Looking ahead: issues facing state governments in 2012

As we start out a new year, I would like to provide some perspective on the major issues likely to face the states in 2012. My perspective is based on having had the opportunity to meet with a large number of governors and state legislative leaders over the last several months and attending several national state conferences.

As 2012 is an election year, the major national issues will likely dominate the states as well. Not only do we have the presidential election, but we have 33 contested Senate races, all U.S. House races up for election, 12 contested governors’ races and a plethora of statewide elected offices up for vote.

From my perspective, the issue of federal deficits and debt will be the defining issue of the 2012 elections. When I addressed the state leadership conference of the National Conference of State Legislatures (NCSL) in Puerto Rico earlier this month, that seemed to be a perspective shared by a number of state Speakers of the House and Senate presidents who were in attendance. Their overriding concern is that as federal actions are taken to address the deficit, there will be an unintended set of consequences on the states. Although the impact will vary markedly among the states given the varying level of federal financial support, it is a significant issue given that the states on average are spending more than 20 percent# of their funds using federal dollars. Based on this percentage, it is clear that state healthcare and education financing will be the areas most likely to be impacted.

The topic of economic development and job creation was top of mind for many of the governors and legislative leaders I spoke to in 2011. This is certainly not surprising. States are looking for innovative approaches to drive economic growth, recognizing the challenges involved. My take away from these discussions? I believe that governors are focused on taking actions to support the growth of current businesses in their state, while developing clear strategies for capitalizing on the differentiated strengths and resources of their state.

In discussions with a few of the more forward-looking state leaders, there is also a recognition of the need to connect economic development and job creation to education. A number of state leaders are concerned that unless they can improve the performance of their education system to produce workers with skills for the jobs of the future, their economic development efforts will be for naught.

I believe that final overriding issue for 2012 will likely be state healthcare cost containment and related healthcare reform implementation. This is a significant issue in the states, independent of how the Supreme Court ultimately rules on the Affordable Care Act (ACA). Medicaid costs are growing much more rapidly than the economy as a whole and the states have a compelling need to get such costs under control. Among other considerations, states will need to focus on improved healthcare information technology, healthcare exchange implementation and data analytics to facilitate evidentiary healthcare management.

The issues facing the states are perhaps as challenging as I have seen over my 40-year career. With that said, there are a number of encouraging innovations being implemented in the states, which all state leaders can learn from. I would encourage you to read Letting Go of the Status Quo: A Transition Guide for New Governors which I co-authored and published this time last year. I believe many of the trends and leading practices described are highly relevant for state leaders planning for 2012.

As always, I would value your questions, comments and insights.

Mr. Robert N. Campbell III is Vice Chairman, Principal, Deloitte LLP and is the U.S. State Government Leader, based in Austin, TX

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