On Tuesday, we covered elections in six states—Arizona, Kansas, Michigan, Missouri, Ohio, and Washington. Here are some results highlights:
Eric Schmitt won the Republican primary for U.S. Senate in Missouri. Schmitt defeated Vicky Hartzler, Eric Greitens, and seventeen other candidates.
John Gibbs defeated Incumbent Rep. Peter Meijer in the Republican primary for Michigan’s 3rd Congressional District. Meijer was one of 10 Republicans who voted to impeach former President Donald Trump (R) following the breach of the U.S. Capitol on Jan. 6, 2021. Trump endorsed Gibbs in this primary.
Kari Lake won the Republican primary for governor of Arizona. Incumbent Gov. Doug Ducey (R) is term-limited.
Last week, the One Fair Wage campaign in Michigan announced it submitted more than 610,000 signatures in its effort to place $15 minimum wage initiative on the ballot in 2024.
Here’s an overview of other minimum wage ballot measure activity:
There is one minimum wage measure certified for the ballot this year—the Nevada Minimum Wage Amendment. The amendment would increase the minimum wage in the state to $12 per hour by July 1, 2024.
A second minimum wage measure could appear on the ballot this year in Nebraska. Signatures are currently being verified for that citizen-initiated measure. The initiative would increase the minimum wage to $15 by January 1, 2026.
Turnout for Kansas’ Aug. 2 abortion ballot measure
On Aug. 2, Kansans rejected an amendment to provide that the state constitution does not secure a right to abortion. The vote was 58.8% No to 41.2% Yes. Based on unofficial results, 908,745 people voted on the constitutional amendment compared to 727,360 in the gubernatorial primaries and 718,545 in the U.S. Senate primaries. Turnout on the amendment exceeded overall turnout at the 2018 (457,598) and 2020 (636,032) state primaries.
Candidate filings before and after Dobbs draft ruling
On May 2, Politico released a draft majority opinion from the Dobbs v. Jackson Women’s Health Organization case before the Supreme Court. We compared candidate filings between states whose filing deadlines came before May 2 and those whose filing deadlines came after. We found that candidate filings remained similar between both sets of states to what we have seen across previous election cycles.
Most states hold their primaries—and general elections—on Tuesdays. Not so for Tennessee, which held its primaries on Thursday, Aug. 4. All of Tennessee’s U.S. House districts are up for election this year, along with the office of governor, 17 districts in the state Senate, and all 99 state House districts. Voters in Memphis and Nashville also decided local ballot measures.
Eighth Circuit issues opinions in two consolidated public-sector union cases
On July 25, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit affirmed U.S. District Judge Susan Richard Nelson’s rulings in four lawsuits brought against public-sector unions in Minnesota. The lawsuits were consolidated into two cases. In each case, the plaintiffs sought damages for fees deducted from non-union employee pay as a condition of employment, and Nelson ruled in favor of the unions.
The Eighth Circuit panel affirmed Nelson’s ruling on July 25, 2022.
What the court decided
U.S. Circuit Judges James Loken, Steven Colloton, and Bobby Shepherd formed the panel that considered the cases.
Hoekman and Piekarski
Colloton wrote the court’s opinion. The clerk’s summary of the court’s decision in Hoekman and Piekarski said:
“In these cases Minnesota state employees sued unions seeking monetary relief based on the amount of so-called ‘fair share’ fees that had been deducted from their paychecks for the benefit of the unions. … The district court granted summary judgment for the unions, and plaintiffs appeal. … [P]ublic-sector unions are entitled to a good-faith defense to liability under Section 1983 if they relied on a then-valid statute to collect fair shares from a non-union member employee before Janus was decided. … Plaintiffs Buros and Piekarski’s claims fail because the unions were private actors and were not acting under color of state law; the district court did not err in awarding certain litigation costs to the unions; the unions were not required to move to dismiss the case, thereby reducing potential costs, rather than wait and file motions for summary judgment.”
Brown and Fellows
Colloton also wrote the court’s opinion in this case. The clerk’s summary of the court’s decision in Brown and Fellows said:
“In these cases, current and former Minnesota state employees sought damages under Section 1983 for money deducted from their paychecks by unions that represented their local bargaining unit. The district court held that the unions were entitled to a defense against liability under Section 1983 because they acted in good-faith reliance on state statutes and existing judicial precedent. … A plaintiff who sues a private-party defendant based on the defendant’s employment of a state law that has been declared unconstitutional must show that the defendant was not acting in good-faith reliance on that law; here, the plaintiffs do not allege that that the unions subjectively believed they were violating the rights of employees by collecting the fees, so the court need not address whether such a showing would overcome the unions’ objectively reasonable reliance on the statute in question; because the unions collected the fair share fees under Minn. Stat. Sec. 179A.06 at a time when the procedure used had been deemed constitutional by the Supreme Court, their reliance on the statute was objectively reasonable, and they were entitled to a good-faith defense.”
President George H.W. Bush (R) appointed Loken to the court, and President George W. Bush (R) appointed Colloton and Shepherd.
About the Eighth Circuit
The U.S. Court of Appeals for the Eighth Circuit hears appeals from the district courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. The chief judge of the court is Lavenski Smith, a George W. Bush appointee. Of the court’s 11 active judges, George H.W. Bush appointed one, George W. Bush appointed five, President Barack Obama (D) appointed one, and President Donald Trump (R) appointed four.
In the 12-month reporting period that ended on March 31, 3,020 appeals were filed in the Eighth Circuit. Six other courts of appeals saw more cases filed during that time. The Ninth Circuit had the most, with 9,018 appeals filed.
We are currently tracking 149 pieces of legislation dealing with public-sector employee union policy. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we’re tracking.
Number of relevant bills by current legislative status
Number of relevant bills by partisan status of sponsor(s)
Recent legislative actions
Below is a complete list of relevant legislative actions taken since our last issue.
California AB189: This appropriations bill includes an ongoing proposal for the creation of a tax credit for union dues.
Introduced by the Assembly Budget Committee.
Sent back to Senate Budget and Fiscal Review Committee Aug. 1.
California AB1577: This bill would allow state legislative employees to organize and bargain collectively.
Bipartisan sponsorship.
Senate Appropriations Committee hearing Aug. 1. Sent to suspense file Aug. 2. (Bills meeting a certain annual cost threshold are sent to the suspense file for further consideration at a later hearing.)
California AB1714: This bill would allow unions representing excluded state employees to request arbitration with the Department of Human Resources in certain circumstances.
Democratic sponsorship.
Senate Appropriations Committee hearing Aug. 1. Sent to suspense file Aug. 2.
California AB2556: This bill would change the time frame for a local public agency employer to implement a final offer after a factfinders’ recommendation has been submitted in the case of a dispute between the employer and employee organization.
Democratic sponsorship.
Senate Appropriations Committee hearing scheduled for Aug. 8.
California SB931: This bill would allow a union to bring a claim before the Public Employment Relations Board against a public employer allegedly in violation of California Government Code Section 3550 and would set civil penalties for violations. Section 3550 prohibits public employers from discouraging union membership.
Democratic sponsorship.
Assembly Appropriations Committee hearing Aug. 3. Sent to suspense file.
California SB1313: This bill would prohibit Los Angeles County from discriminating against union members by limiting employee health benefits.
Democratic sponsorship.
Assembly Appropriations Committee hearing Aug. 3. Sent to suspense file.
California SB1406: This bill would allow unions representing excluded state employees to request arbitration with the Department of Human Resources in certain circumstances.
Democratic sponsorship.
Assembly Appropriations Committee hearing Aug. 3. Sent to suspense file.
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Welcome to Hall Pass. This newsletter keeps you plugged into the conversations driving school board politics and governance. Each week, we bring you a roundup of the latest on school board elections, along with sharp commentary and research from across the political spectrum on the issues confronting school boards in the country’s 14,000 school districts. We’ll also bring you the latest on school board elections and recall efforts, including candidate filing deadlines and election results.
In today’s edition, you’ll find:
On the issues: The debate over grouping higher-performing students into separate classes
School board filing deadlines, election results, and recall certifications
Oklahoma State Board of Education censures two school districts for violating state law
Three Republicans ran in Aug. 2 primary for Arizona Superintendent of Public Instruction; incumbent Kathy Hoffman unopposed in Democratic primary
Extracurricular: education news from around the web
Candidate Connection survey
School board candidates per seat up for election
Reply to this email to share reactions or story ideas!
On the issues
In this section, we curate reporting, analysis, and commentary on the issues school board members deliberate when they set out to offer the best education possible in their district.
The debate over grouping higher-performing students into separate classes
Educators and policymakers have long debated whether grouping higher-performing students into separate, more challenging classes (also known as tracking) is a good policy. For example, in 2014, the San Francisco Unified School District implemented a detracking policy that eliminated accelerated math classes in middle school, prompting concern from some parents. In 2021, the California Department of Education proposed a similar change in a draft of non-binding math guidelines. Those guidelines are still being debated today.
In this section, we’ll look at two perspectives on the issue.
Frederick Hess writes that higher-performing students should have opportunities to take more challenging courses. Hess says eliminating gifted programs from public schools would hold back students who master content and would reduce opportunities for low-income students to excel since they would not have the financial resources to switch to a more challenging private school.
Jo Boaler writes that school districts like San Francisco Unified that eliminated or partially eliminated gifted programs experienced improvements in achievement. Boaler says separating students into different classes teaches them that they have fixed abilities and are not capable of excelling in a subject.
“Of course, gifted programs should be inclusive and should be reformed as necessary to ensure that they are. At the same time, Nobel laureate David Card has concluded that ‘a separate classroom environment is more effective for’ gifted learners—especially those who are disadvantaged. … It’s useful to ground this discussion by asking two straightforward questions. First, when it comes to chess, soccer, trumpet, singing, or dance, do some children have exceptional gifts and stand to benefit from exceptionally challenging instruction? Second, does this also apply to endeavors like writing, algebra, and biology? If one accepts that people are born with an array of talents, and that students and society benefit when schools cultivate those talents, the conversation about gifted education should be how to do it fairly, responsibly, and effectively. Unfortunately, de Blasio-style attacks on gifted education are likely to disappoint on all of those grounds. After all, when schools abandon gifted learners, affluent families have options: They’ll move their kids to private schools or pony up for tutors, enrichment programs, and online courses. It’s low-income students who will get lost along the way.”
“Many believe that children learn more effectively in schools or classes with similar learners, but are they right? … [A]fter San Francisco Unified de-tracked math, the proportion of students failing algebra fell from 40 percent to 8 percent and the proportion of students taking advanced classes rose to a third, the highest percentage in district history. … Eight Bay Area school districts found similar results when they de-tracked middle-school mathematics and provided professional development to teachers. In 2014, 63 percent of students were in advanced classes, whereas in 2015 only 12 percent were in advanced classes and everyone else was taking Math 8. … Why do these results arise? It seems to make sense that learners who are ready for different content are grouped together, and students who are high-achieving push ahead and take advanced classes, but there’s a problem with such an approach. We are at a point where the negative impacts of fixed-ability thinking are undeniable. And when we separate students into different classes, the message we send them is that their ability is fixed. When students, instead, embrace the knowledge that there are no limits to their learning, outcomes improve.”
School board update: filing deadlines, election results, and recall certifications
Ballotpedia has historically covered school board elections in about 500 of the country’s largest districts. We’re gradually expanding the number we cover with our eye on all of the roughly 14,000 districts with elected school boards.
States with school board filing deadlines in the next 30 days
California
The filing deadline for districts holding Nov. 8 general elections is Aug. 12. However, candidates have an additional five days to file if no incumbents file by Aug. 12. The extended deadline does not apply if the incumbent is not eligible to run for re-election. Click here to see a full list of districts whose general elections we’re covering Nov. 8.
Upcoming school board elections
Tennessee
We’re covering the following school board general elections on Aug. 4.
We’re covering school board primary elections in 24 districts on Aug. 23. Click here for a full list of districts.
Oklahoma State Board of Education censures two school districts for violating state law
On July 28, the Oklahoma State Board of Education voted 4-2 to downgrade the accreditation status of Tulsa Public Schools and Mustang Public Schools. The Board said the districts violated a 2021 law supporters say prohibits the teaching of critical race theory.
The Board’s action against Tulsa Public Schools and Mustang Public Schools is the first time the law has been enforced in the state.
The Board downgraded Tulsa Public Schools and Mustang Public Schools from “accredited” to “accredited with warning” for incidents this year and in 2021. The Tulsa Public Schools 2021 incident stemmed from a high school teacher’s complaint that mandatory staff training material contained “statements that specifically shame white people for past offenses in history, and state that all are implicitly racially biased by nature.” The Board downgraded Mustang Public Schools because of a teacher’s January 2022 anti-bullying lesson.
Gov. Kevin Stitt (R) signed HB 1775 into law on May 7, 2021. HB 1775 includes a list of concepts teachers, administrators, and other school staff are prohibited from including in courses, such as the idea that “one race or sex is inherently superior to another race or sex” and “an individual, by virtue of his or her race or sex, is inherently racist, sexist or oppressive, whether consciously or unconsciously.”
When he signed HB 1775, Stitt said, “I firmly believe that not one cent of tax payer money should be used to define and divide young Oklahomans about their race or sex.”
Brad Clark, the general counsel for the Oklahoma Department of Education, advised downgrading Tulsa Public Schools to “accredited with deficiencies,” a less severe demotion than “accredited with warning.” Board member Brian Bobek, however, said the violation was serious enough to warrant a stronger response. Board member Estela Hernandez, who voted for the demotion, later said the Board’s decision was “sufficient in this case because we need to send a message that the deliberate breaking of the law needs to be on probation.”
Board members said they voted to downgrade Mustang Public Schools to “accredited with warning” to stay consistent with the decision they made about Tulsa Public Schools.
Two board members voted against downgrading the districts, including Superintendent Joy Hoffmeister, the Democratic nominee for governor, and Carlisha Bradley. Hoffmeister said, “The penalties are heavily weighted against Tulsa Public Schools because of an obsession or peculiar focus that the governor has with them and their superintendent. And then Mustang became collateral damage.”
The districts have one year to make changes and improve their accreditation status. The Oklahoma Department of Education could revoke the districts’ accreditation altogether if more violations occur, forcing the districts to close.
Three Republicans ran in Aug. 2 primary for Arizona Superintendent of Public Instruction; incumbent Kathy Hoffman unopposed in Democratic primary
Arizona held Republican and Democratic primaries for superintendent of public instruction on Aug. 2. Incumbent Kathy Hoffman (D) ran unopposed in the Democratic primary. Three candidates appeared on the ballot in the Republican primary—Tom Horne, Shiry Sapir, and Michelle Udall. Tiffany Asch and Kara Woods ran as write-in candidates in the Republican primary.
As of this writing, the Republican primary had not been called. With an estimated 80% of the vote counted, Horne led with 42.8% to Sapir’s 31.7% and Udall’s 25.4%.
According to Politico’s Juan Perez Jr., “The heated contest to oversee public schooling for more than 1 million children marks a test of how a swing-state Democrat might hold onto their office as the Republican Party increasingly builds an offensive on reshaping education.”
Horne served as the state attorney general from 2011 to 2015. Before that, he served as the Superintendent of Public Instruction from 2003 to 2011. Horne said he would focus on fighting critical race theory, stopping cancel culture, and promoting patriotism and quality education.
Sapir, a real estate broker, said she pulled her children out of the public school system when, during the pandemic, the school implemented remote instruction. Sapir listed her priorities as empowering parents and putting children ahead of special interest groups. She has also said “education needs to return to the basics.”
Udall was first elected to the Arizona House of Representatives in 2016. She has also served as a school board member. Udall said she ran to oppose “school closures, contentious mandates, and critical race theory.”
The Republican candidates spoke out against pandemic policies that closed schools and criticized what they called critical race theory. Udall said, “You can teach the facts, you can teach what happened, and you can help students understand the horrible things that people went through and the horrible outcomes that racism brings. Students need to know that history. Those are skills and knowledge they need to be successful. Whereas critical race theory and the gender identity stuff, those are not.”
Horne has campaigned on a similar platform: “I want to get rid of the distractions, which in addition to being distractions from academics, are inherently evil and immoral and backwards in emphasizing race and sexuality rather than teaching kids to treat each other as individuals.”
Sapir has emphasized her status as an outsider, saying, “I am not coming from the education apparatus at all. We are where we’re at because of the people that have been in politics in education.”
Hoffman said she will focus on policies to reverse pandemic-related learning loss in students.
Hoffman criticized her Republican opponents for having “this very negative rhetoric of distrust around our public schools in a time when our schools need our support more than ever.”
Hoffman has at times clashed with Gov. Doug Ducey (R) over pandemic policies. In April 2021, Ducey rescinded a universal school mask mandate. Hoffman said Ducey’s action “destabilizes school communities as they end what has arguably been the most challenging year for education.”
The superintendent of public instruction oversees the state’s public school system and directs the Department of Education.
Arizona is one of seven states holding elections this year for superintendent of education. The position is elected in only 12 states. The superintendent is appointed in the remaining 38 states.
Extracurricular: education news from around the web
This section contains links to recent education-related articles from around the internet. If you know of a story we should be reading, reply to this email to share it with us!
Take our Candidate Connection survey to reach voters in your district
Everyone deserves to know their candidates. However, we know it can be hard for voters to find information about their candidates, especially for local offices such as school boards. That’s why we created Candidate Connection—a survey designed to help candidates tell voters about their campaigns, their issues, and so much more.
In the 2020 election cycle, 4,745 candidates completed the survey.
The survey contains over 30 questions, and you can choose the ones you feel will best represent your views to voters. If you complete the survey, a box with your answers will display on your Ballotpedia profile. Your responses will also populate the information that appears in our mobile app, My Vote Ballotpedia.
And if you’re not running for school board, but there is an election in your community this year, share the link with the candidates and urge them to take the survey!
School board candidates per seat up for election
Since 2018, we’ve tracked the ratio of school board candidates to seats up for election within our coverage scope. Greater awareness of issues or conflicts around school board governance can result in more candidates running for each office. Click here to see historical data on this subject.
This year, 2.42 candidates are running for each seat in the 1,156 school board races we are covering in districts where the filing deadline has passed. The 2.42 candidates per seat is 22% more than in 2020.
Welcome to The Ballot Bulletin, where we track developments in election policy at the federal, state, and local levels. In this month’s issue:
New Jersey enacts seven election administration bills
Delaware enacts three election administration bills
Legislation update: Legislation activity in July 2022
Have a question/feedback/or just want to say hello? Respond to this email, or drop me a line directly at Jerrick@Ballotpedia.org.
New Jersey enacts seven election administration bills
On July 28, Gov. Phil Murphy (D) signed into law seven separate bills making modifications to New Jersey’s election administration laws.
A1969: Allows minors between the ages of 16 and 18 to serve as election workers from 5:30 a.m. to 9:00 p.m. on Election Day.
Final state Senate vote (June 29): 37-0.
Final state House vote (June 16): 73-3 (45 Democrats and 28 Republicans in favor, three Republicans opposed).
A3817: Requires ballot privacy sleeves and privacy equipment at each polling place; sets the mail-in ballot curing deadline nine days after Election Day; allows voters to request mail-in ballots using the existing online voter registration system; allows voters to change their party affiliation using the existing online voter registration system; requires the creation of an online form that voters can use to update their names and residences.
Final state Senate vote (June 29): 22-17 (22 Democrats in favor, one Democrat and 16 Republicans opposed).
Final state House vote (June 29): 58-19 (46 Democrats and 12 Republicans in favor, 19 Republicans opposed).
A3819: Requires the removal of a voter’s name from the permanent vote-by-mail list if the voter does not vote by mail for four consecutive elections, starting with the 2020 election cycle.
Final state Senate vote (June 29): 40-0.
Final state House vote (June 29): 78-0.
A3820: Prohibits an unaffiliated voter from receiving a mail-in ballot for a primary election; requires election officials to provide unaffiliated voters with political party affiliation forms and information about voting in partisan primaries.
Final state Senate vote (June 29, 2022): 40-0.
Final state House vote (June 16, 2022): 75-2 (46 Democrats and 29 Republicans in favor, two Republicans opposed).
A3822: Provides that mail-in ballots will be sent to voters starting on the 45th day before an election; requires that all candidate petitions addressed to state or local election officials be filed by 4:00 p.m. on the 71st day preceding a primary election; allows election officials to begin processing mail-in ballots no earlier than five days before an election.
Final state Senate vote (June 29): 23-15 (23 Democrats in favor, one Democrat and 14 Republicans opposed).
Final state House vote (June 29): 78-0.
A3823: Requires municipal officers who maintain death records to file biweekly reports with voter registration officials in the two months immediately preceding a primary or general election; requires registration officials to remove the names of deceased voters from the voter rolls within 10 days of receiving the biweekly report; exempts compensation received by election workers from gross income taxation.
Final state Senate vote (June 29): 40-0.
Final state House vote (June 16): 78-0.
A3929: Amends definitions related to military and overseas voting “to more closely mirror the selection categories voters must choose from on the Federal Postcard Application (FPCA), which determine the types of elections – local, state, federal, or all – in which the U.S. citizen living outside of the country is permitted to participate.”
Final state Senate vote (June 29): 24-15 (24 Democrats in favor, 15 Republicans opposed).
Final state House vote (June 29): 47-30 (46 Democrats and one Republican in favor, 30 Republicans opposed).
Delaware enacts three election administration bills
On July 22, Gov. John Carney (D) signed into law three separate bills making modifications to Delaware’s election administration laws.
HB25: Establishes same-day voter registration for any presidential primary, primary, special, or general election. To register at a polling place, a voter must present a copy of a current and valid government-issued photo ID or a document, dated within the last 60 days, displaying the voter’s name and address (e.g., utility bill, bank statement, etc.).
Final state Senate vote (June 22): 14-7 (14 Democrats in favor, seven Republicans opposed).
Final state House vote (June 7): 24-13 (23 Democrats and one Republican in favor, one Democrat and 12 Republicans opposed).
HB183: Requires a candidate for elective office to provide proof of residency to the state election commissioner. Proof of residency must show that the candidate lives in the district or area that the candidate seeks to represent.
Final state Senate vote (June 30): 21-0.
Final state House vote (July 1): 40-0.
SB320: Establishes no-excuse absentee/mail-in voting in any non-presidential primary election, general election, or special election to fill a vacancy in a statewide office or the General Assembly.
Final state Senate vote (June 16): 13-8 (13 Democrats in favor, one Democrat and seven Republicans opposed).
Final state House vote (June 29): 25-12 (24 Democrats and one Republican in favor, 12 Republicans opposed).
Legislation update: Legislation activity in July 2022
In July, legislatures in 10 states and the District of Columbia took action on 50 election bills.
The chart below identifies the 10 most common policy areas implicated by the bills that state lawmakers acted on in July. The number listed on the blue portion of each bar indicates the number of Democratic-sponsored bills dealing with the subject in question. The number listed on the red portion of the bar indicates the number of Republican-sponsored bills. The purple and gray portions of the bar indicate the number of bipartisan-sponsored bills and bills with unspecified sponsorship, respectively. Note that the total number of bills listed will not equal the total number of enacted bills because some bills deal with multiple subjects.
Democrats sponsored 24 of the 50 bills acted on in July (48%). Republicans sponsored 11 (22%). Bipartisan groups sponsored nine (18%). For the remaining six (12%), partisan sponsorship was not specified.
This information comes from Ballotpedia’s Election Administration Legislation Tracker, which went live on June 29. This free and accessible online resource allows you to find easy-to-digest bill tags and summaries—written and curated by our election administration experts! We update our database and bill-tracking daily. Using our powerful interactive search function, you can zero in on more 2,500 bills (and counting) covering these topics:
Absentee/mail-in voting and early voting policies
Ballot access requirements for candidates, parties, and ballot initiatives
Election dates and deadlines
Election oversight protocols
In-person voting procedures
Post-election procedures (including counting, canvassing, and auditing policies)
Voter ID
Voter registration and eligibility
To make your search results more precise, we first place bills into one of 22 parent categories. We then apply to each bill one or more of the 88 tags we’ve developed.
If you don’t want to immerse yourself in the world of election legislation quite that often, we have a free, weekly digest that goes straight to your inbox and keeps you caught up on the week’s developments.
Economy and Society is Ballotpedia’s weekly review of the developments in corporate activism; corporate political engagement; and the Environmental, Social, and Corporate Governance (ESG) trends and events that characterize the growing intersection between business and politics.
ESG Developments This Week
In Washington, D.C., and around the world
Proposed bill would clarify fiduciary duty of retirement plan administrators to invest solely based on monetary factors
Last week’s edition of Economy and Society highlighted an op-ed co-authored by the entrepreneur and Strive Asset Management founder Vivek Ramaswamy and the former Secretary of Labor Alex Acosta, in which the two argued that the Biden Labor Department’s proposed rule for retirement plans could force plan managers to incorporate ESG principles into their management schemes.
This week, Roll Callreports that Senate Republicans are taking that argument seriously:
“Senate Republicans are teaming up to curb retirement plan sponsors’ ability to consider environmental, social and governance factors in selecting investments, as a counter to the Biden administration’s efforts to expand worker and retiree access to such investing.
Sen. Mike Braun of Indiana this week unveiled a bill that would specify the fiduciary duty of plan administrators is to select and maintain investments based solely on monetary factors under 1974 legislation known as the Employee Retirement Income Security Act, a law that governs a broad range of retirement and health benefit plans.
If plan sponsors want to consider non-pecuniary factors when choosing between funds, they could do so only if they are unable to distinguish them “on the basis of pecuniary factors alone,” according to the bill text. Even if an ESG investment choice is able to meet that standard, plan advisers would also have to make lengthy justifications to include it.
The bill essentially would reinstate a Trump administration Labor Department rule that took away retirement plan sponsors’ ability to direct investments into ESG options.
The bill is also similar to recent legislation from Sen. Steve Daines of Montana, who joined Braun’s bill as a co-sponsor, as did Sens. Richard M. Burr of North Carolina, Tommy Tuberville of Alabama, Cynthia Lummis of Wyoming, Roger Marshall of Kansas, Roger Wicker of Mississippi and James M. Inhofe of Oklahoma.” …
While Braun’s legislation and similar bills are unlikely to advance with Democrats in charge, it may foreshadow what’s to come if Republicans take control of either chamber of Congress after the midterm elections this fall.
“Forcing ESG standards on retirement accounts is a clear violation of the Employee Retirement Income Security Act, which requires fiduciaries to put the financial interests of plan participants first,” Rep. Virginia Foxx, R-N.C., said in a July 13 House floor speech. “ESG requirements pressure investors to subject retirement savings to low-yield investments. This is irresponsible.”
Democrats largely support ESG options and have sided with activist shareholders and sustainable investing organizations, arguing that such factors are just as material as traditional financial considerations. The Democrats’ tight margin in the Senate makes it tougher to pass additional legislation to support ESG investors.”
Can an energy crisis become an ESG crisis?
In large part due to the conflict between Russia and Ukraine and the related economic sanctions against Russia, many nations of Europe are facing an energy crisis that is expected to worsen as summer turns to fall and then to winter. In response, some European governments are turning to coal to fill in the gaps left by Russian natural, which, according to Reuters, threatens to create ESG-score challenges for energy companies operating on the continent:
“European companies turning to coal as an alternative to Russian gas face a hit to their environmental, social and governance ratings, leaving them scrambling to impress investors still vocal on sustainability.
Despite an energy crisis following sanctions on Russia, major European investors say they will not relax their investment principles of reaching net zero targets on greenhouse gas emissions by 2050 or earlier.
Investors increasingly use ESG ratings, developed by companies such as MSCI or Sustainalytics, to judge firms’ merits. Burning coal, which puts out more carbon dioxide than alternatives like oil and gas, gives companies a black mark.
European countries including Germany and Italy are nonetheless considering bringing back coal due to the Ukraine crisis, which has cut Russian gas flows. Some companies, such as German speciality chemicals maker Lanxess (LXSG.DE), have also said they may consume more coal….
Other companies, such as Europe’s top copper smelter Aurubis (NAFG.DE), also said their aim remains to decarbonise, despite the additional short-term complication of including coal in the energy mix.
Investors insist they are similarly committed. AXA Investment Managers, Allianz Global Investors and Zurich Insurance, which between them manage $1.8 trillion in assets, all said they were keeping to their plans to cut back on coal despite the war in Ukraine.
“We are not changing our position and we are not changing our policy – we are sticking to the course,” said Zurich group head of sustainability Linda Freiner.
So far Europe’s energy crisis is showing few signs of being resolved. It remains to be seen how far either companies or investors can keep faith in the importance of long-term ESG principles like cutting out coal if the situation worsens.”
In the States
Governor DeSantis bans the use of ESG criteria in state pension fund management
On July 27, Florida Governor Ron DeSantis announced that he had banned the use of ESG criteria in the management of Florida’s state-sponsored pension funds. The Governor made his announcement at a press conference during the day and then reiterated it that evening on Fox News’s “Tucker Carlson Tonight”:
“The Florida State Pension System will now be under a “flat ban” against incorporating the globalist ESG platform into its investments, Gov. Ron DeSantis announced on Fox News Wednesday.
DeSantis told “Tucker Carlson Tonight” the proponents of ESG – which places what its supporters say are environmentally-necessary regulations – like to “wiggle around” definitions and verbiage to supersede the purely fiduciary responsibilities of fund managers.
“It’s basically a way for [ESG proponents] to do politics,” the Republican governor said. “So we’re going to make sure that that fiduciary duty is defined very clearly and that they stick to that. We also want to provide protections for people in the financial marketplace from being discriminated against based on ideology.”
DeSantis said some Wall Street banks are already inserting their politics in their investments in other ways – discriminating against contractors unfriendly to unfettered immigration or those firms who invest in firearms manufacturers while Democrats seek to pass gun control laws opponents say infringe on the Second Amendment.”
ESG policies of five financial institutions land groups on West Virginia’s restricted financial institution list
In West Virginia, State Treasurer Riley Moore announced that five firms have been placed on his state’s restricted financial institution list because their ESG policies conflict with what the Treasurer says are his state’s financial interests, namely coal and other fossil fuels:
“West Virginia State Treasurer Riley Moore today announced he has published West Virginia’s first Restricted Financial Institution List, deeming five financial institutions ineligible for state banking contracts.
Treasurer Moore has determined that BlackRock Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. are engaged in boycotts of fossil fuel companies, according to a new state law, and are no longer eligible to enter into state banking contracts with his Office.
“As Treasurer, I have a duty to act in the best interests of the State’s Treasury and our people when choosing financial services for West Virginia,” Treasurer Moore said. “Any institution with policies aimed at weakening our energy industries, tax base and job market has a clear conflict of interest in handling taxpayer dollars.”
Six financial institutions were initially identified as potentially engaged in boycotts of energy companies and provided with written notice. These institutions then had 30 days to submit additional information disputing their potential inclusion on the Restricted Financial Institution List. All six institutions submitted responses, which the Treasurer reviewed alongside each institution’s public policy statements.
Out of the six financial institutions initially noticed, U.S. Bancorp was not placed on the List because it demonstrated to the Treasurer that it has eliminated policies against financing coal mining, coal power and pipeline construction activities from its Environmental and Social Risk Policy.
“Each financial institution placed on the Restricted Financial Institution List today has published written environmental or social policies categorically limiting commercial relations with energy companies engaged in certain coal mining, extraction or utilization activities, rather than considering the financial or risk profile for each company,” Treasurer Moore said. “These policies explicitly limit commercial engagement with an entire energy sector based on subjective environmental and social policies.””
Notable quotes
Aswath Damodaran speaks
On July 28, wealth manager David Bahnsen – who is also a trustee of the National Review Institute – hosted Aswath Damodaran on hisNational Review-produced podcast, the Capital Record. Damodaran is a professor of finance at NYU’s Stern School of Business and has, in the past, expressed skepticism about ESG and its impact.
In an accompanying article published at National Review Online, Bahnsen wrote about “A few points I find worth highlighting for those interested in a deeper dive on the subject,” including:
“The claim that ESG comes at “no cost” — that investing in a way that meets these environmental, social, and governance tests involves no trade-offs — ought to ring some alarm bells. Basic laws of economics tell us that there is no such thing as a free lunch. As Damodaran puts it, “constrained optima cannot beat unconstrained optima” (this should be so elementary to any first-year business student, it hurts). It would be one thing if ESG zealots were claiming that although we have to accept lower returns or more difficult business conditions, it is worth it in exchange for the alleged environmental, social, and governance benefits that investing subject to ESG constraints will provide. But alas, that’s not what most of them have been saying. Instead, they claimed they would make the world a better, more “sustainable” place by forcing restrictions on others, and that no sacrifice would be involved. These intelligence-insulting claims are a great place to start one’s critique….”
And:
“Fundamentally, and I cannot say this emphatically enough, ESG is a pharisaical way for people to feel virtuous and good without having to do anything at all. The lack of individual sacrifice being made by those who push so hard for ESG is damning. The sacrifices that are being made are being made by the shareholders in the companies (or the underlying shareholders in the funds that invest in those companies), now expected to measure up to ESG’s standards. Virtue is not something exhibited at no cost to the individual; agency, sacrifice, and cost are part of character and justice. The ESG movement has put the cost on other actors, abusively so, and feigned progress and moral superiority.”
In Missouri, there are two citizen-initiated measures pending signature verification. One would legalize marijuana in the state. The other proposal would enact an electoral system combining top-four primaries and ranked-choice voting for general elections. The state must verify whether enough signatures have been collected by August 9.
The marijuana initiative would legalize the purchase, sale, manufacturing, possession, and consumption of marijuana for persons 21 years old or older; allow individuals convicted of non-violent marijuana-related offenses to petition to be released from incarceration or have their records expunged; and enact a 6% tax on the sale of marijuana.
Legal Missouri, the campaign behind the electoral system initiative, reported submitting about 385,000 signatures on May 8. In Missouri, there is no statewide signature requirement; rather, proponents of initiated constitutional amendments need to collect signatures equal to 8 percent of the votes cast in the previous gubernatorial election in six of the eight state congressional districts. The smallest possible number of signatures required for an initiated amendment is 171,592.
According to the Missouri Independent, Legal Missouri had enough valid signatures in four congressional districts but not others. The campaign needed to collect enough valid signatures in at least six congressional districts. Campaign director John Payne said the unofficial counts were being double-checked for errors. “As we continue to see more signature counts submitted by counties, it’s become crystal clear that we have more than enough signatures to qualify our citizens’ initiative for the November general election ballot,” said Payne.
Missouri is one of 16 states with a signature distribution requirement for citizen-initiated measures. Of those 16, Missouri is one of five states where the distribution requirement is based on congressional districts. The other 10 states with an initiative or referendum process do not have distribution requirements.
If neither of the two initiatives pending signature verification make the ballot, 2022 would be the first even-numbered year since 1986 to feature no citizen-initiated ballot measures.
What amounts to a wave election in the U.S. House?
We define a wave as the top fifth (20%) of elections from 1918-2016 in terms of losses for the incumbent president’s party.
Under this definition, the president’s party must lose 48 seats in the U.S. House for an election to qualify as a wave. There were 11 wave elections between 1918 and 2016: four for Democrats and seven for Republicans.
U.S. House waves occur disproportionately in first presidential midterm elections. First presidential midterm elections made up 30% of all U.S. House elections from 1918-2016. But they also accounted for 54.5% of all House wave elections during that same time. That’s six of the 11 wave elections that happened in this period.
Second midterm elections, meanwhile, accounted for 18% of elections in that period and comprised 18.2% of U.S. House wave elections. Presidential elections accounted for 50% of elections and comprised 18.2% of U.S. House wave elections. Additionally, Franklin Roosevelt had a third midterm election in 1942, where a House wave occurred.
Eleven gubernatorial wave elections took place between 1918 and 2016: six for Democrats and five for Republicans.
The largest wave was in 1970, during President Richard Nixon’s (R) first term when Republicans lost 12 governorships.
The smallest gubernatorial waves came in 1982 and 2010, during the presidencies of Ronald Reagan (R) and Barack Obama (D), respectively. The president’s party lost seven governorships during these elections.
Pat Ryan and Marc Molinaro are running in the special election for New York’s 19th Congressional District
Pat Ryan (D) and Marc Molinaro (R) are running for the open U.S. House seat in NY-19. Former incumbent Antonio Delgado (D) resigned after Gov. Kathy Hochul (D) selected him as lieutenant governor. The winner of the special election will serve the rest of Delgado’s term that ends on January 3, 2023.
The special election is one of two elections for New York’s 19th district in 2022. The other is the regularly scheduled election on November 8.
Legislation update: What’s happened with public-sector union bills so far this year?
This week, we’re looking back at legislative activity for the public-sector union bills we’ve tracked in the first seven months of 2022. We’ll also compare that activity to the same period in 2019, 2020, and 2021.
Highlights & quick facts
Ten bills related to public-sector unions have been enacted so far this year. Democrats sponsored six, and Republicans sponsored three. The remaining bill was an appropriations bill introduced by committee.
We’ve tracked more bills related to public-sector union policy this year than any of the last three years.
Legislators in Maryland have considered 13 public-sector union bills so far this year, followed by California and Minnesota tied with 12. Maryland legislators considered the most public-sector union bills in the first half of the year in 2020, 2021, and 2022. In 2019, it was Oregon.
Washington is the only state that has passed a public-sector union bill by July of each year from 2019 to 2022.
The Maryland General Assembly overrode Gov. Larry Hogan’s (R) vetoes of two public-sector union bills this year.
Enacted legislation
The following 10 bills have been signed into law so far this year:
Arizona SB1166: Prohibits public employers from spending public money on a union’s political or lobbying activities. Prohibits public employers from contracting with a public employee to perform a union’s political or lobbying activities, and prohibits public employers from providing paid leave or other compensation to employees performing a union’s political or lobbying activities. There is an exception for law enforcement and firefighters. Republican sponsorship.
California SB189: This appropriations bill includes an ongoing proposal for the creation of a tax credit for union dues. Introduced by Democratic-led committee.
Colorado SB230: Gives certain county employees the right to organize and bargain collectively beginning in 2023. Democratic sponsorship.
Indiana SB0297: Amends the language of the authorization form school employees must sign before union dues may be deducted from their pay. Republican sponsorship.
Maine LD449: Existing law required public employers and collective bargaining agents to meet within 10 days of receiving written notice of a request for a bargaining meeting. This only applied if the parties had not otherwise agreed in an earlier contract. This bill eliminates that exception. Democratic sponsorship.
Maryland HB90: Extends collective bargaining rights to the deputy public defender, district public defenders, and assistant public defenders. Democratic sponsorship.
Maryland HB580: Extends collective bargaining rights to Maryland Transit Administration Police sergeants and supervisors. Democratic sponsorship.
New Jersey S3810: Expands the terms and conditions negotiable between government employers and public-sector unions to those that “intimately and directly affect employee work and welfare,” with certain exceptions. It also allows a public-sector union to charge a non-dues-paying employee for the cost of representation in arbitration proceedings, and to decline to represent those who do not agree to pay. Democratic sponsorship.
Oklahoma SB1579: Allows school boards to grant unpaid leaves of absence for employees to hold office in an employee association if certain criteria are met. An employee organization would be required to comply with this law in order to be recognized as the representative of a bargaining unit. Republican sponsorship.
Washington HB2124: Gives state legislative branch employees the right to bargain collectively, creates an office of state legislative labor relations to “[e]xamine issues related to collective bargaining for employees of the house of representatives, the senate, and legislative agencies” and to “develop best practices and options for the legislature to consider in implementing and administering collective bargaining.” A final report is due to the legislature by Oct. 1, 2023. No collective bargaining agreement may take effect until July 1, 2025. Employees are not allowed to strike. Democratic sponsorship.
Comparison to recent years
2022 legislative activity, January through July
In the first seven months of 2022, state legislatures took up 149 public-sector union bills, 10 of which were enacted during that time.
Bills introduced or carried over from earlier sessions: 149
Democratic sponsored bills: 91
Republican sponsored bills: 46
Bipartisan or committee bills: 12
Bills enacted: 10
2021 legislative activity, January through July
In the first seven months of 2021, state legislatures took up 98 public-sector union bills, 10 of which were enacted during that time.
Bills introduced or carried over from earlier sessions: 98
Democratic sponsored bills: 44
Republican sponsored bills: 44
Bipartisan or committee bills: 10
Bills enacted: 12
2020 legislative activity, January through July
In the first seven months of 2020, state legislatures took up 99 public-sector union bills, three of which were enacted during that time.
Bills introduced or carried over from earlier sessions: 99
Democratic sponsored bills: 52
Republican sponsored bills: 34
Bipartisan or committee bills: 13
Bills enacted: 3
2019 legislative activity, January through July
In the first seven months of 2019, state legislatures took up 101 public-sector union bills, seven of which were enacted during that time.
Bills introduced or carried over from earlier sessions: 101
Democratic sponsored bills: 51
Republican sponsored bills: 38
Bipartisan or committee bills: 12
Bills enacted: 7
To view spreadsheets with information about all of the public-sector union bills we’ve tracked since 2018, click here.
We are currently tracking 149 pieces of legislation dealing with public-sector employee union policy. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we’re tracking.
Number of relevant bills by current legislative status
Number of relevant bills by partisan status of sponsor(s)
Recent legislative actions
No public-sector union bills saw activity this week.
Thank you for reading! Let us know what you think! Reply to this email with any feedback or recommendations.
Welcome to Hall Pass. This newsletter keeps you plugged into the conversations driving school board politics and governance. Each week, we bring you a roundup of the latest on school board elections, along with sharp commentary and research from across the political spectrum on the issues confronting school boards in the country’s 14,000 school districts. We’ll also bring you the latest on school board elections and recall efforts, including candidate filing deadlines and election results.
In today’s edition, you’ll find:
On the issues: The debate over Arizona’s Empowerment Scholarship Account program expansion
School board filing deadlines, election results, and recall certifications
In your district: reader replies on teacher staffing levels
North Carolina bill would change state board of education members from gubernatorial appointees to elected officials
Extracurricular: education news from around the web
Candidate Connection survey
School board candidates per seat up for election
Reply to this email to share reactions or story ideas!
On the issues
In this section, we curate reporting, analysis, and commentary on the issues school board members deliberate when they set out to offer the best education possible in their district.
The debate over Arizona’s Empowerment Scholarship Account program expansion
Arizona Gov. Doug Ducey (R) signed House Bill 2853 into law on July 7 allowing K-12 students to use taxpayer-funded Empowerment Scholarship Accounts (ESAs) to attend schools or pay for curriculum or tutoring outside the public school system.
Vince Roig and Paul Luna with the Helios Education Foundation write that Arizona’s ESAs will only benefit the children of rich families who can afford home and private schooling options without the savings accounts. They say the law does not hold parents accountable for ESA expenditures. Roig and Luna say the funds should be directed to public schools, which can be held accountable through standardized testing, to benefit less wealthy families.
Arizona House Majority Leader Benjamin Toma writes that the ESA program will not hurt public schools or poorer students who attend them. Toma says the state increased public school funding. He says the ESAs will give all families greater flexibility, and improve academic performance. Toma also compared the ESA program to Arizona’s unlimited public school open enrollment and charter school policies, which he says improved educational outcomes in the state.
“Make no mistake: Only an elite few will benefit from an unprecedented and unpopular expansion of education savings accounts (ESAs), while more than one million Arizona public school students will continue to attend some of the lowest-funded schools in the country. … Right now, the state should be focused on access, accountability and attainment. … Instead, the majority of legislators chose to greatly expand education savings accounts that will help wealthy parents pay for tuition at expensive private schools and other extravagances that Arizona’s neediest children will never be able to afford. … This new law does not hold parents accountable for how they spend their ESA withdrawals. The state will never know if $300 million or more spent on ESAs will yield improved learning. By contrast, public school students will continue to take annual assessments, and their schools will be graded on those results.”
“The truth is ESAs won’t cripple public schools. But we think it will make them better. After years of unlimited district open enrollment and the highest percentage of students in charter schools in the nation, choosing your child’s school – instead of being directed by the government – is the norm here. The results: Arizona schools lead the nation in academic growth for both poor and nonpoor students per the Stanford Opportunity Project. We invested more than $1 billion in our school finance formula this year, most of which was to show holdouts that we weren’t giving up on our public schools and were willing to deal. … School choice opponents have been wrong for decades. Each advance is doggedly opposed because they know parents won’t easily relinquish freedom once enjoyed.”
School board update: filing deadlines, election results, and recall certifications
Ballotpedia has historically covered school board elections in about 500 of the country’s largest districts. We’re gradually expanding the number we cover with our eye on all of the roughly 14,000 districts with elected school boards.
Upcoming school board elections
Tennessee
We’re covering the following school board general elections on Aug. 4.
In your district: reader replies on teacher staffing levels
We recently asked readers the following question about teacher staffing in their school districts:
“News outlets have reported that some districts face a teacher shortage heading into the 2022-2023 school year. Is this an issue in a school district near you? What challenges does it present for the district? How is the district dealing with these challenges, if they exist?”
Thank you to all who responded. Today, we’re sharing a handful of those responses.
Dawn, a school board member from Virginia, wrote:
“We have a teacher vacancy rate of 9%. Our HR department is trying to get creative. We are supporting people with degrees to become licensed and adding video classrooms to name a couple.”
Marc, a school board member from Vermont, wrote:
“Not in our district. We started searches early, pay reasonably and provide an atmosphere teachers enjoy teaching in.”
Kevin, a social studies high school teacher from Virginia, wrote:
“Yes, this has been an issue with my school district, where some schools have lost close to half their staff. Being fully staffed will be a huge challenge. My district has mainly responded through financial compensation, including a salary increase, signing bonus, and a $2,000 bonus for all teachers. The district is also looking to improve substitute pay as we have a shortage there too, which leads to teachers losing their planning time to cover for colleagues.
Suzanne, a community member from Florida, wrote:
“Yes Marion County School District, Florida, is facing a big need for teachers; the district is having a hiring fair. The problem that I see is two fold: the district has too many 6 figure administrators with a big staffing apparatus and to my knowledge the district has very little if any parental input and advisement on any educational issues. The Board has problems with Conservatives elected or appointed to the Board. ”
Lynn, a reader from North Carolina who works to elect school board members, wrote:
“Yes, it is a big issue. The superintendent though is not willing to publicly admit it is an issue. She spent a good deal of time a few weeks ago verbally dismissing ‘the misinformation.’ However the public records of Personnel Reports show a different story. We believe there will be big issues in staffing at the start of the school year as there were all year last year. The district has offered a $10,000 sign on bonus and implemented several programs to bring in lateral entry recruits.”
We’ll be back in August with a new reader survey, and we look forward to reading your responses!
North Carolina bill would change state board of education members from gubernatorial appointees to elected officials
In North Carolina, a recent bill to amend the constitution would have changed the way the state selected its state board of education members.
State Rep. Hugh Blackwell (R) introduced House Bill 1173 on June 15. HB 1173 would have made state board of education member an elected position. Currently, the governor appoints 11 of the 13 members of the board (subject to Senate confirmation) to eight year terms. The lieutenant governor and state treasurer are also members. The bill would also have made the superintendent of education the chair of the board. Currently, the superintendent is the secretary of the board and a non-voting member.
Under the bill, board members would be elected by congressional districts.
The House Education Committee approved the bill 14-7 along partisan lines, with Republicans supporting the bill and Democrats opposing it. On June 30, the bill was removed from the calendar and sent to the House Rules Committee before the legislative session ended. According to NC Policy Watch, the bill is likely to be taken up later in the year.
Democratic legislators who opposed the bill said electing board members would politicize the board.
State Rep. Cecil Brockman (D) said, “I have no idea on God’s green earth why we would make our officials who are supposed to be nonpartisan have to raise money and become partisan.”
Blackwell has said he introduced the bill because “parents and voters feel like they need to have more say in what is happening in our schools, what kind of instruction is being delivered, what kind of leaders we have, and this is designed to give them that voice.”
According to the Education Commission of the States (ECS), North Carolina is one of 34 states in which the governor appoints all or most of the state board of education members. In 13 states and the District of Columbia, all or most members are elected. Neither Minnesota nor Wisconsin have a state board of education.
This year, seven states are holding elections for state board of education:
The North Carolina Superintendent of Public Instruction is Catherine Truitt (R). Truitt was elected in 2020. The position of superintendent exists in all 50 states. Twelve state superintendents are elected, 38 are appointed.
Extracurricular: education news from around the web
This section contains links to recent education-related articles from around the internet. If you know of a story we should be reading, reply to this email to share it with us!
Take our Candidate Connection survey to reach voters in your district
Everyone deserves to know their candidates. However, we know it can be hard for voters to find information about their candidates, especially for local offices such as school boards. That’s why we created Candidate Connection—a survey designed to help candidates tell voters about their campaigns, their issues, and so much more.
In the 2020 election cycle, 4,745 candidates completed the survey.
The survey contains over 30 questions, and you can choose the ones you feel will best represent your views to voters. If you complete the survey, a box with your answers will display on your Ballotpedia profile. Your responses will also populate the information that appears in our mobile app, My Vote Ballotpedia.
And if you’re not running for school board, but there is an election in your community this year, share the link with the candidates and urge them to take the survey!
School board candidates per seat up for election
Since 2018, we’ve tracked the ratio of school board candidates to seats up for election within our coverage scope. Greater awareness of issues or conflicts around school board governance can result in more candidates running for each office. Click here to see historical data on this subject. This year, 2.4 candidates are running for each seat in the 1148 school board races we are covering in districts where the filing deadline has passed. The 2.4 candidates per seat is 21% more than in 2020.
Economy and Society is Ballotpedia’s weekly review of the developments in corporate activism; corporate political engagement; and the Environmental, Social, and Corporate Governance (ESG) trends and events that characterize the growing intersection between business and politics.
ESG Developments This Week
In Washington, D.C., and around the world
Will the SEC’s proposed disclosure rule harm materiality standards?
As the Securities and Exchange Commission (SEC) continues to evaluate its options regarding the issuance of a final rule on climate change-related disclosures by publicly traded companies, Bernard S. Sharfman – a senior corporate governance fellow at RealClearFoundation and a research fellow with the Law & Economics Center at George Mason University’s Antonin Scalia Law School – penned a piece for National Review Online’s “Capital Matters” arguing that the new rule will harm the existing materiality standard by creating a new standard – a climate change standard – that is, in his view, based on a fallacy:
“Materiality has been the hallmark of the Securities and Exchange Commission’s disclosure regime since the Supreme Court’s 1976 decision in TSC v. Northway. Materiality limits disclosures “to those matters to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to purchase the security registered.” In the SEC’s recently proposed rule on climate-change disclosures, the SEC tries, but fails, to make the argument that the proposed disclosures will provide investors with “material” information that is critical to their investment decisions. That the SEC even tries to make a materiality argument may surprise many readers, as it is made so indirectly and done so poorly that readers may have missed it.
The materiality argument in the proposed rule revolves around the term “transition risk.” As defined in the proposed rule, this term includes increased operating and investment costs resulting from stricter climate-related regulations, reduced demand for carbon-intensive products, and the potential for stranded assets such as oil and gas reserves.
There are over 100 mentions of transition risk in the proposed rule. It is mentioned so often because the SEC is using it to create the necessary link between its legal authority to require public companies to make disclosures and the disclosures found in the proposed rule. This legal authority requires the SEC’s mandated disclosures to be “for the protection of investors,” a term that requires such disclosures to be directed at informing investors of the firm-specific financial risk that they take when investing in public companies.
As the SEC states in the proposed rule, “Understanding the extent of this potential exposure to transition risks could help investors in assessing their risk exposures with respect to the companies in which they invest.” For example, the SEC tries to justify the need for companies to provide data on Scope 1 (carbon emissions that come directly from sources owned by a company) and Scope 2 emissions (resulting primarily from the generation of electricity purchased and consumed by the company) in the following manner: “Should a transition to a low-carbon economy gain momentum, registrants with higher amounts of Scope 1 and 2 emissions may be more likely to face sharp declines in cash flows, either from greater costs of emissions or the need to scale back on high-emitting activities, among other reasons, as compared to firms with lower amounts of such emissions.” Therefore, transition risk can be thought of as another type of firm-specific financial risk.
The problem with this argument is that transition risk, as defined by the SEC, is not material for most companies and their investors, including companies that focus on the production and refinement of fossil fuels. The materiality of transition risk rests on the false premise that the world is rapidly moving to net-zero carbon emissions and therefore presumably presenting all public companies with a significant amount of such risk.”
Response to proposed Biden administration ESG rule and its potential impact on retirement plans
On July 19, Vivek Ramaswamy, the author, entrepreneur, and executive chairman of Strive Asset Management, and Alex Acosta, the former Trump administration Secretary of Labor wrote a piece for the Wall Street Journal in which they made the case that the Biden Administration’s plans for the new rule on ESG investments in retirement plans are likely, in their view, to be problematic for investors and will create a new tax on retirement accounts. The two wrote the following:
“BlackRock CEO Larry Fink wrote in 2020 that “sustainable investing is the strongest foundation for client portfolios.” Al Gore said in 2021 that “you don’t have to trade values for value. Green can enhance returns.” These claims haven’t aged well: ESG (environmental, social and governance) funds have trailed the market since the beginning of the year and are badly underperforming the sectors they shun, including oil, gas and coal.
That may spur retirement fund managers to reconsider their commitments to ESG funds. But new ESG-favoring regulations may come to the rescue. Last year the U.S. Labor Department proposed a regulation that would tell retirement-fund managers to consider ESG factors such as “climate change” and “collateral benefits other than investment returns” when investing employees’ money.
This would encourage America’s perpetually underfunded pension plans to invest in politically correct but unproven ESG strategies. It would also violate retirees’ basic right to have their money invested solely to advance their financial interests.
Retirement and pension-fund managers are fiduciaries, legally required to make every investment decision with one purpose—maximizing retirees’ financial interests. The Uniform Prudent Investor Act, a model law adopted by 44 states, makes clear that “no form of so-called ‘social investing’ ” is lawful “if the investment activity entails sacrificing the interests of . . . beneficiaries . . . in favor of the interests . . . supposedly benefitted by pursuing the particular social cause.” This principle is built into the Employee Retirement Income Security Act itself, as the Supreme Court held in Fifth Third Bancorp v. Dudenhoeffer (2014). The Biden administration can’t change that by regulation….
The new rule suggests that fund managers weigh factors such as “climate change,” “board composition” and “workforce practices.” While the drafters were smart enough not to mandate consideration of ESG factors explicitly, the draft rule’s one-sided list of examples tilts the scale in favor of ESG-linked investment selection, proxy voting and shareholder engagement.
The rule states not only that ESG factors can be considered, but that prudent investing “may often require” it. The proposed regulation thus transforms ESG from one factor that may be considered when it has a material effect on the investment to a factor that should be considered in all instances.
The new regulation may also expose fiduciaries who don’t consider ESG factors to lawsuits. Already, activist shareholders are pursuing litigation against public companies that don’t take ESG-approved steps.
Washington should remember that the law governing retirement accounts already spells out the ESG goal that fiduciaries must honor: “Providing a secure retirement for American workers is the paramount and eminently worthy social goal of ERISA plans.” The Labor Department should scrap the rule now.”
The ‘S’ in ESG
The British government has come to the conclusion that pension fund managers can and should be doing a great deal to manage the ‘S’ portion of the ESG equation, that is, the social portion–and if they’re not, then they are not performing their duties:
“The U.K. government wants to make sure that pension fund trustees are giving enough attention to social factors that could have financial implications, and is setting up a task force to help.
“The ‘S’ of ESG is one area in which the risk management of pension schemes can be strengthened,” said Pensions Minister Guy Opperman, the longest serving parliamentary undersecretary of state for pensions and financial inclusion, in a statement on the Department for Work and Pensions website.
“In my view, trustees who do not factor in financially material social factors are at risk of not fulfilling their fiduciary duty,” said Mr. Opperman, responding to the results from a Department for Work and Pensions consultation with the pension community on how they approach social risks and opportunities.”
Opperman’s concerns about social matters could, at least in theory, according to some analysts, draw pension managers into conflict over which is most important, social or environmental concerns:
“While some pension funds and service providers reported managing social factors through engagement with companies and others in the investment chain, “there is clearly more to do,” Mr. Opperman said.
One issue raised by trustees was modern slavery within supply chains, which could be exacerbated by global events like the war in Ukraine. The war has also shifted the conversation about investing in defense and nuclear industries, he said.
“This time last year, industries such as defence and nuclear (both civil and defence) were seen as no-go areas for ESG funds but the situation has changed and ESG investing should change with it,” he said. “Recent events have reminded us — if such a reminder were needed — how vital these sectors are to the safety and security of our society.” Pension fund trustees should join the Occupational Pensions Stewardship Council to collaborate on collective engagement and best practices, and when they delegate stewardship, they should “ensure that asset managers do not leave social factors off the agenda,” Mr. Opperman said.”
On Wall Street and in the private sector
Bloomberg: “ESG Fund Closures Pile Up as Do-Good Investing Takes Back Seat”
According to Bloomberg, many ESG funds are not weathering the downturn in the equities markets well:
“A deluge of do-good ETFs once flooded US exchanges and drew in billions. But as investors contend with fears of a recession, the trend is reversing and more of these funds are closing up.
Cathie Wood’s Ark Transparency ETF (ticker CTRU) is the latest ESG exchange-traded fund set to shutter, bringing the total to seven this year. While do-good funds were popular during the post-pandemic bull market when virtually every strategy surged, they now account for 15% of all US ETF closures this year, according to data compiled by Bloomberg. They only made up about 4% of the funds in the industry at the start of the year.
It’s been a brutal turnaround for an investment strategy that grew in popularity as investors sought to finance companies that battle climate change or focus on diversity in their management. An unforgiving year for markets has put do-good investing firmly in the back seat, with investors fleeing ESG funds as portfolio protection becomes a priority.
“This is a really difficult market — I think people tend to go back to the basics,” said Cinthia Murphy, director of research at ETF Think Thank. “We all just want to survive this market and not lose everything we’ve built so far.”
“The ESG ETF space is already over-saturated,” said Nate Geraci, president of The ETF Store, an advisory firm. “We’re going to continue to see an uptick in ESG ETF closures.””
“BlackRock Inc. is used to breaking records. The world’s largest asset manager was the first firm to break through $10 trillion of assets under management. But the bigger they are the harder they fall. And this year BlackRock chalked up another record: the largest amount of money lost by a single firm over a six-month period. In the first half of this year, it lost $1.7 trillion of clients’ money.
BlackRock management was quick to invoke the first-half market carnage when revealing the investment performance last week. “2022 ranks as the worst start in 50 years for both stocks and bonds,” Chairman and Chief Executive Officer Larry Fink said on his earnings call.
While few firms are able to avoid what the market throws at them, some at least try to overcome it. BlackRock is increasingly giving up: At the end of June, only about a quarter of its assets were actively managed to beat a benchmark — rather than track it seamlessly as passive strategies are designed to do. That’s down from a third when BlackRock acquired Barclays Global Investors in 2009 to become the leading player in exchange-traded funds.”
