2007 Colorado Small Business Forecast

The November 2006 election ushered in a new and largely uncharted political era for Colorado as Democrats secured and bolstered their control of state government. For the first time in nearly five decades, Democrats now simultaneously control the Governor’s office and both houses of the General Assembly.

There are many questions about what this new regime may mean for business generally and small business in particular. With 30 new members of the General Assembly and increased Democratic majorities in both the House and Senate, it is natural to wonder whether there will be a corresponding increase in taxes, regulatory activity and enforcement, mandates and employer costs.

There is no way to answer this definitively before the new Governor and legislators are sworn into office and get down to the business of governing. Moreover, there are so many unknowns about this new political dynamic that it will take more than the usual amount of time to sort out all its implications for business. At best, we are left to gaze into the proverbial crystal ball for clues. Not surprisingly, there are good and bad clues to interpret.

The good clues include:

Governor-elect Bill Ritter did not run and will not govern as an ideologue. A former Denver District Attorney, Ritter is an unusual candidate: a pro-life Democrat widely respected as an inquisitive and thoughtful centrist. He is new to state government, but his training and practice as a lawyer ensure he understands there are two sides to every argument. Moreover, many of his policy goals for the State are business friendly and include jobs generation in urban and rural Colorado, reducing health care costs for employers and employees alike and increased support for the State’s colleges and universities – the State’s talent pipeline. Takeaway: Governor-elect Ritter and his team will govern with understanding and appreciation for the importance of the economic engine that runs the State’s economy.
While the Democratic majorities in the House and Senate grew, they remain razor thin in the context of legislating. In the House, Speaker Romanoff’s majority control is roughly 60% of the total seats, but his caucus includes both powerful pro-business centrists as well as conservative rural lawmakers. A swing of just seven Democrats on any given vote will allow the Minority to prevail. In the Senate, President Joan Fitz-Gerald’s majority is a slightly smaller 58% and again includes several centrist, pro-business members as well as one notable rural conservative. A switch of only three Democratic members of the Senate on any issue is all that is necessary to allow the minority to prevail. Takeaway: To succeed, leaders in both houses will need to govern with a collaborative touch and discourage extremism if they hope to maintain their majorities for more than two years.
The class of 2006 does not fit old stereotypes. Democrats Past were largely of the liberal-social-labor-environmentalist variety. Democrats Present include farmers and ranchers, police officers, military veterans and business leaders. Moreover, the districts these new members represent are not necessarily secure for their party base. Takeaway: They will need to keep the interests of diverse interests in mind to secure their path to reelection.
Finally, the 2002-2003 Recession remains fresh in the minds of legislative leadership in both houses. During the downturn the State lost an estimated 61,000 jobs and the impacts of TABOR dramatically affected the State’s budget and spending processes. Colorado’s economy has been largely anemic ever since. As eager as some ideological members may be to take advantage of their new majority status, many old hands at the Capitol will be reluctant to tinker with anything that threatens to disrupt the State’s precarious economic growth. Takeaway: Legislators will be wary of policy decisions which link them to a predicted downturn in the general economy.

The bad clues include:

The labor-environmental-trial lawyer coalition which helped to generate campaign contributions and foot soldiers for the Democratic sweep could well expect quid pro quo for their efforts. This may include new employer mandates, taxes and fees to generate revenue for new programs, much stricter regulatory activity to reign in specific industries (mortgage banking and natural resources, among them) and adjustments to monetary caps in judicial awards. Takeaway: Rewards for friends is a political norm and business will need to work cohesively and smartly to push back extreme measures.
Key members of the House and Senate are positioning themselves for upward mobility and will likely try to secure the support of their voter base through legislation and policy favorable to specific constituencies. Add to this mix the potential for the Democratic National Convention coming to Denver in 2008 and it is not hard to imagine a slate of bills hostile to business interests. Takeaway: With all the world watching Colorado Democrats may be eager to adopt solutions which endear them to their base.
Amendment 41, voter-adopted ethics reforms, could increase the value of grassroots political action – letters, phone calls, emails, constituent visits – over mealtime conversations, gifts and sporting tickets long favored by the business community. Takeaway: Traditional Democratic constituencies could have the upper hand unless and until business interests organize to communicate in similar ways.
House Democratic leadership has organized the 2007 committees with majorities of at least two members and in one case three members. Inevitably, this will help the Democrats push their agenda through the committees over the objections of minority members. Takeaway: It is always possible to win the battle and lose the war – extremist members and policies will be met by stiff reelection challenges in coming elections.

On balance, from a policy perspective, 2007 will likely be more of the same for business generally and small business in particular. Business interests will be challenged to present smart and substantive rationale for their support or opposition to specific bills. They will be helped by the fact that policymakers no longer fit neat stereotypes. Democrats, who could in the past be fairly categorized as anti-business, understand the importance of balancing the interests of more broad and diverse constituencies. And Republicans who have long championed free market solutions over governmental intervention will fulfill their role as the loyal opposition and help to keep a check on anti-business extremism.

The best news of all is that – like them or not – Colorado’s new Governor and each of the 100 legislators will be working in their own individual and unique ways to help make the State of Colorado a better place to live, work and play.

This month's guest columnist is Jep Seman. Mr. Seman is president of Corporate Advocates, a Denver-based public relations and government relations firm specializing in strategic communications counsel, local, state, and federal lobbying services and government contracts and procurement assistance.