in August 2015, his wife of 50 years filed for divorce amid widespread rumors that he was having an affair with a staff member. The rumors exploded into newspaper headlines in early 2016 when a dismissed law enforcement cabinet member confirmed the affair and added that the Governor went to great—even illegal lengths—to facilitate and conceal it. These allegations prompted the Alabama House of Representatives to initiate an impeachment process, and that process has now begun with an investigation by the House Judiciary Committee. Even though his impeachment is far from certain, the view in political circles is that less than two years after his resounding reelection the Governor’s political clout has been significantly diminished. Alaska Legislative elections: The 2016 general election resulted in a historic change in the Alaska Legislature—a new Democratled House of Representatives majority has taken control from the Republican-led majority that had ruled the House continuously for 23 years. The new majority will be led by a speaker with Alaska Native ancestry—Representative Bryce Edgmon (D-Dillingham)—for the first time in history. The broad ramifications of this significant shift in power are yet unknown, but it is expected that the change will result in a different mix of issues and bills being debated in Juneau than we have seen in recent years. State fiscal crisis: An oil producing state, Alaska is experiencing a profound and protracted budget crisis, as this is a time of low oil prices and diminished production volumes from the famed Alaska North Slope oil fields. How bad is it? Ninety percent of all state spending in Alaska has historically been funded by oil revenues, and due to the plummeting of international oil prices, revenues to the state treasury have declined by 80 percent over the past three years and the state is currently facing a yearly deficit over $3 billion. As a result, the legislature and governor are engaged in a contentious, high-stakes political battle royale over how to fund state government. Last year, the Legislature failed to take any significant action on the budget crisis. The Senate passed a bill restructuring how the state utilizes the earnings of the Permanent Fund (Alaska’s large oil revenue savings account), but the bill was rejected in the House. The Legislature ultimately passed an $8.75 billion dollar budget for FY 2017 that includes $2.2 billion in federal receipts and $4.26 billion in unrestricted funds, and a $1.4 billion capital budget for the fiscal year beginning July 1. In response, Governor Walker made a number of budget vetoes, the most significant being a line-item reduction of the Permanent Fund dividend checks sent to Alaskans in 2016 from a projected $2,000 down to $1,000. The budget crisis dominated the legislative session last year and it is expected to be even more of a focus this year given the government’s failure to adopt any long-term solutions in 2016. Budget: There is significant pressure from the public and Republican lawmakers to address the fiscal crisis in part by continuing to explore options for reducing state spending. In early December, Governor Walker released his budget proposal for the upcoming session and it included a three percent reduction in unrestricted general fund spending. He is proposing to fill the gap primarily through proposals that would generate more revenue for the state, including taxes and a restructuring of the Permanent Fund that has traditionally paid Alaskans’ dividend checks. Taxes: In addition to restructuring the Permanent Fund, the Governor and individual members of the Legislature continue to advocate for more and higher taxes. There are a number of new taxes under consideration, including a statewide income tax and dentons.com 83 US Policy Scan I 2017 a statewide sales tax (Alaska is the only state to have neither), along with proposed increases to existing taxes on the fishing industry, the mining industry, the oil and gas industry, motor fuel tax, sin taxes (alcohol, tobacco, marijuana) and hospital tax. All tax proposals have been met with resistance from both sides of the aisle, with Democrats opposing tax schemes that are viewed as regressive (e.g., sales tax) and Republicans opposing those that they believe would negatively impact the Alaska economy (e.g., income tax, industry taxes). There is, however, an unspoken recognition among the majority of lawmakers that some new taxes will eventually be needed to help close the historic deficit the state is facing. Natural gas pipeline: Low oil prices are also creating havoc around Alaska’s seemingly endless dream for a natural gas pipeline. Although, it is the goal of Governor Walker’s administration, the three major oil-and-gas producers who work in Alaska (BP, Exxon and ConocoPhillips) have all backed away from a partnership to build the $60 billion pipeline. In hopes of moving the project forward, the Governor is shifting gears and the state is now taking the lead. His administration is in the process of looking for investors to build the pipeline and buyers to purchase the gas. The shift has elicited a negative legislative reaction including a request from the state Legislature for an audit (which has started) of what the state has spent on the project and the value it has received. The Governor has said that if their project is unfeasible or uneconomical, he will drop any efforts by his administration to move it forward, which is what BP, Exxon and ConocoPhillips have already done. Arizona Tax reform: As part of his campaign platform in 2014, Governor Doug Ducey (R) promised that he would cut taxes every year in office. One of his priorities around this promise has been to greatly reduce, flatten or entirely eliminate the income tax. It is widely thought that he may take a stab at this in 2017, since a failed effort would be less impactful in a non-election year, whereas a successful effort would carry over into an election year, building momentum for him (and his legislative allies) among their base. Given that both chambers of the Arizona legislature are controlled by Republicans (in 2017, the Republican majorities will be 17-13 in the Senate and 35-25 in the House), it would appear as though the Governor may have a clear path to pursue this tax reform measure. However, any significant change to the tax reform would most likely result in a significant loss of revenue to the state’s general fund (Arizona relies on the sales and income tax; it does not have a statewide property tax), which would impact funding for education and infrastructure, two issues that have become ever-larger priorities for Arizona voters across the political spectrum. So, it appears that Governor Ducey will be looking to pursue a larger tax reform package that will reduce or eliminate the income tax, while offsetting the revenue loss by passing other revenue generating legislative measures. What those are, however, remains to be seen. Energy: Like many other states, there has been an ongoing battle between the rooftop solar industry and traditional utility companies. In Arizona, the energy sector is largely regulated by the Arizona Corporation Commission (ACC). In 2016, the Arizona Public Service Company (APS), the state’s largest utility, and SolarCity engaged in a heated electoral battle over the election of three new commissioners to the ACC. APS supported the three Republican candidates while SolarCity supported the Democratic candidates. The Democratic candidates narrowly lost, and it now appears the ACC will be supporting numerous policy changes which will be opposed by the rooftop solar industry. This past December, the ACC voted to significantly change net metering policies despite the vast opposition to the change from the solar industry and many consumer advocates. In 2017, the battles will only intensify. It remains to be seen exactly what will happen, but a pending rate request hike submitted from APS to the ACC is sure to generate an intense and very public debate on state energy policy. Other changes being discussed are adding nuclear power to the definition of renewable energy and encouraging the development of viable electricity storage options for residential and business customers. Education Funding and Reform: There will be ongoing efforts—from both moderate Republicans and Democrats— to increase funding for education in 2017 and leading into 2018 (possibly via a ballot measure). Many conservative Republicans will be opposed to these efforts, though they probably won’t go as far as proposing any cuts to public education (at least any with political traction). The key question is: Where does Governor Ducey stand on this issue? In 2016, he supported a very controversial education funding formula ballot measure—Proposition 123—that barely passed, and part of his commitment to education advocates and voters during that campaign was that 84 dentons.com US Policy Scan I 2017 Prop. 123 “was just the beginning” of overhauling how schools were funded in order to get more dollars into the classrooms. However, since the passage of that ballot measure, the Governor has been relatively quiet on the issue. It is expected that he will unveil his plans sometime in January 2017, possibly during his “State of the State” speech. Suffice it to say that any plans for reforming or increasing funding for schools will be highly polarized. Additionally, there are ongoing education reform and accountability efforts, including but not limited to more portable funding attached to students, more consistent accountability across traditional and charter schools, increased access to quality schools and overall school choice for parents and students, and an ongoing fight around Common Core/uniform testing standards. All of these issues will be front and center in the education space throughout 2017. Medicaid: Arizona was one of the GOP-controlled states that passed Medicaid expansion. Though many GOP legislators would like to see the repeal, or at least a significant overhaul, of Obamacare, the reality is that any loss of the Medicaid expansion dollars would have a significant negative impact on the state’s economy and communities. While it may be ideologically appealing to support the elimination or overhaul of Obamacare, once the details and impacts begin to take shape the actual political discourse around the issue may change substantially. Furthermore, the business community came out in full support of Medicaid expansion, so it will be interesting to see if it would oppose a massive overhaul that would cut into the Medicaid expansion dollars and, if so, how that position would be received by the Governor’s Office and GOP-controlled Legislature. Marijuana: A ballot measure to legalize marijuana lost in 2016 by approximately 3 percent, but supporters are already gearing up for another effort in 2017 and 2018. The GOP majority-led legislature is decidedly anti-marijuana, which means that pro-legalization advocates will once again have to focus on a citizens’ initiative. Efforts to come together on specific language and overall approach will begin in 2017, and ballot qualification activities (signature gathering, fundraising, etc.) will begin in late 2017 or early 2018. Arkansas The Arkansas 2017 session starts Monday, January 9, and continues for approximately 60 days. Arkansas is one of the “Republican trifecta states,” with the governorship and both bodies of the General Assembly, the State Senate and the House of Representatives, under Republican control. Governor Asa Hutchinson has laid out an ambitious legislative agenda with 18 main policy ideas that he placed into three main buckets—economic development, education and state government efficiency. Economic development: A tax cut proposal by the Governor, estimated at $50.5 million, focuses on lower-income residents and would make military retirement pay tax-exempt. One of his recommendations to pay for the $50.5 million tax cut would eliminate the sales tax exemption on manufactured homes. Education: On the Governor’s education agenda are proposals for teacher training, higher education funding tied to student performance, a heightened emphasis on reading, and a grant for the full cost of tuition at two-year institutions for students in high-need areas of study. Government efficiency: The efficiency-within-state-government focus includes state government agency consolidation and reorganization, elimination of 19 boards and commissions, and state employee incentive programs. Prison reform: Arkansas has the fastest-growing inmate population in the nation and Gov. Hutchison has asked that the general assembly look at reducing incarceration and has also proposed establishing a $5 million pilot for mental health crisis stabilization centers. Miscellaneous: It is anticipated that the general assembly will tweak state laws in response to a recently passed medical marijuana amendment. In addition, prefiled bills give a nod to a range of social issues, from abortion to gay rights. Highway funding will continue to be on the radar. California Recreational marijuana: Now that California voters have passed Proposition 64, legalizing marijuana use for adults for recreational purposes, the Legislature will be fully engaged in wrestling with the repercussions. One difficult issue is how to safely and securely bank the proceeds from this cash-only business for a variety of purposes, state and local tax collection among them. The taxes themselves will have to be dealt with, and other matters to be addressed will impact the motor vehicle, labor and insurance codes. Transportation: California’s transportation infrastructure is aging, in need of repair and underfunded by as much as $5.7 billion per year, according to some estimates. A recent legislative report identified the need dentons.com 85 US Policy Scan I 2017 for an additional $7.8 billion annually to restore the state’s roads to bestpractice level. The Governor and the Legislature will focus on ways of closing this funding gap. Cap and trade: California has been ambitiously implementing AB 32, the Global Warming Solutions Act of 2006. Implementation of this farreaching measure relies on a cap-andtrade system that is coming under increasing criticism from the environmental justice community. The legislative agenda next year will likely go beyond the usual debate over appropriate targets and timing to also include scrutiny of the state’s cap-andtrade program itself. Colorado The 2016 elections saw a number of statewide measures pass, including an aidin-dying measure that will allow terminally ill patients to take their own lives with medication prescribed by physicians, replacement of political party caucuses in favor of a staterun presidential primary, the ability of unaffiliated voters to vote in the state’s primary, an increase in the state minimum wage, and a measure that makes it harder to get constitutional amendments on the ballot. A statewide tobacco tax was rejected as was a statewide healthcare system. The City of Boulder passed a sugar tax and about two-thirds of the 44 school districts that had funding requests on the ballot were successful. Governor’s budget, hospital provider fee and transportation: The Governor’s budget outlined $500 million in cuts between needs and projected revenue. The key message of his budget—turn the hospital provider fee into an enterprise fund and thereby free up monies for transportation and other budget issues. However, with the state Senate controlled by Republicans and the House controlled by Democrats this scenario is likely not to happen. What we are likely to see is more of what we saw in 2016—far-right and far-left bills introduced and killed in their respective committees, and middle-ground bills going to the Governor’s desk. What the Governor’s budget proposes and what the Legislature and Joint Budget Committee recommend usually has to be hammered out during legislative budget considerations, which will occur in April 2017. The Governor’s current budget cuts $109 million out of expected transportation projects— which some think is the signal that the Legislature must address the hospital provider fee in order to move monies back to transportation needs. New Senate President Kevin Grantham (R) and House Speaker Crisanta Duran (D) have pledged to come together on Colorado’s transportation issues—but the bonding issues to “get there” could prove overwhelming. Medicaid expansion vs. K-12 education: The Governor proposes a total budget of $28.5 billion with $926 million in new needs that have to be balanced against $426 million in available revenue. Two outstanding items that must be covered by the budget include $243.5 million in K-12 new students and inflation, and $142 million in new Medicaid costs. Medicaid expansion has outpaced K-12 education for the first time in funding needs, a development which budget analysts say will only continue. With a new Trump administration, the discussion turns to the future of the state health exchange, the changes that will be made to states with Medicaid expansion given that the proposed director of CMS is Governor Pence’s former Medicaid director, and how the potential of block grants being given to the states will affect the planning of health insurance offers and Medicaid. Energy and renewables: Though environmental activist Tom Steyer and billionaire George Soros contributed heavily to Democratic candidates in Colorado, Republican Heidi Ganahll won the coveted CU Regent seat and the state Legislature stayed in split control. This means that activist environmental issues will not be in full play in the Legislature or at CU in 2017. With the passage of Amendment 71 “Raise the Bar” in Colorado, a greater number of signatures across the state must be obtained to change the Colorado Constitution—making it harder for anti-oil-and-gas activists to put multiple measures on the ballot. Sugar tax: The City of Boulder passed the state’s first sugar tax and interest groups are looking to introduce similar statewide legislation in 2017. Legislation is expected to be similar to Philadelphia’s wide-sweeping legislation, with the tax revenue being used to fund a number of health and non-health-related programs. Pharmaceutical drug cost transparency: A bill was introduced in 2016 that will likely return in 2017 requiring pharmaceutical drug cost transparency. Given the Mylan scandal this past year, consumer groups and healthcare agencies are likely to make the discussion of drug price increases and transparency a high-priority item. Autonomous vehicles: Uber, Lyft, Google, car dealers and other stakeholders all have their eyes on advancing driverless vehicles 86 dentons.com US Policy Scan I 2017 in a variety of shapes and forms. Legislation outlining rules and regulations will set the stage for testing and use in Colorado. Procurement modernization: Interested parties doing business in Colorado will want to pay attention to the Department of Personnel and Administration’s move to address the procurement code in Colorado— something that will have businesses, non-profits and attorneys following this legislation. Connecticut Budget issues: The state is facing a significant budget crunch as the Legislature prepares to kick off the 2017 legislative session and craft a biennial budget for fiscal years 2018- 19. Anticipating a budget deficit of more than $1 billion in the next fiscal year, Governor Malloy has asked state agencies to propose budgets that include ten percent cuts in discretionary spending. Meanwhile, the Governor’s budget staff, as well as leaders on both sides of the aisle, are struggling to find ways to make up the shortfall without increasing taxes or fees—a feat few believe will be possible without significant cuts in social services programs and municipal aid. While the immediate future looks bleak, there is some positive news coming out of Hartford with regard to the long-term health of the state budget. Governor Malloy and union leaders from across the state recently inked a deal that would prevent pension payments for state employees—the primary driver of the state’s budget woes—from increasing dramatically over the next 16 years. Under the deal, pension payments would be stabilized by spreading them out over a longer period of time. While the deal will not have an effect on the upcoming biennial budget, it does provide longterm relief from potentially crippling required contributions, which are estimated to rise to $4-6 billion annually over the next ten years. Education funding: A recent ruling by a Connecticut superior court judge regarding the state’s method of funding its education system is forcing legislators to rethink the way they do business. In his unprecedented ruling, which received national attention, the judge called the state’s method of funding its schools “irrational,” and ordered legislators to come up with a plan, within 180 days of the ruling, for reapportioning state education aid. Both the state and the plaintiffs in the case—an unusual coalition of labor and management and small towns and big cities—have appealed the case to the Connecticut Supreme Court. Despite the pending appeal, the Legislature may nevertheless adopt a new means of apportioning education funding in anticipation of a ruling from the state’s highest court requiring it to do so by some future date. Marijuana: With the emergence of state budget issues, as well as the recent passage in Massachusetts of a referendum legalizing marijuana, some Connecticut lawmakers are considering legalizing the possession of marijuana. Unlike Massachusetts, however, the Connecticut Constitution does not allow for direct referendum questions. As a result, any legislation legalizing and taxing the possession and sale of marijuana must be approved by a majority of the members of both houses of the General Assembly, as well as the Governor, who has historically been against the legalization of recreational marijuana. Given the incredibly challenging budget circumstances, there is a chance that legislators, as well as the Governor, could hold their noses and support a plan to legalize possession of the drug if forecasted revenues are significant enough to provide a long-term solution to the state’s budget issues. A plan to legalize and tax the sale of marijuana was one of Senate President Martin Looney’s first ten pieces of legislation filed for the upcoming session. City of Hartford: Hartford Mayor Luke Bronin has recently embarked on a tour of the city’s suburbs attempting to drum up support for regionalization initiatives and increases in state funding for the city, which capitol watchers anticipate he will propose in the upcoming legislative session. The Mayor claims that the city is on the verge of bankruptcy due to sharply increasing pension costs and inadequate revenue, which comes almost exclusively from the city’s property tax (currently the highest in the state) and state aid in the form of “payment in lieu of taxes” (PILOT) for tax exempt property. Roughly 52 percent of Hartford’s property is classified as tax exempt. If Hartford were to declare bankruptcy, it would be the second largest municipal bankruptcy in US history behind Detroit, MI, and the first bankruptcy of a state capitol. Transportation: Transportation has been a major focus for Governor Malloy in recent legislative sessions, and the trend is likely to continue. With many roads and bridges across the state in need of repair or replacement, the Governor will likely renew his efforts to create a “transportation lockbox” that would ensure that transportation funding is not appropriated for other purposes (such as budget shortfalls) in the dentons.com 87 US Policy Scan I 2017 future. Instituting tolls on Connecticut roads and highways is also likely to be a topic of discussion this session, as state legislators grapple with balancing the budget. Minimum wage: Unions and progressive groups are expected to make a strong push for increasing the minimum wage to $15 in the upcoming session. Legislation that would raise the minimum wage to $15 by 2023, and allow it to rise with inflation in the years thereafter has been filed by Senate President Martin Looney. Minimum alcohol pricing: Under current Connecticut law, alcohol retailers across the state must adhere to strict minimum pricing laws. Large alcohol retailers are expected to push legislation to either lower or repeal the pricing minimums, arguing that the law hurts consumers and limits competition. Supporters of minimum pricing, on the other hand, say it protects the state’s small liquor retailers and help keep them in business. Governor Malloy has sided with the large retailers in the past and, if the issue arises in the coming session, is expected to do so again. Family medical leave: This year, the top priority of the Senate Democrats will be passage of legislation creating a paid family leave system in Connecticut. The legislation would establish an insurance program funded by employees through payroll deductions that they could draw benefits from in case of the birth of a child or if a medical emergency arises. Labor groups strongly supported the legislation last year, citing the passage of similar laws in states such as California, Rhode Island and New Jersey. However, members of the Malloy administration, as well as business groups, oppose it, citing fears of high administrative costs. Consumer packaging: In the last legislative session, Sen. Ted Kennedy Jr. led the charge to pass legislation that would drive decreases in the amount of consumer packaging waste entering the solid waste stream. His push ended with the creation of a task force charged with studying the issue. Although the committee never met, there may still be renewed action within the legislature to take action on the issue. If legislation is proposed, it may be similar to what Kennedy introduced last year, which would have required the state Department of Energy and Environmental Protection to amend its solid waste plan and set a goal of eliminating half of all packaging from the trash stream by the mid-2020s. Delaware General Assembly/special election: Although there was no significant change in the House of Representatives in terms of composition and leadership, the Democrat-controlled Senate suffered a major upset in November when Democrat Patricia Blevins, Senator and President Pro Tempore of the Senate, lost to an unknown Republican challenger. As Democratic Senator Bethany A. Hall-Long is vacating her seat after winning the race for lieutenant governor, a special election will occur in late February or early March which will give Republicans a legitimate chance of gaining control of the Senate after 40 years of Democratic rule. If the Republicans win this race, there will be some significant issues brought forth such as passage of a right-to-work law, rewrite of the workers’ compensation law, paycheck protection legislation and tort reform legislation. Transportation/Infrastructure Improvements: In 2017 the General Assembly must address road construction and consider ways to raise millions of dollars for road, infrastructure and bridge projects. DELDOT is currently reviewing and considering the feasibility of a “road use fee.” Drivers would be charged based upon the number of miles they drive on Delaware roads. Escheat: A lawsuit by 21 states against Delaware filed in June is seeking $150 million remitted to Delaware when money orders throughout the country go unclaimed. Delaware claims federal law permits it to collect unclaimed property from financial service companies incorporated in the state. Abandoned property, which includes money orders, account for about 15% of the Delaware state government’s annual income. Education: The fight in Delaware during the 2016 legislation session was related to the ability of a child to opt out of the annual assessment. The General Assembly attempted to override the Governor’s veto. The legislation creates the right for the parent or guardian of a child to opt out of the annual assessment, currently the Smarter Balanced Assessment System. Budget: In September, the Delaware Economic and Financial Advisory Council projected the state will have $3.9 billion to spend in the 2017- 2018 year. That’s about 4 percent less than the current budget. DEFAC meets several times a year to adjust projections using the latest data. Meetings are planned for March, April, May and June, when legislators will be given the final number for how much they can spend in the next fiscal year. The state’s fiscal year is 88 dentons.com US Policy Scan I 2017 July 1 through June 30. The projected decrease is primarily because of lower projections from both the corporate income tax and the personal income tax. Even as revenues are expected to grow, spending is expected to automatically increase. For example, DEFAC went over numbers that show the price tag of Medicaid and health care costs for state employees continuing to increase dramatically faster than inflation. Coastal Zone Act: This session one of the biggest issues will be the revision of the Delaware Costal Zone Act. Many in the business community are looking to revise the 45-year-old legislation, which has severely limited heavy industry on the coastline and is considered the biggest impediment to the development of DuPont’s Edgemoor site and the former General Motors plant on Boxwood Road. Amending the Coastal Zone Act would also have a direct impact on the sale and expansion of the Port of Wilmington. A fight from environmental groups and interests is expected. Sugar tax: We understand that legislation is currently being drafted and considered that would be based upon the Philadelphia model. Rideshare/transportation networks: Uber passed legislation in 2016 here in Delaware. We understand that legislation is currently being drafted and considered that would amend the law to include the ability of county, local and municipal governments to tax drivers or assess fees (which is currently not allowed). Gas tax: The General Assembly will revisit the 2016 debate related to an increase in the gas tax. The proposal that has received the most attention is a $0.10 increase that would raise approximately $50 million in additional revenue. Florida Education: State Senate President-Designate Joe Negron (R-Stuart) has, for over a year, indicated the need for a large increase in funding for universities and student financial aid. Negron wants to boost the prestige of at least some universities to the level of, say, University of North Carolina at Chapel Hill and University of Virginia. By contrast, incoming Speaker of the Florida House of Representatives Richard Corcoran (R-Land O’ Lakes) wants to improve K-12 education by enhancing the quality and effectiveness of teachers and significantly growing the number of high-impact charter schools in the state’s most impoverished communities. Water/Everglades/Lake Okeechobee: Florida experienced unprecedented algae bloom earlier this year. Senator Negron—whose Senate district was most adversely impacted—has pledged to make solving this problem and improving the health of the Everglades his other major priority (beyond enhancing universities). He has floated the outlines of a federal-state partnership that would invest $2.4 billion to buy land owned by the sugar industry for the purpose of storing water south of Lake Okeechobee and storing/ cleaning water with high phosphorus levels before releasing it into Everglades National Park. The House leadership has expressed skepticism. Economic development: Governor Scott is pushing for $85 million for Enterprise Florida to help lure new business to Florida. Speaker-Designate Corcoran has publicly stated that the House budget will include zero funding because it is wrong and inefficient for the state to pick winners and losers. This could be a big bargaining chip. Last year the House prevailed in blocking Gov. Scott’s request for $250 million. The Senate is expected to offer some support for the Governor. Workers’ compensation: The Florida Supreme Court struck down part of the workers’ compensation law that capped attorneys’ fees. Businesses fear large increases in workers’ comp costs and the legislature and Governor want to find a way to deal with the court ruling and keep workers’ comp costs in check. Watch for a huge effort by the Florida Chamber of Commerce to try to reverse the nearly $1.5 billion in costs to Florida businesses. Healthcare deregulation: A push to eliminate certificates of need for hospitals and a debate on 24-hour ambulatory surgery centers is expected. Transportation: With Florida’s population expected to grow by more than 6 million by 2030, the state’s need for reliable, affordable mass transit has been brought to the forefront. New Senate Appropriations Chairman Jack Latvala (R-Clearwater) says that recent budgets have bounced back after years of cuts, but there is a tremendous backlog of projects. He went on to say that fellow Republicans have to “get their head out of the sand” when it comes to funding transportation and “one way to solve the problem is to get people out of their cars and onto trains and buses.” Passenger rail from Miami to Orlando is currently financed, but there are recent legal snags. Senate Jeff Brandes (R), Chair of the Appropriations Subcommittee on dentons.com 89 US Policy Scan I 2017 Transportation, Tourism and Economic Development, is also leading efforts in support of autonomous and electric vehicles in Florida. Georgia Education funding reform: Georgia last overhauled its state education funding formula in the 1980s and many believe it is due for an update. Almost half of the state budget is devoted to K-12 education and the handful of attempts over the years to get a consensus on how to reform the present formula have come up short. Last year, Governor Nathan Deal convened his Education Reform Commission to design a new education funding formula based on input from policy experts and the broader community. The 35-person commission recently published a comprehensive report that promotes a student-based funding approach and the Governor has promised to bring legislation to the General Assembly in 2017 to enact the funding reform. Healthcare access: With the rising cost of healthcare and the growing number of uninsured patients becoming matters of increasing concern in the state, policy leaders are in the process of considering a few options to expand access to high quality healthcare through a combination of Medicaid and other coverage techniques. In designing a system that alleviates the core problem, Georgia hopes to learn from the experience of other states while mindful of the unique challenges and character of its own state. The Georgia Chamber of Commerce is taking the lead, with support from hospital associations and other groups concerned, in particular, with the cost of uninsured care and the impact on rural healthcare. Religious freedom: Governor Deal vetoed a “religious liberty” bill last year that would have done the following: (i) protected religious practitioners and organizations from being forced to officiate or participate in same sex marriages; (ii) exempted faith based organizations from state antidiscrimination laws; and (iii) applied a strict scrutiny standard to any government-imposed limitations on individuals’ and organizations’ exercise of their religious liberties. Despite business groups’ concerns that such legislation may be discriminatory and injure Georgia’s pro-business reputation, some members of the General Assembly vow to bring the legislation back again in 2017. Hawaii Homelessness: Hawaii has the highest per capita rate of homelessness in the United States and Democratic Governor David Ige has declared a state of emergency. A recent poll by the Honolulu Star-Advertiser indicated that homelessness is the top issue for state residents. The city’s “sit-lie” prohibition in the beachfront neighborhood of Waikiki appears to have pushed some of its homeless population into shelters or other areas of the island. Meanwhile state and city leaders continue to address the problem with new shelters, transition housing and hygiene centers. But critics say homelessness continues to be a problem and that the government has not responded quickly enough. Housing: Hawaii is a notoriously expensive place to live, and with the average price of a single-family home now above $700,000, there appears to be an increasing number of multigenerational households across the state, thus making affordable housing a front-burner issue. On Oahu, the most populated island, the city estimates that 26,000 units are needed, and that three-fourths of those will need to be affordable to those making 80 percent or less of median income. The housing crunch is also believed to be contributing to the increased number of homeless. Transportation: Horror stories abound from commuters traveling into Honolulu from suburban neighborhoods in central and west Oahu concerning the traffic jams they must endure. City officials are banking on Oahu’s upcoming, 20-mile rail line from East Kapolei to Ala Moana to help ease the situation, but the project has so far only produced a lot of angry residents as its price tag rises and its timetable is repeatedly pushed back. The project is now anticipated to cost $6.57 billion, up more than $1 billion from just a year ago, and the completion date is now 2022. Debate continues over the future of Kakaako: Long known as a sleepy industrial district between downtown Honolulu and Waikiki, Kakaako has taken center stage in the development game. As construction cranes dot the region, many question whether a sufficient number of the high-rise units will be within reach of local home buyers, or if most will be luxury investment properties accessible only to high-end, out-of-state buyers. Statehood: Native Hawaiians continue to disagree on the future of the sovereignty movement, or even whether there should be one. A constitutional convention in February was fraught with conflict, disagreement and protests. Some want a “nation within a nation” model, while others seek an international tribunal. 90 dentons.com US Policy Scan I 2017 Idaho Education: Much of Republican Governor Butch Otto’s Education Task Force agenda has been checked off in the last three sessions, but a few additional proposals will likely make their way into the his State of the State. The Governor and lawmakers will likely turn a bit more attention to higher education (e.g., completion scholarships to adults who left college without a degree will likely be revisited) and workforce training, which have suffered steeper cuts, proportionately, than K-12, since 2009. Expect to see the education budget rise by approximately 7% this year. Election laws: The Idaho Secretary of State has previewed a series of legislative proposals designed to give more teeth to campaign finance reporting laws. A voter initiative that failed to get on the ballot in 2016 may be the source of inspiration for some of the draft legislation. Transportation: Joe Palmer (R), Chair of the Idaho House of Representatives Transportation and Defense Committee, has indicated that he intends to seek more General Fund monies for transportation (roads and bridges) funding. Medicaid expansion: Given the uncertain future of the Affordable Care Act in the wake of the recent presidential election, the large coalition that has been working for several years to expand Medicaid will likely assume a less prominent role this session as state lawmakers take a “wait-and-see” approach to the issue. Loser pays: In September, the state Supreme Court ruled 3-2 that losers in civil trials could be assessed all expenses associated with the case “when justice so requires.” This issue has come to the fore as a result of the proliferation of frivolous patent lawsuits that have been plaguing R&D firms, such as Idaho’s Micron Technology. While much of the rest of the world follows the UK’s “loser pays” principle, it is largely unknown in America, and Idaho could be a test case for the profession, which has fought it for a century or more. Gun rights: A staple of nearly every legislative session in recent years, the gun rights discussion this year may center on enactment of a “stand your ground” law, which would remove the duty to retreat before using force in self-defense. Illinois Budget: For the 2017 spring session the Governor and General Assembly’s priority is to pass an agreed-upon budget that funds state government operations and agencies. Both sides failed to pass a FY 2016 budget for the fiscal year ending on June 30, 2017. While no budget was in place during the fiscal year, more than 85 percent of funds were automatically spent, largely because of court orders and consent decrees. During the upcoming 2017 spring session there will be a continued effort to pass legislation that will make structural reforms to the cost drivers impacting Illinois businesses. Pension reform: The number one financial reform is the pension system. Nearly $.025 cents of every tax dollar taken from taxpayers goes into the public employee pension system. The Governor’s legislative proposal calls for preserving and protecting all currently earned benefits to date; moving all future employees into a tier 2 pension plan; providing an optional buyout to reform cost of living adjustments in return for a 401K plan; and a constitutional amendment to remove ambiguity in future reforms. Workers’ compensation: Since Illinois has the seventh-highest workers’ compensation costs in the country, legislation will be introduced changing the causation standard from “any cause” to “major contributing cause,” whereby the accident at work must be more than 50% responsible for the injury when viewed alongside all other causes. Tort reform: Legislation will be introduced to decrease the number of tort lawsuits filed against businesses by mandating that corporations, associations and partnerships can only be sued where the entity has an office or does business. Additionally, a lawsuit must be dismissed for lack of venue if there is not at least one defendant who is an Illinois resident and if the transaction or cause of action did not occur in Illinois. Currently, Illinois ranks 46th worst lawsuit climate for business among the 50 states. Special Session: Energy: A significant energy bill benefitting two nuclear plants operated by Exelon was approved by both chambers and Governor Bruce Rauner (R) signed the bill into law. SB 2814 (Sen. Chapin Rose, R-Champaign/Rep. Robert Rita, D-Blue Island) The bill would also increase investments in renewable power and energy efficiency. House fails to override amendatory veto on prevailing wage bill: Following a successful override vote in the Senate, the House failed to secure enough votes to override the Governor’s amendatory veto of SB 2964 (Sen. Don Harmon, D-Oak Park/ Rep. Jay Hoffman, D-Belleville). The override motion received 70 votes in dentons.com 91 US Policy Scan I 2017 the House, one shy of the required threshold needed for the bill to become law. SB 2964 would tether the determination of the prevailing wage to collective bargaining agreements when the agreements cover as few as 30 percent of the workers performing similar work in a locality. If enacted, the bill would have the effect of inflating prevailing wage rates above what is actually being paid to all workers, union and non-union, performing similar work. In addition, local governments would no longer have the authority to determine a local prevailing wage rate. Indiana From a policy perspective, issues that are being discussed during the interim that will most likely be legislative issues in 2017 are the rewrite (i.e., loosening) of the state’s alcohol laws, a three-tier scheme that heavily regulates distribution and sale; transportation funding; a potential tax on services; consolidation of income tax returns; and regulation of fantasy gaming. Iowa Changing political landscape: After capturing majority control of the state Senate in November, Iowa Republicans will, for the first time in 20 years, control both chambers of the Legislature as well as the governorship. Terry Branstad, the nation’s longest-serving governor, has been tapped by President-elect Donald Trump to become the new US ambassador to China and Lt. Gov. Kim Reynolds, whom the Governor has been grooming to take over the office for a number of years, will step into the role sometime in early to mid-2017. Income tax reform: With a new Republican majority in the Iowa Senate, leaders have signaled that they will be looking at personal income tax reforms to lower the tax burden on residents. However, state revenues are coming in below projections, forcing budget cuts that will complicate the picture for tax relief. Water quality funding: Pressure has been mounting in recent years for state leaders to do more to clean up Iowa’s polluted waterways and ensure safe drinking water. Proposals that would divert future tax dollars from school infrastructure projects to water quality efforts have been touted, but lawmakers have so far failed to settle on a funding mechanism. Now that Iowa is a Republican trifecta state, the impasse could be ending. Minimum wage: After several years of the Legislature declining to raise the state minimum wage, currently at $7.25, a number of Iowa’s urban counties have stepped up to enact their own minimum wage hikes. Many in the business community are calling for more uniformity, particularly in cities with boundaries that span more than one county with differing minimum wage levels. Legislators appear ready to preempt the local mandates with either a ban on local minimum wage mandates or a statewide minimum wage hike, but not until the issue has garnered more study. Collective bargaining: AFSCME, the state’s largest employee union, is negotiating its contract this year, and Gov. Branstad has expressed a desire to look at changes to the state’s collective bargaining laws for public employees. Legislative efforts in recent years to make changes to collective bargaining have been predictably contentious. This time, however, there is little that minority Democrats can do to stop or slow any changes Republican lawmakers might try to push through. Kansas General: The 2017 Legislature will return to work on January 9. All 165 legislative seats were up for reelection in 2016 and, between retirements and primary and general election losses, there was a 35 percent turnover of elected legislators. Budget: Kansas is looking at its’ third year in a row of considerable budget shortfalls. The hole is expected to be $350 million in 2017. Possible fixes include: (i) securitizing state tobacco settlement payments; (ii) transferring balances from the state’s unclaimed property fund to the general fund; and (iii) closing a four-year old LLC taxrelief loophole that will put 330,000 Kansas business back on the tax rolls. School finance lawsuit: A state Supreme Court ruling is imminent in a lawsuit related to the Legislature’s underfunding of Kansas schools. It is widely believed that the Court will rule against the state and an additional $300 million to $500 million in K-12 funding will be required, putting further strain on the 2017 budget. Medicaid cuts: Legislation will be introduced to restore a recent 4 percent cut to Medicaid providers. The funding source is likely to be an increase in an MCO (managed care organization) provider tax. Education superhighway project: Republican Governor Sam Brownback recently announced an effort to work with consultants to determine the technology needs of school districts across the state and secure funding to increase broadband speeds to schools in underserved areas. 92 dentons.com US Policy Scan I 2017 Concealed carry in schools: We anticipate legislation to repeal recent legislation that allows students and faculty to carry concealed firearms on college campuses. Kentucky Kentucky’s General Assembly has undergone a major shift. This session represents the first time Republicans have controlled both legislative chambers, as well as the Governor’s office. Moreover, both Senate and House have veto-proof Republican majorities. Of the 38 members of the Senate, 27 are Republican, and of the 100 members of the House, 64 are Republican. Couple that with a Republican Governor, Matt Bevin, and the state is poised for major policy shifts. The focus of the new Republican majority in the upcoming legislative session will be making Kentucky more business-friendly. High-priority legislation will seek to promote job creation and to achieve ongoing red tape reduction. Top priorities being discussed by both chambers and the Governor are: Right-to-work law: Twenty-six states have enacted right-to-work laws in an effort to give employees the right to maintain employment without having to pay for any part of the cost of union representation. Kentucky wants to do the same. Prevailing wage law: The state seeks to repeal its prevailing wage law, which applies to state-funded construction projects with the goal of increasing efficiency of public investments and reducing the cost of government. Tort reform: A constitutional amendment for tort reform won’t be taken up until 2018 session. However, statutory items such as creating medical review panels and reducing judgment interest will likely be taken up. Charter school legislation: What this legislation consists of remains to be seen, but Kentucky is one of only seven states with no form of charter school legislation on the books and this session is looking to change that. Education accountability: State implementation of the federal Every Student Succeeds Act, and fleshing out assessment and accountability standards for the state’s students. Right-to-life law: To satisfy the conservative base, there will be some form of tightening of the state’s rightto-life law. Reorganization bills: Legislation may be passed that is in line with the Governor’s vision of state government. Louisiana Tax reform: The major issue in Louisiana in 2017 is expected to be tax reform. The 2017 legislative session doesn’t begin until April 10, and while much can change between now and then, restructuring the state’s tax code is the top priority for both Democratic Governor John Bel Edwards and many legislators. It’s worth pointing out that recurring budget deficits have become the norm over the past five years in the state. It’s also worth noting that the 2017 legislative session is fiscal-only in nature, meaning bills must deal with tax credits, exemptions, exclusions, etc. (although each member may introduce up to five non-fiscal bills apiece). There are three different task forces actively meeting with an expressed intent to offer up recommendations on how to “improve” the state’s tax code. Many in business and industry have anticipated that these recommendations (most of which came in mid-November 2016 with a few more expected to arrive in early 2017) would include reducing or eliminating many hard-fought tax credits/exemptions that were enacted over the past few years. Examples of tax policies that are expected to receive attention include the state’s Industrial Tax Exemption Program (ITEP), which has been a major issue for manufacturers; inventory taxes and tax credits; sales tax rates; corporate and individual income tax rates; enactment of a professional services tax (unlikely but possible); and elimination of the federal income tax deduction for individual filers (could also impact small business owners), which was on the November 8, 2016, ballot as a legislatively referred constitutional amendment, but was defeated and could reappear next spring; and many more. Gas tax: The state’s Department of Transportation and Development and associated general contractors are promoting an increase in the gas tax by anywhere from $0.20 to $0.30 ($0.384 to $0.484when factoring in federal rate) or even higher depending on the proponent. This will be a very complicated issue considering Louisiana’s legislature, with urging of the governor, increased the state sales tax on all purchases by a penny this spring in addition to suspending a litany of tax exemptions, credits and exclusions. In other words, Louisiana’s tax burden continues to increase and many wonder whether the tipping point has already been reached. dentons.com 93 US Policy Scan I 2017 Coastal lawsuits: Gov. Edwards plans to step up the fight to win damages from oil and gas companies for their role in damaging Louisiana’s wetlands over many decades. Dubbed by many as a trial lawyers bonanza, it is likely that a handful of bills will be filed to curtail these suits against oil-and-gas companies operating in the state and along its coast—or to at least tighten up language on whether contingency fee contracts are lawful. Maine Governor Paul LePage: As the Republican Governor begins the final two years of his second term, speculation continues that he is contemplating running for the US Senate against Angus King, the state’s first independent senator. Although he has been a controversial figure, the Governor’s poll numbers continue to show strong support among his base and moderate voters. He also maintains strong support among the House Republican caucus, but his relations with the Senate Republican leadership are less solid. Legislature: The November elections saw the majority Republicans in the Maine Senate lose two seats but maintain their majority. Incumbent Senate President Mike Thibodeau and his leadership team continue as the leaders with their 18 member caucus. Minority Democrats (17 seats) elected Troy Jackson, a labor Democrat, as leader and Nate Libby, a more moderate official, as the assistant. At the House end, Democrats retained control but lost several seats; they now hold 77 seats, with Republicans elected to 72 seats, and 2 unenrolled members. Rep. Sara Gideon was elected Speaker of the House and Republicans reelected their leadership team, Rep. Ken Fredette as leader and Rep. Elsie Espling as assistant. Budget/taxes: The past four years have seen very contentious battles between the executive branch and the four caucuses, with the House Republicans historically siding with the Governor initially. Though the budget is in its preliminary stages, the Governor is likely to propose significant cuts to the state workforce, possibly attempt to reduce Medicaid spending, and seek to reduce the income tax on the states’ top earners. Voters passed a referendum that places an education surcharge tax on incomes over $200,000 and it is likely that the Governor and Republicans will seek to alter the implementation of this referendum and/or focus on reducing the tax burden on those that earn more than $200,000. Maine has a biennial budget and typically has the two-thirds majority of both bodies needed for enactment in time for the start of the new fiscal year. Majority budgets passed 90 days in advance of the conclusion of the fiscal year are almost unheard of so cooperation among the Legislature’s partisan caucuses at the end of session typically sidelines the Governor when the final budget is negotiated. Referendum questions: During the swearing-in ceremonies on December 7, 2016, the Governor took the opportunity to recommend that the Legislature change the implementation of three of the enacted referenda. The Governor claimed that Question 2, a surcharge tax for educational funding, will damage the economy by driving away high earners, such as doctors and lawyers. Similarly, he wants to change implementation of Question 4, a minimum wage increase, his concerns being both the amount of increase and the tipped wage credit portion. Democrats have publicly stated that the will of the voters should be respected and that there should not be alterations to the rollout of the referenda. The Governor has also expressed reservations about issuing a proclamation legalizing recreational marijuana, as required of him by Question 1, indicating that he believes his oath to uphold the US Constitution precludes him from enacting a law that the citizens approved but that may be against federal law. This matter remains unclear at this stage, though most observers believe the law will be implemented, subject to some changes this session. Medicaid expansion: For the past two sessions Democrats and a small group of moderate Republicans have attempted to expand Medicaid in the state, but the Governor has consistently vetoed these bills and is likely to do so again should such a measure reach his desk in the upcoming session. A progressive advocacy group collected enough signatures this past election day to put Medicaid expansion on the ballot in 2017 or in 2018. However, the advocacy group stated that before having the signatures certified by the Secretary of State, it was waiting to see what, if any, expansion attempts will be made by the Legislature this session. Maryland Gov. Hogan‘s popularity continues : As he enters the third year of his term, Republican Governor Larry Hogan‘s approval ratings continue to soar in this majority-Democratic state. An OpinionWorks poll in September found a staggering 71 percent of registered voters approve of his job performance, the highest number achieved by a Maryland chief executive since 1998. The 94 dentons.com US Policy Scan I 2017 Governor has remained focused on the economy-driven agenda (e.g., improving the state‘s business climate, reducing taxes and reducing government spending) that propelled his upset election in 2014. The Governor did not endorse nor vote for President-elect Trump. Legislative leaders poised to pursue progressive agenda: Senate President Miller and House Speaker Busch are expected to be pressed by their respective caucuses to pursue an “aggressively progressive“ agenda. The House Democratic Caucus, in particular, is considering a progressive, albeit still largely undefined, agenda to serve as a contrast to Governor Hogan and the incoming Trump administration. Leadership changes are anticipated in the House, and certain Senate committees could have several new members due to members either retiring from the Legislature or being elected to other offices. Massachusetts Opioid addiction: In 2004, fewer than 500 people died of unintentional opioid overdoses in Massachusetts. By 2014, the number had more than doubled. Victims of drug overdoses are black, white and Latino; old and young; from the cities and suburbs. The state Legislature and two successive Governors have been taking steps to curb the growing problem of prescription painkiller addiction, which is also a gateway drug to heroin use. Among other efforts, the state has added treatment beds, launched public awareness campaigns, implemented new mandates for insurance coverage and created education requirements for medical and dental students. Transportation: The harsh winter of 2015 crippled the Massachusetts Bay Transportation Authority (MBTA), the Boston area’s aging public transit system, calling attention to its massive backlog of maintenance needs. Audits of the system over the past year have revealed a host of management, labor and financial problems. Meanwhile, the state’s snowy climate means its roads and bridges also need regular upkeep, and money is always in short supply. Attempts to generate new tax revenue for transportation have failed multiple times, either in the Legislature or at the ballot box. For now, state officials are working to reform the public transit system, and fare increases are likely. Healthcare: Massachusetts, which has some of the nation’s leading hospitals. was the first state to offer near-universal healthcare coverage, implementing an individual mandate in 2006. But the state has not been able to curb the growth of healthcare costs, which for years have been among the nation’s highest. The continuing high cost of Medicaid alone, is hitting the pocketbooks of state residents and punching a growing hole in the state budget. While Massachusetts has passed laws aimed at curbing costs through increasing transparency, improving technology and moving toward new payment methods, it’s still too soon to tell whether these efforts will be effective. Energy/environment: Energy prices in Massachusetts are among the highest in the nation – hurting residents and businesses—and the problem is only expected to get worse with the closure of coal-fired and nuclear power plants limiting supply. Massachusetts has been trying to cultivate new sources of clean energy. But potential projects have gotten hung up by political debates over the merits and pitfalls of building solar energy projects, developing offshore wind farms, importing hydroelectric power from Canada and building new natural gas pipelines. Questions include: How much should the state be subsidizing solar energy development? How does the state balance the need for low-cost energy with the environmental impacts of fossil fuel energy generation? What is the right location for new energy infrastructure? Education: Massachusetts has some of the best schools in the nation. But there remains a persistent performance gap between rich and poor students, and between white and minority students. A handful of urban schools are consistently deemed underperforming. As a result, Massachusetts is embroiled in a debate: Does the state need more charter schools or not? Should more money be invested in the traditional public schools? How does the state help the lowest performing schools? Are there more effective ways to use existing resources? With a limited amount of state money available to spend on education, these issues are pitting teachers’ unions against charter school advocates, both of whom want a bigger share of the pie. Legalization of marijuana: Massachusetts has historically been one of the more progressive states on marijuana policy—in 2008, decriminalizing the possession of small amounts and in 2012, legalizing medical marijuana. The state’s first medical marijuana dispensaries opened in 2015. This past November, voters approved a ballot measure to legalize recreational marijuana—over the opposition of the state’s most powerful politicians.