Wins & Challenges: Reflections on the 2018 State Legislative Sessions
As states wrap up their legislative sessions, we’re reflecting on this exceptionally tumultuous year.
This year’s state legislative sessions have brought many wins and challenges, despite several states holding shorter sessions. Yet it would be impossible to discuss the 2018 legislative sessions without acknowledging the backdrop of federal tax reform. While state policymaker decisions did not directly flow from the tax package, especially since the impact to states wasn’t clear until a couple of months ago, lawmakers had to operate without a complete understanding of their revenue. Given this uncertainty, states had to make predictions and difficult decisions about their policy priorities. States were still able to make headway towards financial stability for low- and moderate-income families, but there were also a number of promising bills that did not make it out of committee or the first chamber.
The State & Local Policy Team tracked policy movement related to tax credits and tax assistance (e.g., state Earned Income Tax Credits (EITC), Child Tax Credits, Volunteer Income Tax Assistance (VITA), paid tax preparer regulations); affordable housing and homeownership; consumer protections; savings penalties in public benefit programs; Individual Development Accounts (IDAs); and children’s savings accounts (CSAs). Both state EITCs and CSAs seem to be gaining traction in state legislatures across the nation, but few bills were enacted to create new statewide programs. Affordable housing is a key issue in the Pacific Northwest, as demonstrated by legislation in Washington and Oregon to address housing cost burden. And as the federal administration continues to erode consumer financial protections, some state governments are picking up the slack by fighting against pernicious payday lending. It would be impossible for us to identify each successful state policy that advanced financial security this past session, but we’ve captured some of the highlights below.
Earned Income Tax Credit (EITC) – Near Misses and Near Wins
As mentioned earlier, the uncertainty over tax revenue crept into decisions about tax credits. Although state-level EITC and CTC policies were already gaining momentum last year, the federal tax overhaul may have also helped spur state action. While no new state EITCs were passed this year, Maryland and Louisiana increased their existing tax credits (albeit, Louisiana’s increase was fairly small and included a provision that the credit will be eliminated in 2025) and Maryland eliminated the minimum age requirement, expanding the credit to approximately 40,000 additional low-income younger workers. At least an additional eight states (California, Missouri, Minnesota, Vermont, Hawaii, New Jersey, Michigan, Utah) either introduced EITC legislation, with varying degrees of movement, or an EITC increase was included in recent budget proposals. California extended the CalEITC to an estimated 700,000 households by expanding eligibility to young adults 18-24 and seniors over 65. The state also more than doubled CalEITC outreach funding to promote the credit to eligible families and invest in free tax preparation assistance. However, the Administration did not approve extending the credit to immigrant workers filing taxes with an Individual Taxpayer Identification Number (ITIN). Missouri’s tax bill almost included a new state EITC until the Senate cut the EITC provision at the last minute. The Vermont legislature approved a budget and tax plan that included an increase in the state EITC, but it was vetoed by Governor Scott. Utah’s ‘Intergenerational Poverty Work and Self-sufficiency Tax Credit’ nearly passed both chambers. These near-misses demonstrate the fact that policymakers are increasingly in favor of the EITC, and there is hope that efforts in other states like Arkansas and Georgia will prove successful next year.
Child Tax Credit (CTC) – Questionable Silver Linings
During these last legislative sessions, some legislators have integrated seemingly progressive tax policies that are beneficial to lower-income communities into risky tax packages that will heavily reduce state revenues. For example, Idaho passed a nonrefundable state-level CTC of $205 per child, but the CTC provision was part of a larger $200 million tax cut package that primarily benefits the wealthy and increases taxes for large families with multiple children. Similarly, Wisconsin Governor Walker signed a one-time $100-per-child tax rebate, which critics are dismissing as an election year stunt since the credits are unlikely to have long-term benefits. In short, it’s increasingly difficult to parse out policy “wins” without looking at their full scope of intended and unintended impacts, even those policies that seem positive at first glance.
Protecting and Encouraging Savings – A Study in Contradictions
While increasing the value of and expanding access to tax credits is a crucial part of building financial stability for low- and moderate-income households, it is equally important to dismantle counterproductive policies that penalize families for owning property and building their savings. Asset limits in public assistance programs can discourage anyone receiving or considering public benefits from saving for the future. With the support of the Statewide Poverty Action Network (SPAN), Washington State passed HB 1831, which allows families that qualify for Temporary Assistance for Needy Families (TANF) to have at most $6,000 in cash and a vehicle valued up to $10,000. Prior to this passage, families were forced to spend down their savings to below $1,000 with a car valued at less than $5,000 to access the program. Indiana finally joined the majority of states that have eliminated a lifetime ban on Supplemental Nutrition Assistance Program (SNAP) eligibility for people with drug convictions, meaning they can access some support to, in part, avoid recidivism.
On a similar note, families should not be forced to spend down college savings for eligibility into public assistance programs. Massachusetts introduced legislation to prevent funds deposited in children's savings accounts (that are primarily used for higher education) from counting against cash assistance benefits. Massachusetts is still in session, so there is hope that S. 28 will make it across the finish line. With rising concerns over college tuition and student debt, states are exploring new options for college access. Louisiana passed a bill to create a Children’s Savings Account Task Force that will study and make recommendations about establishing a statewide children’s savings account program. Pennsylvania also made strides in college access with their Keystone Scholars Program. Although the bipartisan legislation to create a statewide program is pending, the state has already launched the program in six counties.
Consumer Protections – Who’s Guarding the Henhouse?
Strong consumer protections, including access to safe, affordable credit and support for consumers facing debt collection, can help vulnerable families keep more of their hard-earned money and better equip them to achieve economic mobility. Several states have recently served as battlegrounds for the debate over consumer protections. Washington State passed the Student Opportunity, Assistance, and Relief (SOAR) Act, which alleviates some of the harsh penalties imposed on individuals who fall behind in their student loan payments. Specifically, the bill increases the amount of wages protected from garnishment, prohibits regulators from revoking or suspending professional licenses due to student loan defaults, and reduces the judgment interest rate for unpaid student loan debt. Washington also enacted HB 1783, which includes a number of reforms such as ending the practice of jailing individuals with criminal convictions who cannot pay court-imposed fines and fees. In DC, City Councilmembers introduced a bill that protects the wages of those with debt in collections. DC currently exempts workers making under a certain amount from garnishment, but the cutoff amount is calculated using the federal minimum wage. This bill would raise the cutoff by aligning the calculation with the District’s much higher minimum wage rather than the existing federal rate. The bill would also create a simpler and fairer system for wage garnishment for workers who are not exempt, since the current system can leave workers with less than $1,000 in disposable wages a month. In Ohio, the House finally passed a bill to crack down on payday lenders and close loopholes, limiting monthly payments to no more than 5 percent of the borrower’s monthly income and capping fees and interest at 50 percent of the original loan amount. The bill has been the subject of intense debate and lobbying for fifteen months, and its future in the Senate is unclear.
Other states have had to stay in defensive mode, opposing bills that would expand predatory lending. As federal legislators try to dismantle the reach and authorities of the Consumer Financial Protection Bureau (CFPB), the payday lobby has gained strength and diversified their products to bypass regulations. Many payday lenders now offer financial products that have the same dangerously-high interest rates as payday loans, but aren’t technically subject to the same regulations. Louisiana successfully opposed the Louisiana Installment Loan Act (House Bill 501/Senate Bill 365) that would have doubled the annual percentage rate on loans that can already be made in the state. Indiana’s HB 1319 passed the House but luckily faltered in the Senate; the bill would have tripled the allowable annual percentage rate of unsecured consumer installment loans. Louisiana and Indiana demonstrate that many states face an uphill battle even for maintaining the status quo, especially as the payday lobby is emboldened with a weakening CFPB, let alone proactively prohibiting these predatory loans outright.
Affordable Housing – Crisis (Not Yet) Averted
State legislatures are also continuing to tackle another basic need – affordable housing. Nationwide, median home values are 3.6 times greater than median household income, meaning that nearly 30 percent of all homeowners and half of all renters are cost-burdened. The affordable housing crisis is especially pronounced in the Pacific Northwest, but Washington and Oregon have both taken steps this past session to explore solutions. Oregon enacted a series of bills to increase the real estate document-recording fee to help fund homelessness prevention, affordable housing development and preservation, and homeownership assistance. The bill HB 4007 also establishes a First-Time Home Buyer Savings Account, which allows Oregon residents to take a small state tax deduction for saving money towards a down payment and other first-home related costs. Though less expansive, Washington passed legislation to ensure that tenants who use federal, state or locally issued benefits (e.g., Social Security, veterans’ benefits, housing vouchers) to pay their rent cannot be discriminated against by landlords. California Senators Wiener and Skinner also attempted to address housing affordability through the hugely controversial SB 827, which would have required California cities to permit midrise-apartment construction around train stations and busy bus stops. The bill’s attempt to use state law to rezone neighborhoods and cities encountered widespread criticism, but sparked debate about options for addressing California’s affordability crisis in the future.
Trends in State Preemption Bills – The Fight for Authority
California’s transit bill debate raised concerns not only about affordable housing, transportation, and sustainability, but also about state attacks on local control. The National League of Cities calls this an “era of preemption” where we saw last legislative session, preemption laws threaten everything from local minimum wage ordinances to inclusive zoning laws. For example, Mississippi introduced HB 1241 which was pegged as an equal pay bill, but actually would have prevented local municipalities from establishing minimum living wages, sick days, and vacation days. Although the bill thankfully died in the Senate Finance Committee, its characterization as an “equal pay bill” demonstrates how opaque language can obscure the harmfulness of a bill. The Louisiana legislature also attempted to pass the detrimental SB 462 bill, which would have banned municipal and parish governments from establishing inclusionary zoning policies. Thanks to the concerted efforts by the Greater New Orleans Housing Alliance (GNOHA) and a coalition of allies in Louisiana, Governor Edwards vetoed the bill in late May. Unfortunately, not all states were able to avoid harmful preemption bills. The Wisconsin legislature passed AB 748, an omnibus preemption bill that prohibits local governments from enforcing their own employment ordinances related to discrimination, hours, wages and benefits. As we continue to track state policies that advance financial wellbeing, we need stay ahead of preemption laws that could threaten the progress that local authorities have already made.
There are still eleven states in session (and one in special session), so opportunities remain for legislative wins. Of course, none of this would be possible without dedicated policymakers and advocates who have a shared vision of financial opportunity and prosperity for all. And as we said, it would be impossible to highlight every bright spot during this past session (e.g., Medicaid expansion in Virginia!), so please let us know about any additional policies that should be on our radar by writing in the comments section or emailing firstname.lastname@example.org!