State legislatures' top 10: here's a sample of the key policy issues that promise to cross state borders and test political wills.

• Author: Rose, Gene
• Position: Cover Story

American state legislatures will set to work in January on a variety of critical issues--some raised by the voters in November and others the result of the nation's decision to give George W. Bush a second term.

Voters were decisive on measures like same-sex marriage. They were more divided, however, on tort reform, education funding and gambling. And although they sent President Bush back to the White House with a Republican majority in Congress, they nearly split political control of state legislatures down the middle.

Fiscal issues will dominate this year's state legislative sessions, but there are plenty of other major topics that state lawmakers will address. Here's a sample of 10 key issues that promise to cross state borders and test political wills this year.

1 MEETING FISCAL CHALLENGES

When it comes to taxes, legislatures clearly are in a more conservative mood than they were in the 1980s and 1990s. Despite four straight years of closing more than $235 billion in budget gaps, legislators have addressed fiscal pressures by avoiding any mention of taxes. Instead, they have used a mixture of cuts, fee increases and rainy day fund withdrawals.

Even though Arkansas and Virginia recently increased taxes to address specific needs, "tax" is the new four-letter word in most legislatures. Lawmakers are reluctant to spend political capital on increasing revenues, especially when there is little reward. Although pressure on the revenue side of state budgets has eased in recent months, there is still growing demand on the expenditure side as programs and services seek recovery from many years of budget cuts.

As lawmakers craft their FY 2006 budgets, will face a host of pressures. The rapid growth of Medicaid costs consumes an ever greater share of budgets. The severe cuts to higher education need to be addressed. Many state employees have gone years without pay raises, and their health insurance costs continue to rise.

2 REDUCING HEALTH CARE COSTS

Double-digit increases to health care costs are expected to continue in 2005, but legislatures are sensitive to the effects of these costs on budgets and the lives of Americans.

Expect lawmakers to look at this from every angle, from tort reform to importing prescription drugs from Canada.

In the November elections there were no less than six tort reform measures on the ballot. Four of them centered on medical liability. Look for states to consider other measures this session that address "frivolous"...