2026 Winter Forum
January 2-5, 2026
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The January Senate Presidents’ Forum, held this year at Amelia Island, FL, was moderated by Sen. John Cullerton (IL, ret.) and covered topics including state budgets, workforce development, short-term rentals, nuclear energy, SNAP regulations, and THC products.
Navigating the Fiscal
Environment:
Economic and Budget Outlook & Leaders’
Roundtable
Morgan Scarboro of MultiState described an economy marked by significant uncertainty, with indicators pointing in conflicting directions. While some data suggest continued expansion, others signal stagnation or a potential recession, making the overall outlook difficult to assess.
The labor market reflects this mixed picture. Wages are still rising, but unemployment has climbed to a four-year high of about 4.6%, with sharp variation across states. Young workers are particularly affected, facing much higher unemployment rates that threaten long-term earnings and skill development.
The economy is also increasingly unequal. Older and higher-income workers tend to feel secure, while younger and lower-income groups struggle in a “low-hire, low-fire” environment. AI is slowing entry-level hiring, reinforcing what economists call a K-shaped economy, where higher-income households benefit from strong asset growth while others face persistent cost pressures.
The economy is increasingly unequal. Older and higher-income workers tend to feel secure, while younger and lower-income groups struggle in a “low-hire, low-fire” environment.
Despite these challenges, overall growth is being driven largely by unprecedented investment in technology. Tech spending has become a central support of GDP growth, to the point that some economists argue the economy would barely grow without it, underscoring how heavily current economic momentum depends on technology investment.
Source: BEA, Manhattan District History, The Planetary Society, Federal Highway Administration FA-203, US Telecom, Company filings.
Notably, investment in data centers has become a major issue for state governments given the downstream impacts on energy costs, labor markets, land use, and long-term revenue planning. While much of today’s economic growth is driven by these investments, the scale of current AI-related spending raises concerns about long-term returns and the risk of an AI bubble. Data centers are also straining energy and infrastructure, with electricity demand projected to approach 10% of U.S. usage by the end of the decade.
Even as state revenue growth slows, overall revenues and rainy day funds remain historically strong.
Technology investment continues to support economic growth, but it also introduces significant fiscal and economic uncertainty for states.
Source: MultiState collection of state revenue estimates. Data as of December 2025.
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Discussion
Comments are paraphrased for brevity.
In the roundtable discussion that followed, Ms. Scarboro asked state Senate leaders to comment on current fiscal opportunities and what challenges they face.
Sen. Stuart Adams (President of the Senate, Utah):
Utah has consistently reduced its income tax in small, incremental steps over the past five years. Another cut is planned for next year, with an ultimate goal of eliminating the income tax entirely. We view income taxes as a burden on productivity and believe that reducing or removing them can support economic growth and competitiveness.
Utah’s ability to pursue this strategy is closely tied to its strong economic performance and fiscal position. Despite repeated tax cuts, the state has maintained funding for public services, including education, and has been able to offer comparatively high teacher salaries within the region.
However, eliminating the income tax poses challenges, particularly in identifying alternative revenue sources. Utah already has one of the lowest property tax rates in the country, so policymakers are balancing tax reductions with the need to sustain long-term fiscal stability.
Sen. Thomas Alexander (President of the Senate, South Carolina):
South Carolina recently debated a proposal to cut individual income taxes, but the measure did not pass the Senate, which has taken a more cautious approach than the House. The proposal remains under review in the Senate Finance Committee.
Tax reform is expected to resurface before the 2026 session ends. One complicating factor is South Carolina’s use of federal net income, rather than gross income, as the basis for state taxation, which makes structural reform more complex than in many other states.
Despite these challenges, revenues remain strong, allowing policymakers to explore broader changes involving income, sales, and property taxes. There is a long-term ambition among some leaders to eventually eliminate the income tax but achieving that goal will require careful balancing of revenue sources. Income tax policy has also become a prominent issue in the state’s 2026 gubernatorial race. The outcome of the election is likely to shape the future direction of tax reform and fiscal policy.
Sen. Phil Berger (Senate President Pro Tempore, North Carolina):
North Carolina is on stable fiscal footing heading into 2026, despite ongoing income tax reductions. Current budget projections already account for scheduled tax cuts, including a recent 0.25% reduction and another planned cut next year, contingent on meeting revenue targets, which the state is expected to reach.
While these reductions have raised concerns about future revenue, economic fundamentals remain strong. The state continues to experience population growth and economic expansion, which policymakers believe will offset the impact of lower tax rates and sustain revenue levels.
There is some disagreement within the legislature about the level of risk. Members of the House have expressed interest in canceling the next scheduled tax cut out of caution, but Senate leadership has rejected that approach, expressing confidence that the state can absorb the reductions without jeopardizing fiscal stability.
Sen. Rod Bray (Senate President Pro Tempore, Indiana):
Indiana initially faced a weaker-than-expected revenue forecast in April, which led lawmakers to make difficult decisions, including cutting more than $2 billion from the state’s two-year budget. These reductions were seen as necessary to maintain fiscal discipline and long-term stability.
More recently, the outlook has improved. Revenue projections for fiscal year (FY) 2027 were revised upward by about 5%, easing immediate concerns. Despite this positive news, state leaders are choosing not to rush into new spending or major budget changes, particularly since the upcoming legislative session is not a budget year. Lawmakers plan to wait until the next full budget cycle in 2027 to reassess spending priorities.
Property tax relief has been a major policy focus. Recent reforms are expected to reduce property taxes for roughly two-thirds of homeowners by 2026, generating about $1.5 billion in savings over three years. However, because property taxes primarily fund local governments and schools, the changes have created tension with local officials. Lawmakers maintain that the reforms were necessary and plan to make only limited, mostly procedural adjustments in the near term as the policy continues to roll out.
Sen. Bobby Joe Champion (President of the Senate, Minnesota):
Minnesota’s fiscal outlook is strong in the near term, but analysts project a $2.5–3 billion deficit in the 2028–2029 biennium. State leaders are not waiting to address this gap and plan to continue managing the risk during the 2026 legislative session.
Recent revenue forecasts have improved, suggesting the eventual shortfall may be smaller than expected. We acknowledge an ongoing structural imbalance between spending and revenue and intend to make gradual adjustments rather than drastic changes.
The state is not pursuing new broad-based taxes and aims to protect residents from additional financial strain. Efforts include supporting local governments to help limit property tax increases, while also preparing for reduced federal funding that may affect future budgets.
Sen. Mattie Daughtry (President of the Senate, Maine):
In Maine we’ve been working to reduce local governments’ reliance on property taxes by covering about 55% of education costs and restoring a 5% municipal revenue-sharing program. Despite these efforts, property taxes remain a major challenge for localities.
To address this issue, lawmakers created a bipartisan Real Estate Property Tax Relief Task Force to develop practical, long-term reform recommendations. Unlike past attempts at quick fixes that risked destabilizing municipal finances, this year-long effort includes legislators, stakeholders, and outside experts. The task force is examining structural issues in the tax system, including the state’s requirement that all property be taxed the same, which may require constitutional changes. Broader tax reform is also underway, including adjustments to income and sales taxes, with cautious optimism that political timing in 2026 may allow meaningful reforms to advance.
Sen. Marilyn Dondero Loop (Senate President Pro Tempore, Nevada):
We recently undertook a multi-year effort to expand the state’s film tax credit, culminating in a highly contentious special legislative session. The debate did not follow clear party lines; Instead, lawmakers were split for a variety of fiscal and economic reasons, making the outcome unpredictable. Supporters argued the expanded tax credit would stimulate job creation. Opponents were more concerned about the cost of tax abatements and long-term fiscal impacts.
Two competing bills—one from the Senate and one from the Assembly—advanced simultaneously, with the Assembly version ultimately moving forward. After an extensive hearing process, the measure narrowly passed the Assembly but failed in the Senate. The narrow defeat and intense debate left lingering frustration among lawmakers, and while the issue remains politically sensitive, there is a realistic possibility the film tax credit could resurface in the future once tensions cool and if economic pressures persist.
Sen. Senator Mary Felzkowski (President of the Senate, Wisconsin):
Wisconsin’s gubernatorial line-item veto has created significant disruption in tax and budget policymaking due to its extraordinary scope. The governor holds one of the strongest line-item veto powers in the country, allowing edits down to individual letters and numbers within budget language.
In a recent budget deal, lawmakers negotiated a two-year increase of $325 per pupil in school funding in exchange for a tax cut. Using the line-item veto, the governor altered the language to extend the $325 increase annually for 400 years—an action later upheld by the state’s courts.
This decision has had major fiscal consequences: It locked in long-term school funding growth without corresponding revenue increases, contributing to higher property taxes and limiting legislative flexibility. At the same time, rising Medicaid costs consumed much of the state’s revenue growth, forcing reliance on one-time funds rather than sustainable budget solutions.
Overall, the expansive veto power has shifted significant budgetary control to the executive branch, complicating tax policy, reducing legislative oversight, and creating long-term fiscal uncertainty in Wisconsin.
Sen. Bill Ferguson (President of the Senate, Maryland):
Maryland has faced recurring budget deficits and is projecting another shortfall of about $1.5 billion in the upcoming fiscal year. These challenges are closely tied to the state’s heavy dependence on the federal government, making Maryland especially vulnerable to federal policy and funding changes.
In response to a $3 billion deficit last year, lawmakers combined spending cuts and revenue increases, including a new business-to-business technology sales tax. However, that tax has generated less revenue than expected and remains politically unpopular.
The current deficit is further complicated by high and growing costs in essential services, particularly for individuals with developmental disabilities. A small number of high-need cases account for a disproportionately large share of spending, making cuts both difficult and ethically fraught.
Overall, Maryland is struggling to balance prior spending commitments with limited revenue growth. Policymakers face tough choices between raising additional revenue, cutting deeply valued programs, or finding a long-term structural solution to stabilize the state’s finances.
Sen. Valarie J. Lawson (President of the Senate, Rhode Island):
Rhode Island’s revenue outlook has improved slightly, but the state still faces a potential budget deficit of about $300 million. State leaders have warned that this gap could create serious fiscal challenges heading into 2026.
Lawmakers are focusing on reassessing the state’s tax structure and considering alternative revenue options as part of the solution. These discussions are driven by growing spending pressures, particularly in healthcare. Major concerns include low reimbursement rates, difficulty retaining primary care physicians, and the financial instability of two hospitals. Given these urgent needs, Rhode Island lawmakers view revenue changes as more realistic and necessary than in the past to address the looming deficit.
Sen. Garlan Gudger (Senate President Pro Tempore, Alabama):
Alabama was an early adopter of an income tax exemption for overtime pay, but the policy became highly contentious once implemented. Although it was popular with workers—many of whom saw meaningful increases in monthly take-home pay—the exemption sparked debate across both parties and both chambers of the Legislature.
The exemption ultimately expired because its fiscal impact was far greater than initially projected. We were told it would cost about $35 million, but the actual revenue loss exceeded $350 million, creating a serious strain on the state budget, particularly education funding.
Rather than administrative difficulties, our primary issue was the inaccurate fiscal note and the resulting budget shortfall. Alabama relies heavily on income tax revenue to fund its Education Trust Fund, so the larger-than-expected cost made the exemption unsustainable.
Lawmakers expect the issue to return and are working toward a compromise that preserves some benefit for workers while protecting the state’s finances. Alabama’s experience highlights the importance of accurate cost estimates and the challenges states face when balancing tax relief with essential public funding.
Sen. Thomas Pressly (Vice Chair, Senate Labor and Industrial Relations Committee, Louisiana):
Louisiana saw little tax policy activity this year after voters rejected Amendment 2, a broad and complex proposal to restructure the state’s tax system. The amendment attempted to shift fiscal power away from the state and return more revenue, including severance taxes from oil and gas, to local governments.
Lawmakers now expect to revisit tax reform but in a more targeted and incremental way. Rather than a single, sweeping ballot measure, future proposals are likely to focus on specific issues, such as allowing more local retention of resource-related revenues.
Amendment 2 failed largely because of its complexity and voter skepticism. Many residents found it difficult to understand and were uncertain about its real impact, reinforcing distrust in how changes would affect local taxes. As a result, Louisiana plans to pursue clearer, segmented constitutional amendments in 2026.
Sen. Bart Hester (Senate President Pro Tempore, Arkansas):
Arkansas considered holding a special session to cut taxes this year but ultimately decided against it due to revenue uncertainty. State leaders wanted clearer information about the fiscal impacts of federal policy changes before committing to tax reductions.
Lawmakers now expect to revisit tax cuts in 2026, likely in the middle of the year. The delay reflects caution rather than opposition, as uncertainty around federal funding for Medicaid and SNAP, and broader tax changes have made long-term revenue forecasting difficult.
Overall, Arkansas is taking a measured approach—preserving fiscal flexibility until there is greater clarity on how H.R. 1 will affect the state’s budget.
Sen. Briggs Hopson (Chair, Senate Appropriations Committee, Mississippi):
Mississippi recently passed legislation to gradually eliminate the personal income tax, adopting a more aggressive approach than the Senate’s original proposal to reduce the rate to a flat 3%. The final plan includes an initial step-down to 3%, followed by a longer-term path toward full elimination.
Lawmakers acknowledge some nervousness about future revenue under this approach. While the goal is complete elimination of the income tax, there are open questions about whether the state will have sufficient revenue to sustain it.
Mississippi looked to other states, such as Kentucky, for models, but the adopted plan was not implemented as cleanly as intended. As a result, the state has until 2030 to make adjustments and correct the structure before completing the transition away from the income tax.
Sen. Dru Mamo Kanuha (Senate Majority Leader, Hawai’i):
Hawai’i enacted a new “Green Fee” in 2025 by increasing the transient accommodations tax and extending it to cruise ships for the first time. Although the governor had pushed for this change for several years, legislative resistance delayed its passage until this past session.
What changed was a successful court ruling that allowed the state to apply the tax to cruise ships, clearing a major legal obstacle. The fee is expected to generate about $100 million to fund climate and environmental initiatives, with the governor’s administration identifying eligible projects.
The Legislature remains skeptical about how the funds will be used and plans to review and potentially challenge the governor’s project selections in the next session. The policy also comes amid softer tourism trends, with fewer international visitors, even as domestic tourism remains relatively strong.
Sen. Chris Karr (Senate President Pro Tempore, South Dakota):
South Dakota has been exploring property tax relief through a legislative task force, but expectations for major reform in 2026 are modest. Lawmakers have struggled to agree on a clear funding source for meaningful tax relief, with competing proposals and little consensus.
Instead of identifying new revenue for tax cuts, the task force focused on strengthening guardrails around how property tax dollars are spent, particularly by local governments and school districts. These recommendations aim to ensure that any future relief would be sustainable and not quickly offset by rising local costs.
Overall, broad property tax reform is unlikely in the near term. While statewide property taxes remain relatively low, rapid growth in a few high-pressure areas—especially fast-growing counties with expanding school needs—continues to drive the debate and may require more targeted solutions rather than a statewide approach.
Sen. Mamie Locke (Chair, Senate Rules Committee, Virginia):
Virginia lawmakers are wary of the state’s revenue outlook despite the outgoing governor’s optimistic forecast. With a new incoming governor, the proposed biennial budget is unlikely to stand, especially given concerns that revenues will fall short of projections.
Federal workforce reductions have hurt Northern Virginia, in particular, and potential federal policy changes from H.R.1 add pressure to Medicaid and SNAP. These two programs along with K–12 education require about $4 billion. Until these priorities are funded, legislators expect little room for additional spending.
Overall, state legislators anticipate a tight budget cycle and significant revisions to the governor’s proposal.
Sen. Dafna Michaelson Jenet (Senate President Pro Tempore, Colorado):
Colorado moved quickly into a special session because changes under H.R.1 had an immediate and significant impact on the state, largely due to Colorado’s close conformity with the federal tax code. While we made adjustments during that session, those changes are not expected to be sufficient.
The state is now facing another projected $1 billion budget shortfall, marking the third consecutive year of major fiscal gaps. We expect the effects in 2026 to be even more severe than those already addressed.
Future options for tax changes are limited. At the same time, spending pressures are intensifying, particularly in healthcare with rural hospitals at risk of closing, broader hospital financial distress, and significant concerns over losses in Medicaid coverage.
Sen. Lonnie Paxton (Senate President Pro Tempore, Oklahoma):
In Oklahoma, lawmakers supported income tax reductions but took a more cautious, detail-oriented approach than the governor. While the governor pushed for a larger, across-the-board cut, the Senate prioritized protecting revenues and targeting relief toward lower-income taxpayers.
The compromise reduced the number of income tax brackets from six to three, eliminated taxes on the lowest brackets, and enacted a smaller quarter-percent rate cut. Lawmakers also established revenue triggers for potential future cuts, ensuring reductions occur only if revenues remain strong.
Looking ahead, further income tax cuts are unlikely in the short term. Instead, the main tax policy focus is expected to shift to property taxes. Because property tax revenue funds local governments and schools—and is constrained by the state constitution—any reforms will require coordination with local officials and possibly voter approval, making changes complex and politically sensitive.
Sen. Matt Regier (President of the Senate, Montana):
Montana passed a limited form of property tax reform this year, but it largely shifted the burden rather than providing meaningful relief. Because the state has no sales tax, property taxes carry an especially heavy load, and many taxpayers feel they are being overburdened.
The legislation that passed mainly redistributed property tax responsibilities, leaving some residents better off but others facing even higher costs, raising concerns about long-term affordability—particularly for homeowners at risk of being priced out of their homes.
There were disagreements between the House, Senate, and executive branch, especially over whether the state should use its strong revenues to offset local property taxes. The Speaker argued that all taxes ultimately fall on the same taxpayers and that future reforms may need to draw more on state revenues to make the system sustainable.
Sen. Charles Schwertner (Chair, Senate Business and Commerce Committee, Texas):
Texas has already enacted substantial property tax relief over the past several years, totaling about $58 billion. We have significantly raised the homestead exemption—up to $140,000 for most homeowners and $200,000 for seniors and people with disabilities—while also increasing rate compression and placing limits on how much local governments can raise property tax rates.
Despite these measures, debate continues over next steps. Governor Abbott has pushed to eliminate school district property taxes entirely, a position that has created tension with Lieutenant Governor Patrick and raised questions about long-term funding.
Some legislative leaders are open to additional relief but recognize the need to evaluate the impact of recent changes before moving further. Texas’ strong fiscal position—no state income tax, a large budget surplus, a well-funded rainy day fund, and continued business relocations—gives the state flexibility, but disagreements remain over how aggressively to pursue further property tax cuts.
Sen. Nicholas Scutari (President of the Senate, New Jersey):
New Jersey lawmakers proposed a novel tax on data collection, driven by concerns that data centers impose significant costs—especially energy consumption—while contributing little revenue. The idea is to levy small charges on data collection activities that would largely be invisible to consumers but could generate substantial state revenue, estimated at up to $2 billion annually.
The proposal emerged as part of a broader search for new revenue sources that do not directly burden traditional taxpayers. Supporters argue that as data centers grow and drive up energy demand and rates, they should contribute more to public finances.
Although the bill lacked detailed implementation mechanics and did not advance, state leaders expect to revisit it in 2026. With a new governor taking office and potential uses for the revenue, such as funding 988 mental health services, the concept is likely to remain under active consideration.
Sen. Amy Sinclair (President of the Senate, Iowa):
Iowa’s property tax reform stalled last year because the House, Senate, and governor could not agree on a single approach. Rising housing values have sharply increased property tax bills, intensifying public pressure for reform, but competing proposals prevented a compromise.
Despite the setback, reform has a realistic chance this year. Both the governor and legislative leaders are developing new proposals, driven by the growing gap between rapidly rising local government spending and more modest growth in wages and state spending.
The consensus is that the current system is unsustainable, making property tax reform a continuing priority that will likely return to the forefront in the 2026 legislative session.
Sen. David Sokola (Senate President Pro Tempore, Delaware):
Delaware’s property tax turmoil offers a clear lesson about state–local tension rather than a one-off local dispute. A court-ordered reassessment—after counties went 40–50 years without updating property values—triggered an unexpected shift of the tax burden from commercial to residential property, especially in New Castle County, which is home to 60% of the state's population.
Over decades, corporate property values were reduced through appeals, while homeowners bore increasing costs. When reassessments finally occurred, some school districts saw massive shifts, translating into large tax increases for residents. To stabilize the situation, the state temporarily allowed different tax rates for commercial and residential properties, with limits on how wide the gap could be.
The broader takeaway for other states is the importance of regular reassessments, transparency in appeals, and oversight of local tax systems. Delaware is now debating deeper structural reforms—such as countywide school taxes and changes to reserve funds—because courts may ultimately force more equitable solutions if lawmakers do not act.
Sen. Karen Spilka (President of the Senate, Massachusetts):
State leaders have blocked Boston’s proposal to significantly increase commercial property tax rates, creating tension between the legislature and the city’s mayor. Higher commercial taxes would further discourage business activity at a time when development and investment in Boston have already slowed. Currently, Boston has flexibility to tax commercial properties at higher rates, and raising them further risks driving economic activity elsewhere. Instead of approving higher commercial taxes, the Senate is advancing an alternative package focused on residential property tax relief.
This approach reflects a broader concern about balancing municipal revenue needs with economic competitiveness. While the relationship between state and city leadership has been strained, the Senate’s position is that protecting long-term economic health outweighs expanding Boston’s authority to raise commercial property taxes.
Sen. Robert Stivers (President of the Senate, Kentucky):
We are committed to following the revenue-trigger framework established for income tax reductions, even though the state again missed a trigger for an additional cut. Abandoning the process would undermine fiscal discipline and risk future budget instability.
The revenue triggers are designed to ensure that tax cuts occur only when economic growth can sustain them, preventing deficit spending. Although the state economy is performing well—with population growth, strong job demand, and an expanding tax base—legislative leaders believe adhering to the established rules is essential.
Overall, our strategy in Kentucky focuses on gradual tax reductions paired with tax-base growth. By following this structured approach, the state aims to maintain fiscal stability while continuing to reduce income taxes responsibly over time.
Sen. Rob Wagner (President of the Senate, Oregon):
Oregon passed a major transportation package that included a gas tax increase, but the policy quickly became vulnerable to repeal after opponents gathered enough signatures to put it on the ballot. Given poor polling and Oregon’s strong initiative and referendum tradition, lawmakers now expect the gas tax increase may be repealed or reset in an upcoming short legislative session rather than defended at the ballot.
The gas tax debate reflects deeper structural challenges. Oregon relies heavily on income taxes, has no sales tax, and faces constitutional limits on local property tax growth. As a result, local governments and school districts increasingly depend on the state for funding, putting pressure on the general fund even as federal policy changes created an unexpected $900 million shortfall.
At the same time, service expectations remain high. Despite significant increases in K–12 funding, school districts report looming layoffs, highlighting a mismatch between spending growth, revenue capacity, and rising costs. Looking ahead, Oregon’s biggest challenge will be managing reduced federal support—especially for SNAP and healthcare—without sufficient state resources to fully replace those funds.
Breaking Down Barriers to Workforce Growth
Early in 2025, Alabama’s governor recruited former Senate President Pro Tempore Greg Reed to lead a new, consolidated workforce effort as Secretary of the Department of Workforce. The central premise is that workforce readiness is the bridge connecting education goals to economic development—and that states must be able to answer investors’ core question: Can you reliably supply a skilled workforce now and in the decades ahead?
Secretary Reed framed Alabama’s recent strategy in phases: strengthening incentives (Jobs Act/AIM Act), investing in enabling infrastructure (a 10-cent gas tax increase that funded about $3 billion in road and bridge work); roughly $2.6 billion for rural broadband that improved the state’s ranking, and building an “innovation economy” pipeline through programs like Innovate Alabama. The capstone was the “Working for Alabama” package, including childcare and housing credits and a Career Pathways Diploma to steer students earlier toward trade and career options.
The Alabama Department of Workforce combines labor, workforce development, training/apprenticeships, and mine safety programs into one agency.
The Transformation Act created the Alabama Department of Workforce by combining four separate entities—the state’s Department of Labor, the Workforce Development Division at the Alabama Department of Commerce, Abandoned Mine Lands and Mine Safety under the US Department of the Interior, and the educational and training components of the Alabama Industrial Development Training program—into one agency. The new department is meant to function as a one-stop shop for employers and job seekers, with unified data capabilities, a statewide footprint (59 offices, about 850 employees), and governance structures including a large business-led advisory board and seven regional boards.
Operationally, the emphasis is on education/training, public awareness, and organizational consolidation. Secretary Reed cited strong headline labor stats (low unemployment, rising prime-age participation) but flagged troubling gaps—notably, low participation among ages 20–29 and a large pool of “some college, no degree” residents—as key opportunities to re-engage talent through short-term credentials, online training, apprenticeships, and wraparound supports (e.g., childcare, housing, transportation, healthcare).
Education funding may need a paradigm shift to better align student programs with real labor-market demand and measurable employment outcomes.
He also argued that better data is essential to regionalizing a workforce strategy, since local economies differ sharply across Alabama. The department is launching a statewide data hub and marketing effort, plus partnering with community leaders to make training and job pathways easier to understand and access. Regarding internal reforms, Secretary Reed described streamlining staffing, relocating employees from unsafe facilities, and reorganizing the merged agency. He closed with the message that incentives and plans don’t matter without people ready to work, and that workforce development must remain the state’s top priority.
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Discussion
Comments are paraphrased for brevity.
Sen. Garlan Gudger (Senate President Pro Tempore, Alabama):
What would you say is a key factor in effective plans to develop workforce?
Secretary Reed:
The secret to effective workforce policy is deep, ongoing stakeholder engagement—government, educators, and employers working together rather than operating in parallel. Schools and agencies cannot reliably meet labor-market needs on their own, because business demand changes faster than traditional training systems.
The key shift is from a supply-driven model to a demand-driven model. That means starting with industry. Ask employers what skills they will need in the future, then design education and training programs to meet those requirements. Tapping those forecasts makes workforce spending more efficient and increases the likelihood that training translates into real employment.
Sen. Dafna Michaelson Jenet (Senate President Pro Tempore, Colorado):
Colorado does not spend enough on K–12 and higher education. What does education funding look like in Alabama?
Secretary Reed:
Alabama operates with two separate state budgets. Most income taxes and certain use and sales taxes flow into the Education Trust Fund, which in the most recent year reached about $10 billion—the largest education budget in the state’s history. All other state functions are funded through the General Fund, which totals about $3 billion.
Sen. Robert Stivers (President of the Senate, Kentucky):
Do we need a paradigm shift in how we spend education funds and what our education systems should look like, and base them on economic aspirations?
Secretary Reed:
Higher education is becoming more proactive in reshaping its role to better align with workforce needs, especially as artificial intelligence accelerates the pace at which workers must be retrained. Colleges can play a key role in continuous upskilling rather than focusing solely on traditional degree paths.
At the K–12 level, career coaches are important—starting in middle school—to help students understand a wide range of career options, not just four-year college tracks. This is critical because most job growth will be in nontraditional pathways, even though four-year degrees will remain important for some professions.
The core message is that education funding and priorities may need a paradigm shift toward demand-driven outcomes. Since only about 25% of students earn a four-year degree within five years of completing high school, education systems must better serve the remaining majority by aligning programs with real labor-market demand and measurable employment outcomes.
Sean Conner (Senior Manager, Government Affairs, Lowe’s):
Alabama has some noteworthy examples of innovative public-private partnerships. How do you align industry, state leadership, and philanthropic stakeholders on such efforts? What initiatives have you used to foster that collaboration and drive innovation?
Secretary Reed:
Legislative leaders—especially Senate Presidents—can convene industry simply by calling them together, creating powerful opportunities for workforce collaboration. In Alabama, this approach has led to innovative partnerships.
One example is Ingram State Technical College, the nation’s only “behind the bars” junior college, which trains incarcerated individuals with the same credentials as other two-year colleges. Another is construction trade academies where industry fully funds instructors, equipment, and training, while school systems provide facilities, principals, and career coaches. These programs have produced hundreds of industry credentials at no cost to students.
Youth apprenticeships also are a valuable track, where 16- and 17-year-olds work in manufacturing settings such as a program with Mercedes-Benz. By coordinating regulators, lawyers, and industry, the state resolved child labor concerns, allowing students to earn pay and credentials while still in high school—demonstrating how strong public-private collaboration can rapidly expand workforce pipelines.
John Cullerton (Moderator):
What is the role and response from labor unions to these workforce initiatives?
Secretary Reed:
Unions contribute tremendously to these efforts. They are an engaged stakeholder. Everyone wants these initiatives to be wildly successful.
Keys to Regulating Short-Term Rentals
Short-term rentals (STR) have become a significant source of revenue for the states but also have contracted tight local housing markets. The U.S. is the world’s largest STR market, with about 1.8 million listings at any time—roughly 1.6% of total housing stock, though impacts are uneven. STRs lack a uniform definition across states, with defining factors including length of stay, use of a home, and property type (e.g., full unit versus a single room, and percentage of units rented). Within an individual state or municipality, these characteristics can determine whether a unit falls under housing or lodging rules, shaping regulation, registration, and enforcement.
STRs are most concentrated in tourism hubs but have an increased presence in smaller and rural communities, where they can strain infrastructure and services. The market is also concentrated by platform: about 10 platforms dominate listings, with the top two (AirBnB and Vrbo) accounting for roughly 75%, shaping how easily governments can tax and regulate the sector.
The U.S. is the world’s largest short-term rental market, with about 1.8 million listings.
Revenue from STRs can fall under property taxes (classification/assessment rules) or lodging/occupancy taxes (per-stay transaction taxes), and STR tax policy varies widely across the states. A length-of-stay of approximately 30 days subjects guests to lodging taxes in several states, with the rate in most states clustering between 4% and 9%. Lodging taxes are more visible, but property-tax classification is often the stronger, less obvious policy lever.
Traditionally, STR taxes fund tourism and visitor services; but some jurisdictions now allocate portions to affordable housing, infrastructure, or environmental needs. However, lodging taxes raise revenue but they do not change housing supply or market behavior.
Research suggests STRs can slightly worsen housing affordability in some places, often concentrated in tourism hubs or certain rural areas. Restricting STRs doesn’t necessarily lower rents unless units return to the long-term market; broader factors like low supply and high interest rates often dominate.
Many states are facing housing shortages and have enacted legislation to ease shortages. While STR policy can help at the margins, it isn’t a substitute for new supply. Long-term affordability is most reliably improved by adding housing stock; e.g., streamlining building approvals, allowing multifamily by-right development, reducing parking minimums, and similar reforms. From 2011–2022, only 19 bills nationwide were passed to allow more homes to be built, versus more than 100 bills in 2025.
Morgan Scarboro of MultiState added commentary about the tax implications for STRs, which may include state and local sales taxes or hotel taxes. Due to this complexity, STR tax compliance varies widely. Easing tax compliance for STR owners is a goal and a centralized collection platform at the state level may be easiest solution, but can often trigger strong local backlash if taxes do not revert to the localities. Approachable avenues for progress include standardizing filing deadlines and forms, and publishing local tax rates/contacts on a state site—all are efforts to improve tax compliance without removing local authority.
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Discussion
Comments are paraphrased for brevity.
Mr. Bill Ferguson (President of the Senate, Maryland):
Are there any established models for auditing—either tax compliance or registry systems—to ensure enforcement is occurring? In Maryland, this has been a persistent challenge. While we have numerous rules in place, we lack a standardized mechanism to audit the accuracy and validity of the underlying data.
Ms. Roche:
One of the biggest issues that consistently emerges across state research on short-term rentals is compliance—it’s difficult to achieve. Clear definitions can help, especially where existing lodging statutes apply, but there is no widely accepted standard or model. Some states have had partial success capturing taxes and enforcing rules, but results vary widely. Overall, this remains a challenging area, closely tied to broader concerns about uncollected tax gaps.
Sen. Marilyn Dondero Loop (Senate President Pro Tempore, Nevada):
In Nevada, short-term rentals have been especially controversial because tourism and resort hotels are central to the state’s economy. The state legalized short-term rentals but left primary regulatory authority to local governments. In Clark County and Las Vegas, this has led to significant neighborhood conflict as some rentals have evolved into large “party houses,” hosting events with dozens or even hundreds of people.
These party rentals have triggered complaints about noise, crowds, and safety, prompting Clark County to increase fines and tighten enforcement for illegal use and over-occupancy. Local officials emphasize that these situations differ from families or small groups using a home as a practical alternative to a hotel; the core issue is commercial-scale partying in residential neighborhoods.
Ms. Roche:
The battles over licensing, zoning, and enforcement have been intense, with ongoing disputes and lawsuits between counties and short-term rental owners. The experience underscores that constituents have been far more vocal about quality-of-life impacts—like living next to a 200-person party house—than about tax compliance issues. As a result, Nevada’s case illustrates how focusing solely on taxation or streamlined compliance can miss the real challenges driving public pressure: neighborhood disruption, enforcement, and land-use conflicts.
Sen. Dru Mamo Kanuha (Senate Majority Leader, Hawai’i):
Hawai’i is facing a significant test case as Maui County moves to phase out short-term vacation rentals. The decision has triggered major lawsuits from owners who previously received permits and invested heavily in these properties, raising unresolved questions about property rights and compensation.
At the state level, Hawai’i depends on counties to regulate land use and ensure compliance, while the state collects the general excise tax, sales tax, and transient accommodations tax. For years, some counties were slow to enforce regulations because vacation rentals generated substantial property tax revenue. That changed as community backlash grew over noise, overcrowding, and party-style rentals in residential neighborhoods.
Now, counties are tightening enforcement in response to resident pressure, even as the state seeks continued tax revenue and balances support for the hotel industry—especially in areas with limited hotel capacity. The outcome of the Maui lawsuits will be an important case study for how states and counties manage short-term rentals, property rights, and community impacts going forward.
Focusing solely on taxation or streamlined compliance can miss the real challenges driving public pressure: neighborhood disruption, enforcement, and land-use conflicts.
Sen. Robert Stivers (President of the Senate, Kentucky):
The situation in Kentucky highlights how difficult statewide consistency can be. The growth of the bourbon industry and the Bourbon Trail has transformed short-term rentals in our state, especially in small rural areas where many distilleries are located. Communities near distilleries have seen a surge in homes being purchased and converted into Airbnbs and Vrbos, driving frequent use and sharply increasing property values.
At the same time, regulation and tax collection remain limited. By contrast, in very small towns—population around 1,200—short-term rentals are often welcomed because they provide the only quality overnight lodging available. These starkly different local dynamics make it extremely difficult to design a single, consistent statewide model that addresses the needs and impacts of every region.
John Cullerton (Moderator):
How does the American Hotel & Lodging Association view short-term rentals?
Marilou Halvorsen (Senior Vice President, American Hotel & Lodging Association (AHLA)):
The lodging industry is not opposed to Airbnb or short-term rentals outright. The core issue is parity—ensuring consistent rules around taxation, registration, transparency, and local oversight. Short-term rentals can play an important role in tourism areas where traditional lodging is limited. However, concerns arise when large, out-of-state operators effectively run hotel-like businesses without following the same regulations. The industry’s message to state policymakers is not opposition, but the need for fair and enforceable standards that allow communities to govern what works best for them.
Sen. Mary Felzkowski (President of the Senate, Wisconsin):
In northern Wisconsin, a lake- and tourism-driven second-home market has shifted toward large, investor-owned short-term rentals. Companies are buying and rebuilding properties into high-end vacation homes, spreading beyond lakefronts into trail and off-water areas. Entry-level housing has effectively disappeared, forcing workers like teachers to commute long distances. Despite a major state investment in housing, many townships are now moving to regulate short-term rentals, driven largely by community backlash over noise, partying, and the loss of quiet residential character.
Sen. Stuart Adams (President of the Senate, Utah):
Housing demand in Utah is rising rapidly while zoning resistance and local opposition are restricting new construction, driving prices higher—especially when short-term rentals are added to the mix. The key question is how other states are overcoming local resistance and expanding housing supply, a challenge that is becoming increasingly acute in Utah.
Ms. Roche:
There is growing agreement nationwide on the need to expand housing supply, using a range of strategies. States are encouraging smaller and more varied housing types—such as starter homes, condos, apartments near transit and job centers—while reducing barriers like large minimum lot sizes. Many are allowing housing “by right,” expanding accessory dwelling units, and permitting manufactured homes, which are often the only truly affordable, market-rate option left. These factory-built homes can be delivered quickly and at much lower costs, making them an increasingly important tool for boosting supply where traditional homebuilding no longer pencils out.
The Case for Nuclear Power:
Technological Solutions to Meet Increased Demand
Jess Gehin
Associate Laboratory Director for Nuclear
Science and Technology
Idaho National Laboratories
Increasing demand for energy has brought nuclear energy opportunities front and center, according to Dr. Jess Gehin of Idaho National Laboratories. Demand is projected to climb sharply, driven heavily by data centers along with increased electrical draw from sources such as EVs. Dr. Gehin said the United States is facing a fast-rising demand curve without having built enough new “firm” infrastructure to match it, and large projects take significant time. Dr. Gehin pointed to U.S. electricity production from 1950–2024, showing strong growth through roughly 2000, followed by a “flat” era in the 2000s as efficiency improved, generation shifted, and cheap natural gas expanded. At the same time, reactors shut down as nuclear energy struggled to compete economically.
Sources: EIA Monthly Energy Review, AEO 2025, STEO; Rystad Energy; DOE; IEA.
Why Nuclear Fits the Moment
The growing demand for energy has driven new interest in evolving nuclear technologies. Dr. Gehin emphasized nuclear power’s energy density and refueling advantages. Nuclear reactions release vastly more energy than chemical ones, so nuclear plants require comparatively little fuel. Moreover, contemporary plants are refueled every 18–24 months rather than relying on more frequent fuel deliveries, as coal plants do. In a context where affordability and reliability are top concerns, Dr. Gehin positioned nuclear as an efficient way to deliver large amounts of steady power—and, importantly, high-quality heat that could serve industry as well as the electric grid does.
He described bipartisan interest in nuclear energy at the federal level, with general support and recurring questions focused on direction, new designs, waste, and safety. He highlighted major federal actions taken over the prior year, particularly executive-order-level direction and financing support, as a meaningful shift after decades of slow or stalled new construction.
Federal Support for Fast Restarts of Nuclear Facilities
A key theme was the need to bring nuclear capacity back on a rapid timetable. Federal support has focused on restarting shuttered plants, completing partially built units, pursuing uprates, which are regulatory-approved processes to increase a nuclear plant's electricity output by enhancing fuel, optimizing operations, or upgrading equipment, allowing more power from existing reactors, and enabling new construction—using tools such as federal loan programs to address financing challenges. He cited examples including the Palisades plant in Michigan; the restart of Unit 1 at the Three Mile Island site in Pennsylvania, now branded as the Crane Clean Energy Center; and other discussions involving the Duane Arnold Energy Center in Iowa and the Virgil C. Summer plant in South Carolina. He also noted an ambitious target: having 10 large, gigawatt-class reactors under construction by 2030.
National Security and DOE Sites
Another driver Dr. Gehin emphasized was national security. This includes deploying advanced reactors at military and Department of Energy sites, such as the planned new builds at Idaho National Laboratory, and growing Department of Defense interest in microreactors and small reactors for military bases. His logic was that government-backed deployments could mature technologies and de-risk them, enabling later cost reductions for civilian applications.
Testing and Licensing Reform
Dr. Gehin highlighted efforts to modernize how the United States tested and licensed reactors, noting that the country had not routinely tested new reactor concepts at national labs for decades. He referenced a DOE pilot program designed to approve several demonstration nuclear reactors on an accelerated timeline, with the near-term objective of reaching criticality—meaning the reactors achieve a self-sustaining, steady-state nuclear chain reaction, but are not ready for full commercial operation. He further described reform efforts at the Nuclear Regulatory Commission (NRC) focused on improving efficiency and timelines while maintaining existing safety standards and reducing unnecessary bureaucratic delay.
Source: Idaho National Laboratory.
Building Out
Using a historical build chart, Dr. Gehin noted that the United States once deployed close to 10 GW per year from nuclear, but largely stopped new construction by the late 1990s. The new goal is quadrupling nuclear capacity by 2050, from roughly 100 GW to 400 GW. This will require sustained construction rates along with a major rebuilding of the nuclear workforce and supply chains.
Indications are that domestic nuclear activity is accelerating. Technology companies are seeking reliable, clean power for data centers; the DOE’s Advanced Reactor Demonstration Program (ARDP) is helping the industry demonstrate new reactor designs; and momentum continues to grow for small modular reactors (SMDs) at 300 MW and below.
Fuel and Geopolitics
Dr. Gehin flagged enrichment as a major strategic issue. U.S. enrichment capacity supplied only about one-third of the current reactor fleet, with the remainder imported—historically including a significant portion from Russia. He described congressional action to restrict Russian uranium imports and substantial federal funding to rebuild domestic enrichment capability. He pointed to renewed investment and interest in locations such as Paducah, Kentucky; Oak Ridge, Tennessee; and Ohio, leveraging legacy infrastructure and expertise.
State Policy Trends
Dr. Gehin highlighted several recurring state-level policy approaches, including:
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Allowing partial cost recovery during construction to reduce financing risk;
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Offering tax credits for generation and manufacturing;
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In some cases, making direct state investments to attract projects, supply-chain facilities, and jobs.
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Discussion
Comments are paraphrased for brevity.
Sen. Stuart Adams (President of the Senate, Utah):
Utah is taking a strategic view that leadership in artificial intelligence will determine future economic and military power, and that the United States is in a real competition with China in this space. If we don’t lead in AI, we risk losing global influence. AI requires massive data centers, and data centers require large amounts of reliable electricity. Utah sees a growing gap between rapidly increasing power demand and the fact that the United States has slowed the construction of new generation. We view nuclear energy as a solution because it provides constant, emissions-free power and benefits from newer, safer reactor designs developed at national laboratories.
To support this, Utah is partnering with Idaho National Laboratory, the University of Utah, and technical colleges to develop a nuclear workforce. The state has permitted a nuclear reactor manufacturing facility in Brigham City and is strengthening domestic fuel supply by supporting uranium mining and processing within Utah.
The area generating the most excitement is microreactors—small, factory-built reactors that can be transported by truck, installed quickly, and linked together to scale power safely. Utah sees microreactors, alongside broader nuclear development, as essential to powering AI growth and maintaining U.S. leadership.
Sen. Charles Schwertner (Chair, Senate Business and Commerce Committee, Texas):
Texas expects electricity demand to nearly double by 2036, reaching about 150 gigawatts at peak demand. The state has already taken proactive steps by incentivizing nuclear development through loan programs and regulatory changes within the Texas Advanced Nuclear Energy Office (TANEO). TANEO provides strategic leadership to support advanced nuclear project development within Texas and administers the $350 million Texas Advanced Nuclear Development Fund to incentivize the development of the nuclear energy industry in Texas. However, the main bottleneck remains the federal NERC (North American Electric Reliability Corporation) approval process. While there is widespread discussion about streamlining reviews without compromising safety, we wonder whether NERC will actually move faster in practice.
Dr. Gehin:
The Advance Act is already helping to speed up licensing, and there are early signs of progress. For example, TerraPower completed its construction permit licensing for a Wyoming plant ahead of schedule, increasing pressure on the NRC (Nuclear Regulatory Commission) to meet required timelines while maintaining safety. This effort is still a work in progress, but momentum is building because the current approach to building energy infrastructure is too slow and too expensive.
In addition, the Department of Energy can authorize first-of-its-kind test and demonstration reactors under pilot programs, with a clear path to transition from DOE authorization to NERC licensing. Texas is emerging as a leader in this space, with privately funded projects—such as large reactor deployments tied to data center development in the Texas Panhandle—showing how faster pathways can unlock significant investment.
Sen. Bill Ferguson (President of the Senate, Maryland):
What are the biggest obstacles to deployment of nuclear energy? Is it regulatory uncertainty—wherein long and unpredictable approval processes can drive up costs and risk—or is it the technology itself?
Dr. Gehin:
Regulatory processes are already improving, especially through demonstration projects, and private investment is now flowing in at scale—highlighted by commitments on the order of $80 billion. As those barriers ease, the biggest constraint is becoming workforce. Building reactors will require hundreds of thousands of skilled workers, largely in the trades, at a time when states are already competing for construction labor across many infrastructure projects.
Supply chain capacity is another key challenge. Past delays were driven in part by the lack of domestic manufacturing for major components like reactor vessels, forcing reliance on overseas suppliers. Rebuilding U.S. supply chains and construction capability is essential. The technology itself is not the limiting factor.
Dr. Gehin:
Fusion has achieved major scientific breakthroughs, including recent demonstrations where more energy was produced from a fusion target than was put into it—a significant milestone. However, fusion still must pass through substantial engineering and scale-up phases. Realistically, commercial deployment appears to be around 2040 or later.
By contrast, fission is a mature technology. It has been proven across dozens of reactor designs, with technology no longer the barrier. What’s new is the innovation environment: beyond traditional companies like Westinghouse and GE, many startups are now developing advanced fission reactors. This influx of private investment and Silicon Valley–style innovation is accelerating progress and expanding options for near-term deployment.
Today, the United States produces only about one-third of its enriched uranium domestically, creating long-term risk if imports are disrupted.
John Cullerton (Moderator):
Is fusion playing a role in meeting our energy needs?
Sen. Dafna Michaelson Jenet (Senate President Pro Tempore, Colorado):
What about recycling the spent fuel from nuclear reactions. How much of the residual energy goes back into use?
Dr. Gehin:
In today’s light-water reactors, only a very small fraction of uranium’s energy is used. About 20,000 tons of uranium are mined to produce roughly 2,000 tons of enriched fuel, and when that fuel is removed from the reactor, only about 0.6% of the energy in the original uranium—or about 5% of the energy in the reactor fuel—has been used. That means roughly 95% of the energy remains in the spent fuel.
With recycling and the right reactor types, that remaining energy could be recovered. In principle, existing U.S. spent fuel could power the country’s electricity needs for more than 100 years. The technology to recycle fuel exists and is already being demonstrated for advanced and microreactors, but challenges remain to making it cost-effective and addressing non-proliferation controls. As uranium becomes more expensive with large-scale nuclear buildouts, recycling is likely to become increasingly important.
Sen. Bobby Joe Champion (President of the Senate, Minnesota):
Is there concern about U.S. dependence on foreign—particularly Russian—uranium to fuel our reactors? Second, while I understand that spent fuel is currently stored on reactor sites in temporary storage, is there concern about the lack of permanent nuclear waste storage facilities?
Dr. Gehin:
U.S. uranium mining once supplied most domestic needs but collapsed when low-cost foreign imports, especially from Russia, undercut production. While allies like Canada and Australia have large reserves, rebuilding U.S. mining and enrichment is important for energy security, jobs, and avoiding reliance on competitors. Today, the United States produces only about one-third of its enriched uranium domestically, creating long-term risk if imports are disrupted.
Spent nuclear fuel is safely stored at reactor sites in durable dry casks designed to last 100 years or more, with no near-term safety concerns. The challenge is not technical but policy: the United States lacks a permanent disposal or recycling pathway. Recycling could recover much of the remaining energy, but Congress would need to update current law to allow alternatives beyond Yucca Mountain and enable long-term solutions.
Preparing workforce and infrastructure now is key to accelerating nuclear development.
Sen. Robert Stivers (President of the Senate, Kentucky):
Our current focus is on siting, locations, and workforce readiness rather than research. The goal is to be prepared for deployment. Fuel recycling and enrichment work is already happening in places like Paducah, where depleted uranium tails are being reprocessed using centrifuge and laser enrichment, providing decades of fuel that will be sent to Ohio for pellet fabrication, and providing 1,500 jobs.
Significant investment is going into workforce development and infrastructure. Funding is being used to plan training needs and identify suitable sites—avoiding seismic risks while leveraging existing grid and industrial infrastructure, such as former steel mill sites, to control costs. The urgency is clear: Reliable, dispatchable energy is needed quickly, but coal, renewables, and natural gas all face limitations.
Dr. Gehin:
Preparing workforce and infrastructure now is seen as the key role states can play to accelerate nuclear development. It takes time to deliver adequate training for these jobs. Workforce readiness and supply chain challenges are the current holdups.
Sen. David Sokola (Senate President Pro Tempore, Delaware):
What are the cost comparisons between traditional reactors and the newer small modular reactors and microreactors?
Dr. Gehin:
There is a basic engineering rule that unit costs fall as systems get larger, which is why early nuclear plants quickly scaled from a few hundred megawatts to gigawatt size. That principle still holds. What has changed is that large-scale construction has become more expensive, while manufacturing costs continue to decline.
Smaller reactors aim to shift from on-site construction to factory manufacturing, then shipping finished units to the site. This could lower costs through standardization and reduced capital risk, even if per-unit power costs are slightly higher. The key question is whether manufacturing and material costs can be reduced enough to compete with large reactors—a model that still needs to be proven.
Understanding the New SNAP Landscape
Introduction
The Supplemental Nutrition Assistance Program (SNAP) is the federal program (formerly "food stamps") providing monthly benefits to buy groceries for eligible low-income households. Participants are required to show proof of income, residency, and identity, with eligibility based on household size and income. Benefits are loaded onto an EBT card to pay for food at participating stores, including online purchases. The program cost nearly $100 billion in Fiscal Year (FY) 2024, serving 42 million people who received benefits. Average benefits were about $187 per person per month (roughly $6/day). States administer the program under federal oversight.
Critical Program Changes
H.R.1 made significant changes to the SNAP program in terms of cost-sharing with the states, eligibility criteria and what foods are approved. Historically, the federal government paid 100% of benefit costs while administrative costs were split 50/50. Now this cost-share is calculated based on the error rate for the state.
H.R.1 ties state responsibility for benefit costs to error rates beginning in FY2028 as follows:
Below 6% error = no cost share
6 – <8% error = 5% cost share
8 – <10% error = 10% cost share
>10% error = 15% cost share
States will use FY2025 or FY2026 error rates to set their future share, creating urgency to reduce errors quickly. H.R.1 also shifts the admin match to 75% state / 25% federal starting in FY2027 and ends SNAP nutrition education grants in FY2026. A limited exception delays cost sharing to FY2030 for states with very high FY2025 error rates.
Error rates
SNAP Quality Control is an audit-like process that measures overpayments and underpayments (not fraud). States review a statistically valid sample of cases using detailed federal rules, and USDA rechecks a subset. Official state error rates are released each June for the prior fiscal year; FY2024’s national payment error rate was 10.93%, which is higher than pre-COVID levels.
H.R.1 creates a major structural change to SNAP funding that hasn’t occurred since the program was established in 1977. Error rates were originally designed for program oversight, not for determining state funding responsibility. Now error rates will determine the state’s cost share.
Other Changes and Challenges
Additional provisions took effect July 4, 2025, but detailed federal guidance arrived slowly, forcing states to make complex system changes under uncertainty—raising the risk of errors. Changes include limits on future Thrifty Food Plan updates, tighter rules around “heat and eat” utility deductions and removal of internet costs, and complicated non-citizen eligibility changes requiring later clarification.
Work requirements expanded in scope and complexity, including a higher age cap for able-bodied adults without dependents (up to 64) and narrower exemptions. Waiver rules also tightened, with limited temporary flexibility for Alaska and Hawai’i. These rules require more case “touches” and documentation, increasing administrative burden and error risk.
Overall, the changes in H.R.1 represent a contraction of the program, expanding work requirements and reducing deductions, which may lower benefits or make some households ineligible.
How States Are Responding
States are prioritizing error-rate reduction because potential costs to state budgets are large and guidance remains incomplete in key areas. Common error drivers include wage verification (harder with gig work and fluctuating hours), shelter/utility expenses, household composition, major IT changes, staffing shortages, and rapidly shifting policy.
States clearly understand the message: Error rates matter, and there is a strong commitment to reducing them, but there is still significant uncertainty about whether timelines and requirements can realistically be met.
States are using data to pinpoint root causes, investing in hiring and training, improving the clarity of notices and documentation requests to recipients, fixing system-driven errors, and strengthening coordination between policy teams and QC staff so eligibility rules are applied consistently.
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Discussion
Comments are paraphrased for brevity.
Ms. Silbermann:
South Dakota has maintained a low error rate, and the state staff are very generous with sharing their best practices with other states. What are some of the best practices your state has employed to keep error rates low?
Senator Chris Karr (Senate President Pro Tempore, South Dakota):
It’s hard to compare states directly because size and scale matter. In our smaller state, about 8% of residents receive SNAP, and our FY2024 error rate was about 3.2%. Our department runs SNAP in a centralized, top-down way at the state level rather than delegating to counties, and supervisors actively review and audit cases. All economic assistance programs are housed in one agency with an integrated eligibility system, so when someone applies for one program (like child care, TANF, or Medicaid), the system evaluates them for others, too. The same staff person handles both eligibility determination and case management. They also make policy choices that reduce automatic enrollment: no broad-based categorical eligibility, no automatic transitional SNAP from TANF, and a full review is required—especially at recertification and when someone misses certification or recertification.
Sen. Senator Mary Felzkowski (President of the Senate, Wisconsin):
Wisconsin also has a low SNAP error rate, though it’s the result of more recent reforms. Years ago, the state faced much higher error rates, so it partnered closely with Deloitte to develop data-driven tools that continuously flag where errors are most likely to occur, especially in complex cases like self-employment or veterans’ benefits.
Unlike South Dakota’s fully centralized model, Wisconsin largely operates through counties, though the state took over administration in Milwaukee County to improve performance. The state now closely monitors error trends, aims for an error rate closer to 3%, and pre-reviews more complex cases—sometimes twice—before benefits are issued. This targeted approach has improved accuracy while keeping costs and staffing manageable.
Sen. Dafna Michaelson Jenet (Senate President Pro Tempore, Colorado):
Colorado’s SNAP error rate is higher than states like Wisconsin and South Dakota, but it was among the first to take aggressive action. After challenges during the Medicaid unwind, the state moved quickly following H.R.1, even holding a special session to raise revenue by adjusting tax deductions to help cover anticipated SNAP-related shortfalls and support school meals.
Since July 4, 2025, SNAP teams have been meeting twice weekly and developed a detailed, multi-point improvement plan. A key step is hiring a new SNAP accuracy review team, expected to be trained and operational by the end of January.. The top priority is reducing errors tied to shelter and utility calculations by improving training and guidance for county staff.
Sen. Bobby Joe Champion (President of the Senate, Minnesota):
Can you clarify the new work requirements and are veterans no longer exempt under the new rules?
Ms. Silbermann:
The ABAWD (Able-Bodied Adult Without Dependents) work requirement for SNAP mandates that eligible adults (generally ages 18-64 without dependents) must work or participate in work-related activities for at least 80 hours per month to receive benefits, facing a 3-month time limit if they don't comply.
ABAWD work requirements and time limits exclude people who are:
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Already working at least 30 hours a week (or earning wages at least equal to the federal minimum wage multiplied by 30 hours);
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Meeting work requirements for another program (TANF or unemployment compensation);
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Taking care of a child under six or an incapacitated person;
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Unable to work due to a physical or mental limitation;
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Participating regularly in an alcohol or drug treatment program;
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Studying in school or a training program at least half-time (but college students are subject to other eligibility rules).
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Unable to work due to a physical or mental limitation;
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Pregnant;
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Have someone under 18 in your SNAP household;
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Certain veterans with disabilities or who meet financial criteria;
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Experiencing homelessness;
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Age 24 or younger and in foster care on their 18th birthday.
Sen. Thomas Alexander (President of the Senate, South Carolina):
Administrative cost sharing is shifting from a 50–50 split to a 75% state / 25% federal split, so states will face higher costs regardless of error-rate outcomes. This increase may be significant—often in the millions of dollars. These added costs are compounded by the pressure to reduce error rates, since higher error rates can trigger even greater financial responsibility and strain state budgets.
Ms. Silbermann:
It can cost millions of dollars to develop systems to reduce SNAP error rates, and this can consume a significant percent of the state budget.
The strain on state budgets means tough decisions are going to be required. Will states decide not to run a SNAP program? Will they change how eligibility is determined? This is where the uncertainty comes in.
Sen. Bill Ferguson (President of the Senate, Maryland):
Of the roughly 42 million SNAP participants, what percent are children and how do they qualify?
Ms. Silbermann:
Children make up a large share—generally estimated at about 30–40%. More than half of SNAP households include a child, an elderly person, or someone with a disability. Benefits are issued at the household level, typically through a parent or caregiver. In mixed-status families, ineligible adults are not counted as household members, but their income is included when determining benefits for eligible children.
Sen. Bobby Joe Champion (President of the Senate, Minnesota):
What about coverage for children aging out of foster care?
Ms. Silbermann:
They are a particularly vulnerable group. While they are no longer automatically exempt from work requirements, they may still qualify for exemptions based on disability or other factors. Otherwise, they are subject to the ABAWD work rules, which require regular documentation of work hours. Failure to meet these requirements can result in loss of benefits.
The Buzz on THC-infused Beverages:
Legal, Health and Regulatory Perspectives
Gillian Schauer, PhD, addressed the Forum as Executive Director of the Cannabis Regulators Association (CANNRA), a non-profit group of government agencies that regulate cannabis, marijuana, and hemp. CANNRA’s membership includes regulators from 44 states and three territories, plus observing members from states that don’t yet regulate marijuana or hemp the same way. She was joined by attorney Neil Willner, Counsel at Vicente LLP, who provided a legal perspective on related regulations.
Hemp vs. Marijuana Under Federal Law
The 2018 Farm Bill defined hemp as cannabis with 0.3% or less delta-9 THC by dry weight, making it federally legal with interstate commerce. Anything above that threshold is treated as marijuana (Schedule I) under federal law. Because the definition focused narrowly on delta-9 THC and did not clearly regulate finished products, a large market of cannabinoid hemp products emerged (edibles, vapes, beverages, concentrates), often with limited oversight unless states acted.
This cannabinoid market developed because of three gaps in federal law. First, the “derivatives gap” allowed hemp-derived cannabinoids to remain legal if chemically altered from CBD. This led to the creation of compounds like Delta-8 and similar variants, many of which have not been studied for safety.
Second, the THCa gap emerged because early federal language focused only on Delta-9 THC. Since cannabis naturally produces THCa, which converts to Delta-9 when heated, THCa flower is effectively marijuana once used. Despite later federal clarification, this loophole fueled a large, mostly online market.
Third, the 0.3% Delta-9 THC limit based on dry weight allows edibles and beverages to contain very high total THC amounts while remaining technically compliant. As a result, some hemp products far exceed the dose limits set in state marijuana programs.
Together, these gaps created an unregulated market with growing consumer safety concerns, including confusion about intoxication, drug testing risks, untested compounds, and limited screening for contaminants.
There's a lot of consumer confusion about what hemp is. Can it get you high? Can it result in a positive drug test? These are new, unknown molecules that have not been studied for human consumption.
Federal Changes
A new federal hemp policy shift (passed in appropriations language) takes effect November 12, 2026, and is expected to force many states’ current hemp rules out of alignment with federal law. It separates industrial hemp from cannabinoid products and introduces tighter limits—notably, a milligram cap concept for finished products—while requiring the FDA to publish key cannabinoid lists and clarifications within 90 days (with more guidance expected by mid-February).
The law separates “industrial hemp” from cannabinoid products and tightens the definition of legal hemp products. Key practical effect: Many intoxicating hemp products would become illegal federally unless they meet a strict 0.4 mg total THC per container cap, and certain converted/synthetic cannabinoids are excluded. The FDA is required (within approximately 90 days) to publish lists of cannabinoids and clarify elements such as what counts as a “container.” Much remains unclear about enforcement and how industry and states will respond during the lead-up.
Come next November, most states will now no longer be compliant with federal law.
Executive Order on Marijuana
A presidential executive order issued December 18 called for expediting the process to reschedule marijuana to Schedule III, but marijuana has not been rescheduled yet. Any rescheduling would still face procedural steps and likely litigation, and it would not automatically legalize state markets or allow interstate commerce. The biggest practical effect discussed is tax-related, while research would still face major limits unless products are FDA-approved.
There are two possible paths the Department of Justice could use to reschedule marijuana to Schedule III. One is the traditional notice-and-comment rulemaking process, which is slower. The other, faster route would allow the DOJ to issue a rule directly, citing international treaty obligations and the directive to “expedite.” While the faster path is expected, litigation would likely delay implementation regardless of which route is taken.
Marijuana has not been rescheduled and rescheduling is likely still several years away, even under the most optimistic timelines.
If marijuana is eventually rescheduled to Schedule III, state medical and adult-use markets would see little immediate change. State-regulated cannabis would still not be federally legal because those products are not FDA-approved Schedule III drugs, and interstate commerce would remain illegal. The biggest impact would be on businesses, because moving marijuana out of Schedule I or II would eliminate the federal tax rule known as 280E. That change would allow marijuana and hemp businesses to deduct ordinary business expenses, significantly improving their financial viability.
State Actions
States differ on what products they allow, dose and package limits, definitions, taxes, and which agencies oversee enforcement and funding. With new federal policy taking effect in 2026, many states will be out of alignment with federal law unless they update their frameworks.
Regulators describe three broad state approaches: Some states regulate intoxicating hemp in some form (with wide variation), some have largely banned it, and others are moving to treat it like cannabis within their existing marijuana systems. The remaining group has taken little action to date.
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THC Beverages
States often treat beverages differently than other hemp products, and policies vary widely on dose limits and allowable formats (cans, shots, powders, tap service). Key regulatory issues include ingredients (like caffeine or supplements), testing standards, retail access and age controls, labeling that clearly communicates impairment, taxes, and how alcohol laws interact with THC products. Some states are shifting hemp beverage oversight to alcohol agencies (e.g., Alabama, Tennessee, Kentucky), using alcohol-style distribution and tax systems, while others argue cannabis regulators are better positioned because cannabinoids are not regulated like alcohol and require specialized scientific expertise.
Questions also remain about how the 365-day sell-down period leading up to full implementation will be handled in practice, and what expectations or limitations may be placed on businesses during that transition. The response of major national players in this space—such as Total Wine, Shopify, Circle K, and others—is likewise uncertain and could significantly influence market dynamics.
Finally, it is unclear how existing federal alcohol laws and regulatory requirements will affect the participation of alcohol wholesalers, retailers, and brands in the THC beverage space now that federal law explicitly outlaws the vast majority of THC beverages on the national market.
What is clear is that these changes will immediately impact capital, banking, insurance, and more for the hemp industry.
There have been questions about whether Congress is considering a national approach similar to alcohol, such as a minimum age requirement, for THC-related products. This concern is driven by the fact that Delta-9 products can still be sold without age limits in many places, making them easily accessible in locations like gas stations. That lack of uniform age restrictions is a significant public safety concern.
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Online Marketing and Postal Delivery
This has been a major challenge for state regulators in the hemp space. Even when states are granted regulatory authority, the online marketplace remains vast and difficult to control. Products can often be purchased by simply clicking that you are over 21, entering a credit card, and having them shipped directly to your home through USPS, with minimal real age verification. The states will likely address this differently from state to state based on a variety of factors.
It remains unknown what federal enforcement will ultimately look like and which agencies, if any, will take the lead in enforcing this law.
What’s Still Unknown
Several key issues remain unresolved. It is unclear what federal enforcement will ultimately look like and which agencies, if any, will take the lead in enforcing this law. There is also uncertainty about whether a Cole-like memorandum will be issued to provide guidance to states that choose to exercise states’ rights by continuing a cannabinoid hemp program. In addition, it is not yet known what other federal bills or regulations may follow and add further requirements or restrictions.
"Cole-like Memorandum"
Refers to a guidance document issued by the United States Department of Justice (DOJ) to federal prosecutors that outlines priorities for enforcement. It is not a law but rather guidance that addresses the conflict between federal prohibition (specifically the Controlled Substances Act) and state-legalized cannabis markets.
The Near Future
Looking ahead to 2026, states face new questions: whether an in-state-only hemp market can survive if interstate sales are curtailed, whether businesses can remain viable without key tax deductions, and whether states can source needed ingredients if inputs are coming from other states. Expect more state action during the 2025–2026 transition period, more enforcement, and more litigation—especially where governors and legislatures clash over implementation details. Federal hemp policy is shifting quickly, and states will likely need to decide—between now and November 2026—how to respond to stay compliant or assert state approaches, while keeping consumer safety and enforcement realities in view.
The most significant impact of rescheduling would be on taxation. Section 280E of the federal tax code currently prevents businesses trafficking in Schedule I or II substances from deducting ordinary business expenses. Moving marijuana to Schedule III would allow marijuana—and potentially cannabinoid hemp—businesses to take standard tax deductions. Existing financial compliance guidance from the Financial Crimes Enforcement Network (FinCEN) would continue to apply unless explicitly changed.
Cannabis Glossary (provided by CANNRA)
Cannabinoid - Active ingredients or molecules in the Cannabis sativa L. plant. The plant makes more than 100 cannabinoids.
CBD (cannabidiol) - One of the cannabinoids in the Cannabis sativa L. plant. When consumed in isolated form (e.g., as the only active ingredient), cannabidiol is not impairing or intoxicating. Cannabidiol can be turned into other cannabinoids in a lab using basic chemistry. Most CBD products on the market are not isolated forms of CBD and contain other active ingredients and cannabinoids.
Flower - The Cannabis sativa L. plant produces flowers that contain most of the active ingredients or cannabinoids.
Hemp - A variety of the Cannabis sativa L. plant. While hemp may be cultivated to have lower amounts of THC in the plant, it can contain THC as well as many other cannabinoids that are part of the cannabis sativa L. plant. These cannabinoids can be extracted from the plant in more concentrated amounts. They can also be taken into a lab and turned into other cannabinoids (including intoxicating cannabinoids) using basic chemistry.
Marijuana - A variety of the Cannabis sativa L. plant that is grown with higher amounts of THC in the plant. Marijuana is a Schedule 1 substance by the U.S. Controlled Substances Act and is regulated individually through medical or adult use programs across a number of states.
Schedule I Drugs - The U.S. Controlled Substances Act classifies drugs and substances into five schedules. Schedule I drugs have no currently accepted medical use and have the highest potential for abuse and the potential to create severe psychological and/or physical dependence.
Schedule III Drugs - Schedule III drugs and substances are those defined as having currently accepted medical use in the U.S. and as having less potential for physical and psychological dependence than Schedule II drugs.
THC (tetrahydrocannabinol) - One of the cannabinoids in the Cannabis Sativa L. plant. THC is the most well known intoxicating cannabinoid in the plant (but it is not the only intoxicating cannabinoid the plant makes).
THCa (tetrahydrocannabinol acid) - The acid form of the THC molecule. The plant manufactures more of the acid form (THCa) than it does THC. When you heat THCa, the acid molecule drops off and it becomes THC.
Delta-8 THC - An isomer of THC. An isomer is a molecule with the same chemical formula but a different arrangement of atoms that results in different physical and chemical properties. THC has a number of isomers - including Delta-9 THC, Delta-8 THC, and Delta-10 THC. Both Delta-8 THC and Delta-10 THC exist naturally in the Cannabis sativa L plant in very small quantities. CBD can be turned into Delta-8, Delta-9, and Delta-10 THC in a lab using heat, acids, and solvents.
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Discussion
Comments are paraphrased for brevity.
Sen. Mattie Daughtry (President of the Senate, Maine):
Is Congress considering a national approach similar to alcohol, such as a minimum age requirement, for THC-related products? The lack of uniform age restrictions is a significant public safety concern.
Dr. Schauer:
This has been a major challenge for state regulators in the hemp space. Even when states are granted regulatory authority, the online marketplace remains vast and difficult to control. Products can often be purchased by simply clicking that you are over 21, entering a credit card, and having them shipped directly to your home through USPS, with minimal real age verification.
Age limits and basic regulatory controls are regularly discussed at the federal level, but there is still no comprehensive federal framework. Most states that regulate hemp have set a 21-and-over age requirement and enforce violations within their borders. However, widespread direct-to-consumer online sales undermine those rules, prompting some states to increase enforcement and, in a few cases, ban direct-to-consumer hemp sales altogether.
Sen. Mary Felzkowski (President of the Senate, Wisconsin):
If you're a state that has no marijuana program whatsoever, and now you're going to try to regulate these derivative products, are you, in a sense, regulating marijuana? And if we allow manufacturers of THC beverages and do nothing to regulate or restrict them, what happens?
Dr. Schauer:
Yes, you are regulating marijuana. If states do nothing, businesses are left in violation of federal law with no state framework to protect them, a situation that benefits no one. As a result, many states are likely to act rather than remain passive. If a state does nothing, federal changes—particularly the reclassification of excluded hemp products back to Schedule I—will still trigger state-level consequences.
What we are likely to see is states bringing hemp under a broader cannabis framework, or, in states without existing cannabis programs, choosing between creating a pathway that includes marijuana or building a stand-alone hemp model. Each option comes with legal and practical challenges.
States also respond differently when federal scheduling changes occur. Some automatically align state law with federal scheduling, others trigger a rulemaking process to decide whether to follow the federal change, and some require rescheduling but only after a formal process.
Sen. Lonnie Paxton (Senate President Pro Tempore, Oklahoma):
In the states that are choosing to totally ban these products, is there any effective way to keep them from being shipped in?
Dr. Schauer:
The new federal language taking effect in November should help significantly, and there is an expectation of federal enforcement, potentially by the DEA. States have already shown this can work. Arkansas is a clear example: After court rulings shifted, regulators quickly went into the field, educated thousands of retailers, and brought products into compliance without relying on criminal enforcement.
Another emerging tool is RICO litigation. RICO (Racketeer Influenced and Corrupt Organizations) law is a federal statute that lets law enforcement prosecute leaders of organized criminal groups by targeting their "pattern of racketeering activity." Private plaintiffs have begun filing state RICO cases against organizations that market hemp products as “compliant,” when they actually contain more than 0.3% THC and are legally marijuana. At least two of these cases have survived early dismissal. If products exceed the THC limit, they can be treated as illegal controlled substances, making interstate sales vulnerable to RICO enforcement.
Sen. Dafna Michaelson Jenet (Senate President Pro Tempore, Colorado):
We know that a THC-beverage bill will be coming in Colorado. Why are these beverages difficult to test, and what should we be doing to make sure that we're putting out quality products?
Dr. Schauer:
Testing needs to focus on the finished product, not just ingredients. Some states have considered THC beverages “on tap” in bars (Minnesota allows it), but products served that way are hard to test reliably because you can’t be sure what concentration is coming out each time. The biggest technical issue is consistency: the drink has to homogenize and stay homogenized. THC tends to stick to container linings or equipment surfaces, which can throw off both lab results and real-world dosing.
That matters even if the dose is lower than the label says. If one brand delivers far less than advertised and another delivers the full amount, consumers can’t judge or “titrate” their effects safely. The fix is strong quality control: good materials, validated protocols, and enough scientific capacity to confirm the product actually contains what it claims.
Sen. Thomas Pressly, Vice Chair (Senate Labor and Industrial Relations Committee, Louisiana):
In Louisiana, some restaurants were grandfathered in to sell THC beverages, while most others have been banned. Has there been increased litigation nationally from restaurants being sued for serving or giving out these products?
Mr. Willner:
There has been very little litigation so far. That’s not because problems don’t exist, but because there aren’t many deep-pocket defendants yet. Lawsuits are expensive, and on-site consumption of hemp products and beverages is still relatively new, so the market hasn’t been around long enough to generate significant or established litigation trends.
Sen. Bill Ferguson (President of the Senate, Maryland):
Is there a difference between hemp-based THC beverages and non-hemp-based beverages?
Mr. Willner::
THC is THC, regardless of whether it comes from hemp or marijuana. Hemp-derived beverages took off largely because they could be sold through far more retail channels. In state-regulated marijuana markets, beverages were often hidden behind the counter, while the hemp market allowed them to be sold alongside alcohol and in many more locations, driving rapid growth.
The effects may be similar, but the source and production method can differ. Some products use plant-derived THC, while others rely on chemically converted or synthetic THC made from inexpensive CBD. In theory, precise chemistry can produce a clean result, but that requires advanced equipment and expertise. In practice, many products are made through cheaper conversion methods, which can introduce variability depending on who is producing and selling the product.