Illinois was the first state to designate Martin Luther King, Jr. Day as a state holiday in 1973. MLK Day became a federal holiday in 1986(Fed holidays are a big deal for the DC area), and by 1993(Arizona was the lager), all states had some sort of holiday on the third Monday of January. Some jurisdictions refuse to commemorate holidays that mark a single individual. On that point, some politicians pointed to the need to commemorate all of our Civil Rights activists. New Hampshire and Utah had names such as Human Right's Day to mark the day. On the other hand, some states were less altruistic to the concept of world-as-a-family: South Carolina and Virginia conveniently moved their Confederate Commemoration days to overlap the third Monday in January. Since 2000, though, Virginia's Lee-Jackson Day has been moved to the Friday before the third Monday in January. By 2000, the official name for the holiday in mid-January had been changed to MLK Day.
As for the shrugging of shoulders over designating this day a holiday, it's nothing new. The politically acceptable reason is that MLK day was planned to be too close to the excesses of the holiday season! (Remember that Christmas Week was just three weeks ago?) There is also the reason of relevance. In the DC area, it's a big celebration and commemoration with a deep social context. The influence of MLK is less prevalent in some parts of the country, and thus understandably, isn't as widely celebrated and commemorated. Some counties, usually in areas which do not widely celebrate the day, choose to have school on MLK Day, but some don't have a firm stance. At least one county in North Carolina decided to use this holiday as a snow make-up day. The sudden change really ruffled some feathers.
So whatever you celebrate or don't, enjoy your Martin Luther King, Jr. Day!