With D.C. divided, lobbying turns to the states

The prospects of a federal government divided between Democrats and Republicans who are barely on speaking terms has special interest and industry groups turning to state governments to make progress on policy and legislative fights over the next two years.

Tuesday’s midterm elections are likely to result in a Republican majority in the U.S. House of Representatives, if only by the slightest of margins. Democrats will retain control of the U.S. Senate, even before a runoff election to be held next month in Georgia. The narrow election results have set Washington on a path to two years of gridlock.

In interviews, top lobbyists inside and outside the Beltway, special interest groups and experts who study the lobbying industry say a divided Washington means a fundamental shift in the way business thinks about influencing lawmakers.

“The action has been moving towards the states for years. Congress is just not functioning as efficiently as they once did, which is saying something. So the focus has turned to the states,” said Dawson Hobbs, executive vice president of government affairs at the Wine and Spirits Wholesalers of America. 

A Democratic Senate and a Republican House of Representatives “puts even more emphasis at the state level,” he said. “As partisanship became more the norm, especially at the federal level, it just created a slower process and it created more opportunities at the state level, where they’re able to get things done a little quicker.”

Lobbying spending in the states has exploded in recent years. Though only about half the states require lobbyists to report the amount of money they are paid, the data those states must report shows a robust influence industry that is growing far faster than at the federal level. 

In just the last year, interest groups spent nearly $400 million seeking to influence lawmakers in California alone, a record high.

“The trend in the past ten years or so has been corporations with regulatory interest in Washington haven’t left Washington to go to state capitals, but they’ve expanded the scope of their lobbying to state capitals,” said Tim LaPira, a political scientist who studies the lobbying business at James Madison University.

While gridlock grips a divided Washington, the situation in most states — where one party controls both the legislature and the governor’s mansion — is the opposite. That poses its own challenge to interest groups: The Democrats who hold every lever of government in Sacramento will move policy in a much different direction than the Republicans who control everything in Austin or Tallahassee.

“A historic number of states now have one-party rule, enabling easier passage of bold legislation,” said Bruce Mehlman, a veteran Washington-based lobbyist.

The amount of money spent lobbying the federal government is not likely to shrink, said Clare Brock, a political scientist at Texas Woman’s University who studies lobbying — but, she said, the money will shift focus.

“During divided government, lobbying groups don’t downshift, they don’t stop lobbying Congress,” Brock said in an interview. “But they do upshift toward the executive, the bureaucracy and the White House. At times when Congress isn’t getting very much done, they tend to delegate more and there’s more action in bureaucracy and the White House.”

“Lobbyists are not agenda-setters. They are, for the most part, agenda-followers. So if the locust of policy action shifts to the states on particular policy ares, you’ll see lobbyists congregate in those states on policy areas,” Brock said.

When the federal government does manage to get something significant passed, the results provide new incentives for interest groups to shift to their focus to the states. The infrastructure bill, which passed a year ago this week, sent billions to the states to allocate as they saw fit.

“When the federal government acts, there’s going to be downstream effects where state governments have to act,” James Madison’s LaPira said. He pointed to the Affordable Care Act as a prime example: “The minute Obamacare becomes law, corporations had no choice but to turn their attention to major states where their employees are, where their markets are.”

State legislators, governors and attorneys general have become more assertive in policy fights with the federal government in recent years as partisanship rises and animosity between state and federal governments increase. Red states fought the Obama administration constantly. Blue states battled the Trump administration. And red states have again taken to suing the Biden administration at every possible occasion.

“You have more pushback from the states on federal mandates and federal policies, and that just serves as a policy driver in other areas,” Hobbs said. “It has become inherent to a lot of [attorneys general] to exert state regulatory authority against what they perceive as federal overreach.”