November 14, 2012

 

 

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Public Policy & Government Affairs

 

 

 

ALERT

A Big Night for Democrats in the Statehouse Results in an Increase of One-Party Control

While election night brought big wins for Democrats at the federal level, the ultimate result was a return to the status quo. Democrats control the White House and Senate while Republicans control the House. That is a formula for continued gridlock absent bipartisan compromise.

That trend did not extend to state elections where Democrats racked up big wins in statehouses flipping control of at least eight chambers they lost during the Republican sweep in 2010 and garnering super-majorities in Illinois and California. Republicans won four majorities and obtained a supermajority in Tennessee. The end result is a historically low number of split-party control states. One party controls both chambers of the legislature in all but three states: Iowa, Kentucky, and New Hampshire (Nebraska is unicameral and nonpartisan). And the governor and the legislature are controlled by different parties in only six states: Maine, Missouri, Arkansas, New Mexico, Montana, and Nevada. That means that in 40 states, one party is in complete control — many with supermajorities in the legislature.

The results of this election will have dramatic implications for business interests in legislatures across the country as new Democratic majorities and supermajorities flex their muscles. Historically, the year after a presidential election is when states entertain the most new tax proposals. The trend toward hyper-partisan representation in state government also means that bipartisan compromise becomes less important. This can be both good and bad for business interests as natural roadblocks to passing legislation are removed at the state level.

An analysis of the switching chambers and other key states follows:

New Democratic Control and Key States:

  • Colorado: Democrats retook the Colorado House where Republicans had held a slim one-vote majority obtained in 2010. The Democrats emerge from Election Day with a 37-26 majority. A backlash over the way the Republican controlled House killed a civil marriage bill is reported to have been a significant factor in the party control switch but Republican Speaker Frank McNulty gave credit to the Obama ground game sweeping up Democratic legislative candidates. Denver Democratic Rep. Mark Ferrandino has already been tapped to be the new House Speaker starting next session. The Democratic House means Colorado is once again fully controlled by the Democrats. 
  • Maine: Both the Maine House and Senate returned to Democratic control one election after losing control of both in 2010. There are several recounts pending in both chambers. The question, however, is not whether Democrats will control but by how much. In the House they could have as many as 87 seats in the 151-person chamber, a high-water mark not seen since 1993. Legislative control is doubly important in Maine because the legislature selects the Attorney General, Treasurer, and Secretary of State. Each of those officers has been Republican the last two years, and they will also switch to newly appointed Democrats because of the new Democratic legislative majority. The Governor of Maine remains Republican, making Maine one of the few split-control states. 
  • Minnesota: Both chambers in Minnesota reverted back to Democratic control on election night. Just as the 2010 Republican switch of both chambers took national observers by surprise, the switch of the House in 2012 was unexpected. Going into Election Day, it was believed the Senate was in play but that Democrats would not be able to flip the House back in one cycle. When the dust settled on Election Day, Democrats picked up nine seats in the Senate and eleven seats in the House, giving them comfortable majorities. They will join previously elected Democratic Governor Mark Dayton in complete control of the state for the first time in 22 years. Gov. Dayton had run on taxing the wealthy. After his party obtained legislative control, he signaled his intention to propose a comprehensive overhaul of the tax system next session. Many of the new legislators from his party are pro-business fiscal moderates from rural and suburban areas who may serve as some check on his agenda. 
  • New Hampshire: The 400-person New Hampshire House switched back to the Democrats after only one cycle under Republican control. While significant swings are not uncommon in the very large chamber, Democrats 115-seat pickup was unexpected. The result moves the chamber from a 293-105 Republican majority to a 217-177 Democratic majority. Democrats also won the Governor’s office, but the Senate remains in Republican control. 
  • Oregon: For the last two years, the Oregon House was tied at 30-30. On election night, Democrats gained four seats to assume the outright majority next session. In the tied House, the Republicans were credited with pushing fiscal restraint and lower spending; including leaving funds unbudgeted due to the worsening economy. Under Democratic control the assumed Speaker Tina Kotek has already stated she will be focusing on “education, jobs, and middle class families.” Her party has previously pushed for increased revenue through elimination of tax rebates. Oregon is now fully controlled by the Democrats. 
  • New York: It appears that the Democrats have retaken the New York Senate although ultimate party control is still unknown. The Senate adds a 63rd seat next session and Democrats appear to have a 31-30 lead with two races outstanding where they lead. However, a four person “Independent Democratic Conference” which caucused with the Republicans last session could ultimately decide who controls the chamber. A decision on final control is still probably weeks away. If Democrats retain control, New York will join the large majority of state governments with one-party control. 
  • California: Despite hovering just under the 2/3rds level for several cycles, Democrats were not expected to achieve the supermajority status they earned in both chambers on election night. The supermajority is critical because a 2/3rd vote is needed for any tax increases—giving Republicans veto power over new taxes. That is no longer true as Democrats, along with Democratic Governor Jerry Brown, can now pass tax increases without seeking bipartisan support. Gov. Brown issued a statement of restraint that he was not planning to use the new power to raise taxes after election due to the passage of Prop. 30 and 39, which combined will generate around $7.5 billion to the general fund. 
  • Illinois: Democratic control of both chambers of the legislature was never at issue in this election. But Democrats have much greater control over policymaking after picking up a supermajority in the House and increasing their supermajority in the Senate. This means that Democratic legislators can now pass legislation without Republican input at all, including overriding the governor’s veto if they like.

New Republican Control and Key States: 

  • Arkansas: For the first time since reconstruction Republicans now control both chambers of the Arkansas legislature. Arkansas had been a major target of the party this cycle as it completes the switch of the Deep South to complete Republican legislative control. In the House, Republicans appear to have a 51-48-1 margin, but that is subject to a recount in one race decided by 44 votes on Election Day. In the Senate, new Republican Senate President Michael Lamoureux will enjoy a 21-14 majority. 
  • Wisconsin: In what appears to be the last chapter of the recall wars that rocked Wisconsin the last couple of years, Republicans took back control of the Senate they lost this summer. This is the third time control of the chamber has switched in the last two years. This result was widely expected given the redistricting maps Republicans drew after taking power in 2010. The Democrats short-lived majority, achieved during recall elections in June was an empty victory as they weren’t able to conduct any real business before they lost control in November. Republicans will have a 17-15 majority and join the Republican House and Republican Governor Scott Walker to provide total Republican control of Wisconsin state government. 
  • Alaska: The Alaska Senate has had one-party in control for almost a decade thanks to caucuses of Senators not based on party, but the Republicans won a 13-7 majority with one seat still counting with the Democrat up by 300 votes. Republican Senator Charlie Huggins has already been elected the new Senate President and has laid out an agenda of cutting spending, reducing oil taxes, and encouraging in-state use of Alaska’s oil. 
  • Tennessee: Republicans garnered a supermajority in both the House and Senate with margins of 67-24 and 24-9, respectively. These numbers mean that Democrats can no longer stop legislation from passing. Republicans have reached a high-water mark in seats held not seen in 147 years. 
  • Other Races: Republicans netted one Governor’s office, flipping North Carolina. This leaves them holding 30 Governor’s Seats, giving them a strong majority nationwide. The parties traded attorney general pick ups with Democrats flipping Washington and Pennsylvania and Republicans picking up Montana and West Virginia. Pennsylvania is notable in that it will be the first time since the office has been chosen by partisan election that it will be held by a Democrat. In West Virginia five-time incumbent Darrell McGraw was unseated ending 20 years in office.

Orrick’s Public Policy group is deeply involved in state legislative and federal affairs. For more information about these developments and how they might affect your business, please contact Jeremy Kudon at
(212) 506-5343 or jkudon@orrick.com, or your Orrick relationship lawyer.