ELI STEELE: California forces companies to mine the past for slavery's sins

California's AB 2599, signed into law by Governor Gavin Newsom in September 2023 and set to take effect January 1, 2025, requires publicly traded companies and state contractors with annual revenues exceeding $1 million to audit their supply chains and corporate histories for any connection to slavery—from their own operations to their investors' historical holdings to their vendors' pasts. The law applies retroactively with no cutoff date, meaning a software company incorporated in 1995 could be forced to excavate financial relationships stretching back centuries. Failure to comply triggers fines up to 5% of annual revenue in California, creating enforcement teeth that could cost Fortune 500 companies hundreds of millions.

The stated goal is transparency and accountability. Supporters argue that tracing corporate ties to slavery—particularly through pension funds, insurance companies, and banks that profited from slave labor—creates a factual record and potentially justifies reparations. The law's language is deliberately expansive: companies must report "any connection" including indirect financial relationships, making compliance nearly impossible to verify objectively. No guidelines exist for what constitutes sufficient "connection," leaving companies to hire consultants and lawyers to guess at sufficiency while California's regulatory bodies figure out enforcement standards in real time.

Here's what actually matters: California's schools are collapsing. The state ranks 46th nationally in per-pupil spending despite having the nation's highest tax rates. Reading proficiency among fourth graders dropped from 41% to 34% between 2018 and 2022. Instead of fixing classroom outcomes, Sacramento is requiring companies to fund historical audits that generate consulting contracts and law firm billings. The mechanism is a classic progressive shell game—create moral urgency around historical injustice, outsource the work to private firms who benefit from compliance complexity, and call it justice while actual children in actual schools continue receiving worse outcomes than peers in Mississippi.

The conservative case is direct: this law monetizes white guilt without solving anything. It creates a new compliance industry where consultants sell absolution to corporations afraid of regulatory retaliation. A tech company discovers a 19th-century shareholder once invested in a bank connected to slavery and now must pay six figures to document this, file reports, and potentially face fines if regulators decide the disclosure insufficient. This money doesn't go to harmed individuals—it goes to lawyers, auditors, and environmental, social, and governance (ESG) consultants. The law also gives regulators subjective power to penalize businesses based on historical findings that have no clear legal standard. If California truly believed in reparations, it would pass reparations law with specific beneficiaries and payment mechanisms. Instead it passes a vague compliance regime that enriches professional classes while placing burden on businesses already considering leaving California.

The immediate threshold: January 1, 2025, when the law takes effect. Large companies will begin receiving notices about compliance deadlines. The first major test comes when California's attorney general's office issues guidance on what "connection to slavery" actually means legally. Watch for the first enforcement action—when a company gets fined for insufficient disclosure, the fight over the law's constitutionality moves into court. Companies will argue it's either too vague to enforce or that it violates Commerce Clause protections. Also watch whether other blue states adopt identical language; if New York, Illinois, or Washington pass versions, the compliance burden becomes national, turning this into leverage for federal legislative clarity or challenge.