A full agenda is underway in the 35 states that have just convened their legislative sessions. Affordability is the buzzword heard far and wide, as millions of Americans continue to struggle with the high cost of living. Economic concerns are likely to dominate statehouses in 2026, especially in an election year, with 36 states holding gubernatorial races. The issues debated in the legislative halls will almost certainly spill onto the campaign trails.
Even without the election-year backdrop, state lawmakers will feel pressure from their constituents to do something about rising household costs. Beyond the cost of groceries and lingering inflation, nothing has quite captured the cost-of-living spotlight like the skyrocketing price of housing.
Home ownership, once a staple of the American Dream, is out of reach for many, but especially the poor and younger generations. The average first-time homebuyer is now 40, a striking shift from the 1980s and 1990s, when Americans usually bought their first home in their late 20s or early 30s.
Owning a home is the key to moving up the economic ladder and building wealth, but it also plays an important role in helping people build families and communities. When Americans no longer see homeownership as part of their future, they delay starting families and putting down roots.
Many state and local governments recognize the magnitude of this problem — and, thankfully, have a great deal of control over housing policy through zoning, permitting and land-use rules. State leaders can look to Montana as an example; it recently passed housing reforms that are set to expand supply and reduce prices.
Even when Americans can afford to buy a home, many homeowners say the cost of keeping it is becoming unmanageable with rising property taxes. A convergence of rising home values, persistent inflation and increased spending from local governments has pushed property tax bills upward. As a result, property tax reform is shaping up to be a major issue in state capitols this year.
Perhaps the most consequential issue state lawmakers will face in 2026 — one that touches not only housing and property taxes but nearly every other policy area — is the budget, and the growing fiscal pressures facing most states.
When lawmakers convene, years of excessive federal pandemic funding are coming to an end, having masked the true picture of state spending and revenues. In many states, revenues are no longer keeping pace with growing spending demands, forcing difficult decisions about priorities and cuts. States would do well to adopt responsible budget models that establish spending limits and prevent government spending from growing faster than taxpayers’ ability to pay.
On top of these underlying fiscal pressures, states will have to confront an additional budget challenge brought on by the recent changes to Medicaid and SNAP in the One Big Beautiful Bill. The legislation shifts more costs to state governments if they fail to address high error rates in SNAP, or frequent mistakes when determining eligibility or benefit amounts. While state lawmakers can’t fix error rates through legislation, lawmakers may start to pressure agencies to bring error rates down, especially as they deal with mounting budget problems.
The One Big Beautiful Bill also requires states to implement work requirements for Medicaid and SNAP beginning in 2026, a change that will pose significant administrative challenges. State agencies will need to better coordinate and share information about recipients, something many safety-net systems were oddly not designed to do. Some states, including Louisiana, Arkansas and Mississippi, are already preparing by more closely linking their safety-net programs with workforce development efforts and taking steps to make these programs function as a more integrated system. Other states would be wise to follow their lead.
This growing focus on the safety net is an opportunity for states to reassess their welfare systems and take steps to ensure they act as a bridge, not a barrier, to opportunity.
Removing barriers should be a priority for state lawmakers, especially when it comes to education. While it has taken a backseat to more headline-dominant issues such as affordability and inflation, it remains a core responsibility of state and local governments and a continued concern of many families. Parents and teachers are alarmed by America’s poor performance in reading and math, keeping the issue top of mind for legislators and communities nationwide.
School choice policies such as Education Savings Accounts are likely to expand, along with open enrollment policies that allow students to attend public schools outside their assigned districts. Lawmakers are also expected to continue advancing Science of Reading laws, which embrace phonics in teaching students how to read.
Artificial intelligence is becoming a priority for the states. Although President Trump recently signed an executive order aimed at limiting state regulation of AI, it’s likely to face legal challenges, leaving uncertainty about how much authority states have in this area. Nonetheless, expect states to continue to debate the issue as many Americans remain uneasy about AI’s rapid adoption — and the lack of clear answers regarding what it means for jobs, society and children.
As legislative sessions get underway, the states will become the central arena for many of America’s most pressing policy challenges. Midterm elections may grab the spotlight, but keep in mind it’s the debates happening in legislative chambers that will determine how affordability, education, opportunity and much more are addressed in the years ahead.
