Government Relations Alert: Voters Elect a Divided Congress; Give Democrats More Power at the State Level

Background

November 7, 2018 – Approximately 114 million votes were cast in U.S. House races in midterm elections. This represents a significant increase in voter participation when compared the midterm election in 2014, which drew 83 million votes. All 435 seats in the U.S. House of Representatives (“House”) and 35 seats in the U.S. Senate (“Senate”) were contested in this election. In addition, over 6,000 state legislative seats (nearly 80%) and 35 gubernatorial offices (75%) were on the ballot. While some races remain too close to call, we know that Democrats increased their numbers in the House and in numerous state races while Republicans expanded their control of the U.S. Senate and won several high-profile state races of their own. In many ways, this was a historic election for women and minorities across the board. Ninety-four women were elected to serve in the House and 13 women were elected to the Senate, raising the total number of women in that chamber to 23. The first Native American and Muslim women were elected to Congress, while the first black and Latina women were elected in their respective states of Massachusetts and Texas. And, Alexandria Ocasio-Cortez (D-NY) now becomes the youngest woman elected to Congress at age 29, replacing the previous holder of that title Elise Stefanik (RNY), who was 30 when first elected. And, on the gubernatorial front, Rep. Jared Polis (D-CO) is poised to become the first openly gay governor in the nation, while Rep. Kristi Noem (R-SD) is the first woman to be elected governor in South Dakota.

Key takeaways

Democrats have regained control of the House for the first time in 8 years, picking up 30 seats. The current breakdown of the House is 225-197 in favor of the Democrats, with 13 races still pending.
In the Senate, Republicans extended their majority, picking up 2 seats with 3 races still undecided. The Republican Senate majority currently stands at 51-46.
House and Senate leadership elections – where the Speaker of the House and other Congressional leaders are selected – are expected to take place when Congress returns next week, though House Democrats may wait until after Thanksgiving to conduct votes.
At the state level, Democrats picked up 7 Governorships, won 350 legislative seats and flipped 6 legislative chambers. Republicans now have 27 Governors and complete legislative control (trifectas) in 23 states while the Democrats have 23 Governors and trifectas in 14 states. Thirteen states will have divided government.

In depth

The U.S. House
While some House races remain undecided, Democrats have so far gained 30 seats, retaking the majority 225-197 with 13 races still pending. Since World War II, the President’s party has lost an average of 26 House seats in midterm elections. The Democratic victory likely paves the way for Nancy Pelosi (D-CA) to become the Speaker of the House – a position she held when the Democrats were last in control of the House in the 111th Congress. Perhaps the most significant shift in the House is on the Ways and Means Committee which has jurisdiction over tax policy and has substantial jurisdiction over retirement policy. Of the 24 Republicans who sat on the committee during the 115th Congress, only 14 will return in January for the 116th Congress. The Ways and Means committee will now be chaired by Richie Neal (D-MA), a long time champion of retirement policy. Expect him to seek to advance important bipartisan retirement proposals, several of which he has authored, including one that would require all employers to offer a retirement plan. Several Republicans who are strong champions of retirement survived the election and will return in the 116th Congress. They include Mike Kelly (R-PA), who introduced comprehensive bipartisan legislation earlier this year, and Tim Walberg (R-MI), who co-sponsored a bill TIAA has strongly supported because it would reform the current annuity provider selection safe harbor regulations. As the result of this election, two other important committees will have new leadership. The House Financial Services Committee will now be chaired by Maxine Waters (D-CA). The soon to be renamed Committee on Education and Labor (formerly Education and Workforce) will now be chaired by Bobby Scott (D-VA), who is supportive of improving the retirement system.
The U.S. Senate
In contrast to the House, Senate races were a bright spot for the Republican Party yesterday. With four races still undecided, Republicans have so far added two seats to their majority which now stands at 51-46. This was a particularly difficult year for Democrats in the Senate; they were forced to defend 26 of their 49 seats going into the election including 10 seats in states that were won by President Trump in 2016. Of those 10 seats, Democrats have so far lost three – Heidi Heitkamp (SD), Claire McCaskill (MO), and Joe Donnelly (IN) – with one more (Bill Nelson (FL)) not yet decided. Across the aisle, there were only 9 Republican seats up for grabs yesterday and only one in a state that President Trump lost in 2016 – Dean Heller (NV) - who lost his seat to Democratic Congresswoman Jacky Rosen. The retention of the Republican majority in the Senate likely means very little potential change from a policy standpoint; the Republican Senate leadership is likely to remain unchanged. However, the retirement of Senate Finance Chairman Orrin Hatch, a key architect of RESA and other significant retirement legislation, means a new retirement agenda could be on the horizon in the Senate. The new Chairman won’t be decided until leadership elections next week, the leading candidate is Charles Grassley (R-IA).
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