Policymaking By Unelected Commission Has Become Increasingly Popular, But Faces Challenges

A coalition of franchisees, restaurateurs, and other small business owners submitted more than a million signatures in early December to qualify a referendum for the 2024 California ballot to overturn Assembly Bill 257. AB 257, which was signed by California Governor Gavin Newsom (D) in September, is an unprecedented new law, one that critics contend will inflate food costs and make it more difficult to do business in what is already one of the nation’s most hostile tax and regulatory climates.

AB 257, which California voters will have the chance to repeal in less than two years, creates a 10 member council with the authority to set wage and benefits mandates for more than 16,000 fast food restaurants across the Golden State. The council created by AB 257 would have the power to impose policies that the California Legislature has proven unable to pass. Should AB 257 be overturned by California voters, however, it would mark a major set-back for this unelected commission-based (UCB) approach to governance.

The UCB approach to governance typified by AB 257 relies on a powerful unelected commission to impose unpopular policies that critics argue will have adverse economic effects and, as such, cannot garner majority support even in a deep blue state legislature with Democratic super-majorities. Legislation mandating a 32 hour work week for fast food employees, for example, failed to make out out of the California Assembly. Despite that mandate’s inability to garner support from a majority of democratically elected legislators, the council created by AB 257 would be able to impose the same policy without legislative approval.

The key feature of the UCB approach is the transfer of tax and regulatory authority from elected legislators who are accountable to voters, to unelected commissioners or bureaucrats. Along with the effort to repeal AB 257 through a 2024 referendum, some are also considering a legal challenge to the controversial law. “We believe it violates rights of free speech and assembly to insist that workers can only be represented through a government council,” said Will Swaim, president of the California Policy Center, when discussing the prospect of a lawsuit against AB 257 during the November 1 episode the Radio Free California podcast.

Most fast food franchises are owned not by a corporation, but by small business owners. The majority of all small businesses pay taxes under the individual income tax system. In California, that means small businesses are paying the highest top marginal income tax rate in the country at 13.3%, which pushes the combined federal and state top marginal income tax rate beyond 50%. The same small business owners who contend with these relatively high state income tax rates will soon be saddled with additional costs and new management restrictions unless AB 257 is repealed by voters.

Under AB 257, 10 unelected bureaucrats would assume control of important operational and management decisions from thousands of small business owners across California. AB 257 critics contend the law will yield higher prices for consumers and fewer dining options. This first-of-its-kind law is projected to increase food prices in the Golden State as much as 22%, according to a UC Riverside report. Governor Newsom’s own Department of Finance says the new law will create a “fragmented regulatory and legal environment for employers and raise long-term costs.”

In the months leading up to the 2022 midterm elections, President Joe Biden and fellow Democrats warned that “Democracy is under attack.” Ironically, these lamentations about threats to democracy came from many of the same Democrats who have, in states where they have some of their largest legislative majorities, supported legislation recently that removes governing authority from elected representatives, transfers that power to unelected bureaucrats who do not answer to the public, and then empowers these unelected commissions to change state law in ways that impose new costs on consumers. California’s AB 257 is the quintessential example of the UCB approach to governance, which has also become a go-to for many federal Democrats.

“For a movement that prides itself on wonky grand plans to solve huge problems, the leading progressive bills make utopian promises of huge new benefits and then assign a commission or agency to figure out how to make it all work,” noted Brian Riedl, a senior fellow at the Manhattan Institute who issued a report in December dissecting the leading progressive federal proposals on tax, defense, health, and climate policies. “Progressives fail to build specific legislative policies because their utopian promises are often half-baked, contradictory, unworkable, or mathematically impossible,” Riedl added.

“The AOC/Markey Green New Deal was just a list of goals,” Riedl noted as an example. “The ‘100% Clean Economy Act of 2019’ with 170 cosponsors, & ‘Clean Economy Act of 2020’ with 33 cosponsors simply direct the federal govt to come up with a climate plan. They offer no substantive blueprint whatsoever.”

Blue State Legislators Vest Significant Powers In Unelected Commissions

In Vermont, arguably the bluest state aside from California, legislators have applied the UCB approach to the progressive climate agenda. Despite having sizable majorities like they do in California, Democrats in the Vermont Legislature have been unable to pass legislation enacting a carbon tax or a cap and trade program. After years of failing to garner the votes necessary to impose a carbon tax or cap and trade scheme, Vermont lawmakers pivoted to the UCB approach in 2020 by passing the Global Warming Solutions Act (GWSA). Democrats who run the Vermont Legislature enacted the GWSA by overriding Governor Phil Scott’s (R) veto.

The GWSA sets carbon emissions reduction goals for Vermont. But in voting for the GWSA, Vermont lawmakers made no decisions as to how those emissions reduction goals will be achieved. The GWSA mandates greenhouse gas (GHG) emissions reductions of 26% below 2005 levels by 2025, 40% below 1990 levels by 2030, and 80% below 1990 levels by 2050. How those lofty and costly goals will be reached, the GWSA doesn’t say. The “how” is a matter to be sorted out by the 10 member climate commission established by the GWSA, which is tasked with recommending the new taxes, fees, and regulations required to meet the law’s emissions reduction goals.

As Rob Roper, former president of the Ethan Allen Institute, a Vermont-based think tank, explained shortly after introduction of the GWSA, its structure serves to “effectively eliminate democracy – the voters and their elected representatives – from the process.” Some legislators agreed with Roper’s view of the GWSA. As Representative Heidi Scheuermann (R-Stowe) warned her colleagues during a committee hearing on the GWSA, “ceding our authority as lawmakers and elected officials to a bureaucrat across the street and the judicial branch…is really concerning to me.”

“Dictatorships are really efficient,” Representative Scheuermann told Representative Tim Briglin (D), a GWSA-supporting colleague who bemoaned the legislature’s inability to address climate change, with Scheuermann explaining that “Democracies are not.” “Separation of powers is important,” Scheurmann added. “We have the executive branch, the legislative branch and the judicial branch, and ceding our legislative authority and responsibility to the executive branch and the judicial branch, I think, is – I think we really need to think about long term what we’re doing here and the impact and the precedent that we’re setting.”

Like California’s AB 257, Vermont’s GWSA epitomizes the UCB approach to governance. Black box legislation that simply states a goal, but doesn’t stipulate the taxes, fees, and regulations by which that goal is to be achieved, strikes critics as an opaque and unsound method for making policy. But the GWSA’s lack of specificity as to how emissions reduction targets will be achieved is actually a feature of the UCB approach, not a bug. Setting an agreed upon objective into state law, but leaving out the policy mechanics for how that goal is to be achieved is a hallmark of the UCB approach.

“[T]he lack of any plan or details is a key part of the cynical design of the GWSA,” the Ethan Allen Institute’s Roper explained as the bill was pending in the Vermont statehouse. “If voters knew what was required to achieve the mandates in the law, it would be a political non-starter. So, as it stands, a newly appointed panel of unelected ‘stakeholders’ (that’s political-ese for ‘special interests’) will design a plan to meet the GHG reduction mandates and give it to the unelected bureaucrats at Agency of Natural Resources (ANR), who will then create, implement, and enforce rules impacting the lives and livelihoods of Vermonters based on that plan.”

Roper laid out a few examples of the actions that bureaucrats could take to achieve the GWSA’s goals:

“ANR could ban ATVs and snow machines. They could ban gas powered landscaping equipment. They could ban backyard barbeques and fire pits. They could ban fireplaces and wood stoves in new homes and/or curtail their use where they already exist. They could disallow fossil fuel heating systems from being used in new or renovated homes or other buildings. They could limit the types of vehicles and appliances allowed for purchase, they could ban racing at Thunder Road.”

Members of the Vermont Climate Council created by the GWSA have been meeting and are in the process of formulating recommendations to achieve the now codified emissions reduction goals. As Roper warned in a July VTDigger article, historically high energy prices are already “putting tremendous pressure on family budgets, stressing businesses, and making life generally more expensive — the Vermont Climate Council is coming up with a plan to make the problem worse.”

Progressive Democrats appear to have decided that unelected but powerful commissions, like those created by California’s AB 257 and Vermont’s Global Warming Solutions Act, are a defensible way to impose policies that are too controversial or unpopular for a majority of elected legislators to enact. Californians, through the most direct form of democracy, will have the chance in 2024 repeal AB 257 and in doing so can stop the transfer of regulatory and tax authority from elected legislators to unelected commissioners.

Democrats increased their power at the state level in the 2022 midterms, adding four new states where Democrats control both chambers of the legislature along with the governorship. Whether the UCB approach to governance will see continued uptake in 2023, particularly with Democrats in control of more state capitals, time will tell.