TABLE OF CONTENTS
- What Happened
- What Now
- What’s Next
- Ballot Initiatives
- The Road Ahead
In one of the most interesting midterm elections in decades, voters sent mixed signals on Election Day. Overall, Republicans were disappointed to not see a red wave materialize. And, Democrats bucked the historic trend of a midterm wipeout for the President’s party.
The immediate impact is likely a return to divided government in Washington, D.C. which will stymy President Biden’s agenda in Congress. Republicans will likely control the U.S. House but by a historically low margin (~6 seats). Control of the U.S. Senate will not be determined for days if not weeks, and possibly could hinge on a runoff election in Georgia (again).
At the state-level, Democrats fended off Republican challenges in almost every major battleground, and made gains in key states. Democratic governors won reelection in Wisconsin, Michigan, Kansas, and New Mexico. Wisconsin and Kansas are notable because a flip would have resulted in a Republican trifecta in those states. New Mexico is notable because a win there is likely to preserve a Democratic trifecta. And finally, Democrats earned new trifectas in Maryland, Massachusetts, and Michigan. Additionally, the party looks poised to protect its trifecta in Oregon, and potentially break a Republican trifecta in Arizona (although the outcome there is uncertain). Overall, that’s a huge night for Democrats and cause for celebration for the blue team. The one potential bright spot for Republicans is that they appear poised to take the governor’s mansion in Nevada, breaking a Democrat trifecta there.
Expect that the moment that Republicans take control of the U.S. House they will be fully absorbed with Congressional oversight and investigation of the Biden Administration. The employer community will certainly cheer some legislative checks on the National Labor Relations Board and the Labor Department. Additionally, if Republicans gain control of the U.S. Senate then they will be able to block appointees to federal agencies and the courts. Total legislative control for Republicans would allow for the party to advance legislation to President Biden’s desk as well.
Regardless of which party wins the U.S. Senate, leadership of both chambers will be operating with razor thin margins. The House Speaker and Senate Majority Leader will spend a significant amount of time and energy (as Senate Democrats did over the past two years) keeping their delegation in-line. In short, do not expect a lot of big legislative packages out of Congress over the next two years. Messaging bills and oversight will take up most Congressional activity. Expect the Biden Administration to double down on action at federal agencies as opportunities for wins in Congress become slim.
At the state-level, the policymaking environment will change dramatically in Maryland, Massachusetts, and Michigan. The other state to watch is Nevada where Republicans could break the Democrat trifecta if they earn the governor’s mansion. Elsewhere the policy environment will stay surprisingly static. The biggest shifts are likely to occur in places like Florida where one party expands trifecta control to include super majorities in both chambers. A number of states are still counting votes to determine partisan control (and at what level) within state legislative chambers.
Storylines heading into Election Day were already focused on 2024 due at least in part to former President Trump teasing the launch of a 2024 campaign. Gridlock in D.C. will push action to the states. The ambition of state-level politicians (on both sides of the aisle) to queue up for either 2024 or 2028 is also likely to incentivize bold action on issues. Brands are likely to face FAST Act copycats and tip credit elimination bills in blue trifectas and may also have to fend with franchise bills and “anti-woke” legislation in red trifectas. Otherwise, the state policy making environment in 2023 will look very similar to 2022.
Wages and Benefits
Voters continue to back minimum wage increases, even in the most Republican states in the nation. Nebraska voters approved a $15/hr minimum wage, proving that the measure can pass nearly anywhere. That said, an $18/hr measure failed in Portland, Maine, demonstrating there is an upper limit to what voters will approve.
Nebraska – Approved. Incrementally increases the minimum wage to $15/hr.
Nevada – Approved. Incrementally increases the minimum wage in Nevada to $12/hr.
Portland, Maine – Failed. Incrementally increases the minimum wage $18/hr, and eliminates the tip credit.
Washington, D.C. – Approved. Eliminates the tip credit and increases the minimum wage for tipped employees to the minimum wage for non-tipped employees.
Illinois – Approved. Creates a state constitutional right to collective bargaining.
Tennessee – Approved. Embeds right-to-work in the state constitution.
Oregon – Approved. Voters approved a constitutional right to affordable healthcare.
A number of alcohol licensing, sales, and delivery measures appeared on the ballot in Colorado and Massachusetts. Two impact the industry.
Colorado – N/A. Permanently allows bars and restaurants to allow alcohol takeout and delivery.
Massachusetts – Failed. Changes the limit of off-premise licenses a retailer can hold. Allows for out-of-state driver’s licenses to be used for identification purposes.
Marijuana and Drugs
Recreational marijuana appeared on a number of state ballots with mixed results. Developments in this space impact a number of retailers in a number of ways.
Arkansas – Failed. Legalizes recreational marijuana.
Maryland – Approved. Legalizes recreational marijuana.
Missouri – Approved. Legalizes recreational marijuana.
North Dakota – Failed. Legalize recreational marijuana.
South Dakota – Failed. Legalize recreational marijuana.
Colorado – Approved. Decriminalizes use and possession of some hallucinogenic/entheogenic plants and fungi.
Tax measures appear on the ballot every year and this year is no exception. Two measures in Massachusetts and California may impact some operators.
Massachusetts – Approved. Raises taxes on incomes above $1 million.
California – N/A. Raises taxes on incomes above $2 million.
California – Failed. Legalizes sports betting.
THE ROAD AHEAD
Divided government in D.C. is likely to push political energy into state capitols at a time when the industry faces unprecedented threats from FAST Act copycats and other business model issues. While the results will bring new threats and new opportunities, much of our issue agenda will remain the same albeit with renewed vigor in many places. The key states and issues that we will be watching closely in 2023 include:
- Increased regulatory focus by the Biden Administration, particularly in the labor space;
- Broadened progressive labor agendas in Massachusetts, Maryland, and Michigan;
- Pushback efforts by the liquor industry in states where Republicans make gains;
- Increased efforts at sectoral bargaining / FAST Act copycats, particularly at local level;
- Increased efforts at curbing corporate “activism” in Florida, Texas, and potentially Ohio, and;
- Renewed efforts to pass wage and benefit policy at the ballot, already underway in Ohio.
It will be more important than ever for the industry to proactively connect with moderates in target states. As always, don’t hesitate to contact us with any questions and we’ll continue to report out developments as votes continue to be counted.