It’s gonna hit the fan

Depending on how you see life, the governor just experienced the most sparkling couple of weeks of his young administration, or the worst. That’s because, now that he’s performed triage on California’s most threatening potential mortal wound, the question is rapidly going to become, “Yeah, but what have you fixed for us lately?”

At press time, Governor Arnold Schwarzenegger was surmounting the problem of how to handle more than $12 billion in loans taken out by Gray Davis and the Legislature in 2003 after Democratic legislators failed to cut spending—which cost their man in the Capitol his governorship.

Proposition 57, a $15 billion bond to refinance those unfortunate loans, appeared headed for passage after being supported by a massive bipartisan coalition unlike anything I have ever seen in California.

Business, labor, bankers, environmentalists and other unusual dancing partners backed Proposition 57 and its companion measure, Proposition 58, a constitutional amendment that makes it extremely difficult for borrowing of this magnitude to occur again.

Meanwhile, a new Los Angeles Times poll showed the guv with a stellar approval rating of 71 percent among men and 59 percent among women, plus a big surge in the number of Californians who say the state is moving in the right direction under Schwarzenegger.

Schwarzenegger is now viewed favorably even in the Bay Area—a stunning development since 80 percent of San Franciscans voted against the recall and missed the hot news that Davis was an incompetent dud.

The governor had doubly lucked out already just before these boosts to his political clout. First, he lost a harsh critic in the print media, an editorial writer who left The Sacramento Bee to work for the leading anti-Schwarzenegger politico, State Treasurer Phil Angelides. Editorial writer Mark Paul was so far left on taxes that the Bee had developed into the most pro-tax daily newspaper in California, and his editorials were increasingly focused against the Schwarzenegger administration.

This raises the question of how long Paul had been negotiating his fancy $100,000-plus job with Angelides while firing off missives against Schwarzenegger in the Bee. Angelides, who wants to become governor, was one of the few politicians to fight Proposition 57. And interestingly, the Bee was the only major California paper I noticed that strongly editorialized against Proposition 57.

One Sacramento Republican political analyst said, “Don’t tell me Mark Paul wasn’t negotiating this job while writing his unsigned editorials that parroted Angelides.”

David Holwerk, editor of the Bee’s editorial page, said, “Mark wrote some of our editorials against the Schwarzenegger administration, but I wrote the harshest ones.” Holwerk said he himself had set out to “make the Bee the most anti-Proposition 57 newspaper in California” and that “I would be more concerned if Mark had pushed me toward that direction. … I don’t know if he was negotiating his new job while writing any of his editorials.”

At least one thing hasn’t changed under Schwarzenegger: Sacramento is still a juicy soap opera.

Besides Paul’s exit from the Bee, the other news that broke the governor’s way, before March 2, came from Schwarzenegger’s trips to Washington and New York, where he was treated like a visiting head of state while raising copious wads of campaign dough to promote his twin ballot measures.

In New York, his friend Warren Buffett said the governor’s bipartisan work in his first 100 days in office were comparable only to the early political achievements of Franklin Delano Roosevelt. And in Washington, where he attended an annual governors conference, Schwarzenegger was mobbed by the media and had to plead with reporters to ask questions of the other governors.

So, a nod to the governor for his good fortune.

But the real news is this: The you-know-what is about to hit the fan. Assembly Speaker Fabian Núñez went on CNN during Schwarzenegger’s Washington trip, praising the governor and telling the CNN interviewer he hadn’t criticized the governor “because he hasn’t done anything to deserve it.”

But don’t get Núñez wrong. As Núñez told me a couple of weeks before he was sworn in as speaker in February, he will rigorously fight the governor over proposed budget cuts for 2004-2005 that Núñez perceives as detrimental to California.

And if the Legislature refuses to make serious budget cuts, just as it did with Davis, we’ll probably see another bloodbath/gridlock over taxes.

I got a taste for Núñez’s fighting side two months ago, after he criticized then-Speaker Herb Wesson during the governor’s tour of California malls, where Schwarzenegger was pressing the Legislature to back his spending-cap idea. Behind closed doors, the governor was negotiating with Wesson and Senate President Pro Tem John Burton, who wanted to water down the spending cap (and ultimately did).

Núñez had taken a hard line, saying, “If I were speaker, I would not be negotiating with the governor.” When I asked him why not, he remarked, “Because Governor Schwarzenegger is the one who created this mess by returning the car-tax money to people. This is his problem, not the Legislature’s problem. So, he should have to fix it on his own.”

Signs of a gathering storm can be seen already in the failure of Núñez and Burton to seriously consider the governor’s January request for real-time cuts in current spending. The governor wants the Legislature to roll back some 2003-2004 spending immediately. Núñez and Burton could have saved millions of dollars per day that’s currently flying out the door.

A frustrated Assemblyman Joe Canciamilla, a Democrat and a rare moderate in the Legislature, said this: “I have no idea why we are not cutting right now, but frankly, I think we should be cutting more than the governor asked, and right now.”

This ignore-the-guv scenario is an eerie repeat of what Burton and Wesson pulled last spring. They simply ignored Davis’ pleas to cut $20 million or so per day in real-time overspending.

Several days ago, Burton was on the same CNN report as Núñez, joking about how Schwarzenegger “sends me bonbons.” Burton begrudgingly admitted they have a good working relationship.

But Burton’s purposeful foot-dragging on real-time budget cuts and on workers’ compensation reform says, loud and clear, that he still believes Schwarzenegger can be ignored.

Why? Because Burton is a lame duck, facing his final 10 months in office, and he’s a feisty old warrior for big government. He’s not leaving without a pitched fight for his causes.

The big war comes soon, in hammering out the 2004-2005 budget. Chief Legislative Analyst Elizabeth Hill says Schwarzenegger’s proposals leave a $7 billion deficit. Schwarzenegger intends to close much of that by scouring government programs, using a 150-person performance-review team. Adapting a model from Texas, he is borrowing the sharpest state employees from their posts in California to cut duplication, waste and fraud in state services and bureaucracy.

Their recommendations are almost certain to take aim at social programs Burton has been fighting to enlarge rather than decrease.

Against this backdrop, the governor faces other huge hurdles. Didn’t I see Schwarzenegger return empty-handed from Washington—where he talked to his pal, President George W. Bush, about how much money we need to cover illegal aliens and other federal responsibilities?

When is Bush going to cough up the $3 billion to $5 billion in costs to the California treasury for illegal immigrants who use state services and public schools but who work in the underground cash economy and thus file no income taxes?

Moreover, state-tax revenues for the past few months dropped significantly from what had been expected, as California’s sluggish economic recovery continued to be dampened by the workers’-comp crisis and business distaste toward expansion in California.

Findings of a survey commissioned by the respected California Business Roundtable explain why: Nearly 40 percent of “mobile” companies, such as high-paying insurance firms, plan to leave California, mostly relocating to Texas and Western states. Moreover, 50 percent of mobile companies have explicit policies not to add jobs in California.

The study found that “high-value jobs” that stimulate the economy—such as equipment manufacturing—are sliding well below the national average, while “low-value jobs”—such as retail clerking and government work—have boomed.

Senior executives of companies were surveyed, and 100 percent of them (100 percent!) viewed California’s business climate as less friendly than that of the other 49 states. In fact, the survey found, a typical small manufacturer with an operating income of $200,000 a year in California would earn more than $1 million a year if it moved to Nevada. So, that’s what they’re doing.

This confirms what our nutty Legislature has been spawning for the past several years.

In the past decade, California has enacted an average of 15 new labor laws a year that tell businesses what they can and cannot do, some of which make sense and many of which don’t. During that decade, California enacted three times the number of labor laws as labor-aware New York.

So, as Schwarzenegger bounds around the Capitol with that big grin on his face, handing out cigars to people who don’t smoke, you gotta wonder: What’s a poor, big, strong leader to do?

Can he somehow fill the $7 billion gap, get the federal funds, deal with lame-duck theatrics, truly fix workers’ comp, tax the rich American Indian tribes, address the decaying infrastructure and keep a lid on partisan warfare?

If he can, I have a fantastic job for him after this. It’s in Baghdad.