Web Chat: Policy Outcomes of the State Elections

Following the recent midterm elections and the power shift at the federal and state level, the focus will turn to how newly-elected leaders will govern in difficult fiscal environments. On November 10, Brookings expert Amy Liu answered your questions on the policy implications of the gubernatorial elections, discussing the relationship between states and the federal governments in a live web chat moderated by David Mark of POLITICO.

The transcript of this chat follows.

12:30 David Mark: Thanks for joining us today. Let’s get started.

12:30 [Comment From Eric: ] What were some of the most important issues in the state races?

12:32 Amy Liu: Hello, it’s good to join you today. We’ll start with an easy question. No doubt, the most important issues on the campaign trail were the economy and the budget deficits. And while the policy details were thin, there was a lot of posturing about how – no new taxes, less government, cut spending. But the daunting realities of governing will move most governors into a pragmatic mode.

12:32 [Comment From Lou: ] How can governors be innovative when they are facing budget deficits?

12:34 Amy Liu: The budget realities are severe. In total, the 50 states face $140 billion shortfall in FY 2012, from as high as $21b billion in CA and $1.5 billion in MI. And many of the easy cuts have been made. The smart and bold governors have an opportunity to use the fiscal crisis to fundamentally overhaul the delivery of key programs and services, and put real performance metrics on spending so we maximize return to taxpayer investments.

12:35 [Comment From Guest: ] Do you think any of the newly elected Republican governors will be inclined to roll back state renewable energy portfolios?

12:37 Amy Liu: There are more than two dozen states that currently have some form of state renewable energy standards, including strong GOP states like TX. I think there is a group of governors who see the shift to renewable energy as a true market opportunity to deliver innovation, create new products, and grow jobs. So, i think we will see that stay in most cases as an affirmative, future oriented part of the economic agenda.

12:37 [Comment From Laurie: ] How will this affect the Obama administration’s relationship with the states, and what will it mean for stimulus spending?

12:41 Amy Liu: The bulk of the conversation to date has been about the dynamic between Congress and Obama but it is just as important to focus on the federal-state relationship. Feds and state together deliver on the big-ticket priorities facing the nation, such as the implementation of the $800 billion stimulus package, the implementation of the new health care law, and delivering on the core fundamentals that drive prosperity like innovation, education, and infrastructure. Obama has an opportunity to not just build bridges with Congress but to partner with states in ensuring that existing programs are truly delivering jobs in the economic centers around the country, be it Detroit, Sacramento, or Tampa Bay, Florida. There are many tools that Obama can use through his executive powers to better align program delivery with states and reward those states who want to use the fiscal crisis to reform programs (like k-12 education) to deliver real results.

12:42 [Comment From Donna: ] What do you think the governor of Michigan should do to decrease the deficit and what role should the federal government play?

12:44 Amy Liu: Donna, i’m going to answer your question for all governors. I think we will see a number of states tackle pension reform as that is responsible for a large part of state deficits. But, i think governors can also review existing spending commitments, like roads and infrastructure repairs and investments, and conduct an audit on which investments are truly going to boost jobs and catalyze economic activity. In the end, we must prioritize our investments.

12:45 [Comment From Rebecca: ] What policies do you expect the new governors to bring to the fore? Are there priorities from the RGA that will see greater prominence now?

12:48 Amy Liu: The budget crisis in states will really limit partisan approaches to growing jobs and closing the deficit. In fact, with the sweeping GOP wins across state legislatures, the GOP currently controls both the governorship and both chambers of the state legislature in 20 states, up from just 8 before the election. That means these governors and state legislators will co-own the problem of economic recovery and fiscal discipline. We are seeing proposals to better leverage private sector funds in such critical investments as infrastructure. We are seeing both democratic and republican governors call for empowering regional economic development strategies to grow industry clusters and jobs… essentially better enabling bottom-up approaches to job creation.

12:49 [Comment From Danny: ] Any new rising stars worth noting? Any new governors to watch?

12:50 Amy Liu: I think there are a number of pragmatic governors who have a history of working across the aisle to get things done, and the ones i’m going to name are also all former business leaders. Governor Rick Snyder of MI was a former venture capitalist and knows the challenges in southeast MI and Detroit. Gov elect Haslam from TN and governor Hickenlooper from CO are all worth watching.

12:50 [Comment From Guest: ] Do you think Chris Christie, the New Jersey governor is the standard bearer of the Republican governors and even the Republican party?

12:53 Amy Liu: I think Gov Christie is certainly a leader in taking bold stances on deficit reduction, with states now wanting to mimic his pension reforms. However, i think budget cuts need to be governed by more than a value of shrinking the size of government. What kind of economy are we growing to grow that will create jobs and opportunity for the long haul? How are we going compete globally and innovate at home, while making sure our workers are employed? New governors must lay out an affirmative vision of the post-recession economy that will create a framework for how to prioritize limited dollars and what cuts to make.

12:53 David Mark: There’s an unusually high number of return governors – Jerry Brown in California, John Kitzhaber in Oregon, Terry Brandstad in Iowa (and perhaps others). What special experiences do they bring to their jobs and what drawbacks?

12:56 Amy Liu: Well the most important skill they bring is an awareness of how to work with state legislators to get to a balanced budget. But, they also know how to streamline and improve existing programs so they can have maximize effect on the ground. With very limited new dollars in the coming years, governors are going to have to learn how to do more with less, which means fundamentally repurposing existing economic development, workforce, education, transportation programs in ways that still put our states and economy on the path to long-term prosperity. With global economies bouncing back from this recession faster than the US, this is not the time to retrench. However, the drawback is they must go to the job with fresh ideas. The world has fundamentally changed in the aftermath of the Great Recession.

12:57 [Comment From Troy: ] Are we seeing any governors focusing on transportation issues? High-speed rail and mass transit are such important issues it would be nice to see states trying to improve their infrastructures with these tools.

1:00 Amy Liu: Yes, with crumbling infrastructure and the need to modernize our transportation network that will meet today’s economic (and workforce) needs, this remains top of mind for many states. A few governors have called for the continuation of investments in high speed rail and mass transit, despite calls by other governors to return high-speed rail investments. Others are trying to figure out how to create public-private partnerships or state infrastructure banks to finance repairs and new construction during these stark times.

But most interestingly, there were about 30 ballot measures this election that all focused on the need to raise funds for regional transit and infrastructure improvements. An astounding 75 percent of those passed, with voters willing to tax themselves (through property tax increases and sales tax increases) to ensure that we don’t neglect this critical part of our economy.

1:00 David Mark: Thanks for the chat, folks.

1:00 Amy Liu: Thanks again for the opportunity!