2006 election cycle to feature ballot measures: state legislatures increasingly targeting the small business community.

Special interest groups that have failed to get state legislatures to enact their regulatory and tax agendas have adopted a new strategy take these proposals directly to the voters. In 2006 the franchising community will be faced with ballot initiatives in states stretching from California to Massachusetts that could threaten their business's viability. Although November of 2006 is more than a year away, the small-business community, including the International Franchise Association, is now organizing to defeat these proposals next year.

Costly Agenda Stymied at the Statehouse 

Over the past few years anti-business forces have attempted and failed in many instances to convince local officials, state legislators and the U.S. Congress to enact their agendas that include ratcheting up the starting wage and mandating universal health care. While these special interest groups did succeed in getting the California legislature and former Gov. Gray Davis to pass and sign a pay-or-play healthcare system shortly before the governor's recall, California voters narrowly rejected the measure on the ballot in 2004 after a $17 million dollar campaign, funded by small businesses and supported by IFA, convinced them that such a law would destroy thousands of jobs and lead to lower quality health care.

Not all of the news that day was good, however, and it was a warning shot across the bows of small businesses everywhere about the importance of meeting this threat head on and early. In normally-pro-business states like Florida and Nevada, voters overwhelming approved minimum wage hikes that included annual indexing to inflation and made them part of those states' constitutions, which means that these laws cannot be repealed without voter approval. Emboldened by these successes last year, groups such as Health Care for All and ACORN (Association of Community Organizations for Reform Now) are planning a national effort in 2006 in states including Arizona, California, Florida, Massachusetts, Michigan and Ohio to put pay-or-play health care (a policy requiring employers to pay for employee health care) and minimum-wage increase initiatives on the ballots for voter approval.

Understanding the Initiative and Referendum Process

There are two basic processes in the United States that organizers can use to put a public-policy question directly before the voters--either the initiative or the popular referendum process.

Twenty-four states and the District of Columbia allow what is called a ballot initiative. An initiative is a law or constitutional amendment introduced by citizens either to the voters directly or to the legislature once state qualifications are met. On the other hand, three states are popular referendum states and they allow citizens to collect signatures on a petition to refer specific legislation enacted by their legislature to the voters for affirmation or rejection. Of these two processes, the initiative process is the more widely used and presents the greater threat to the businesses community because unlike a referendum, an initiative does not need to be approved by a legislature first, so there are fewer obstacles to getting an initiative on the ballot. And in all states, a state legislature, elected official, state-appointed constitutional revision commission or other government agency may refer a legislative referendum to the ballot.

In 2004, according to data collected by the National Restaurant Association, more than 163 initiatives were referred to the ballot, 57 of them were initiatives or popular referenda and 106 were legislative referenda. A surprising 108 of these were approved by the voters which is an approval rate of 66 percent. These numbers underscore exactly why a coordinated campaign by those wanting to enact expensive health mandates and wage hikes in 2006 present a very real danger to the small-business community.

A Preview of 2006

According to the NRA, five states-California, Arizona, Nevada, Michigan and Ohio--have been targeted for initiatives in 2006 to raise the minimum wage. Another four states-Florida, Massachusetts, Ohio and Washington-are targets for health-care proposals. In most cases, with the assistance of organized labor, ACORN and Health Care for All, supporters are in the early stages of declaring their intentions to put these measures on the ballot, submitting official language for state certification and approval and gathering the signatures needed, which vary in every state, for qualification for the 2006 ballot.

As of this writing, the Massachusetts attorney general has certified the Health Care for All's initiatives on health care. The details of these provide examples of what we may expect to see in other states with health-care initiatives. The Massachusetts proposals, for example, contain a new 7 percent payroll tax on employers with 100 or more employees, 5 percent for fewer than 100, to help fund a the expansion of the current government health insurance program in the state. Health-care expenditures by a business can be credited against the new tax, but many small businesses with limited health-insurance offerings will not likely benefit from this provision.

In Nevada in 2004, voters approved a constitutional amendment that is required to go to the voters again 2006 for final approval, which would increase the minimum wage to $1 above the federal wage and index increases to the Consumer Price Index. Most of the other minimum wage initiatives under discussion will likely increase the wage significantly and include some kind of annual indexing.

Health Initiative Language Unsettled

The franchising community must be particularly careful that these health-care initiatives do not specifically target franchised businesses. Last legislative session, a bill (SB1147) in Connecticut that was defeated would have forced franchisors to count franchisee's employees toward a threshold that would have required the employer to pay for health insurance. This not only ignores that fact that franchisees are themselves independent small-business owners, but this kind of language could broadly impact the independence that franchisees enjoy in other areas of the relationship as well. For these reasons, the IFA is looking carefully at ballot language to make sure that it doesn't include any of these provisions.

What IFA Members Can Do

IFA members who are interested in joining an effort to defeat these dangerous initiatives should contact the association as early as possible. Defeating these measures will require substantial financial investments by businesses (in the millions of dollars) and strong grassroots organizations in every state where a threat exists.

IFA members who belong to state trade or business associations in any of the states highlighted above should encourage these groups to get actively involved in these efforts as well and, of course, offer support.

Finally, it is important to share with fellow franchisees and franchisors information about these proposed initiatives and just how devastating they will be to small business if they are approved by the voters.

Matt Lathrop is director of government relations for the International Franchise Association. He can be reached at 202-662-0792 or [e-mail].