Gov. Making a Quiet Retreat

SACRAMENTO —  The broad policy changes that Gov. Arnold Schwarzenegger unveiled with a flourish in his State of the State speech in January have foundered amid a series of missteps, compromises and clashes with a well-organized opposition.

Portraying 2005 as the “year of reform,” Schwarzenegger shocked the political establishment with a menu of far-reaching proposals: a new method of drawing legislative and congressional districts; spending restraints aimed at averting future deficits; an end to spiraling public pension costs; and better pay for the best teachers.

He said he would take his ideas straight to the voters in a special election if necessary.

One by one, however, his proposals have proved all but unsalable. “The whole special election ... and direct democracy is looking more complicated to his people than maybe a few months ago,” said Dave Gilliard, a Republican political consultant.

Schwarzenegger remains publicly optimistic about his agenda and insists that when he is done, California’s finances will be stronger, its political system more accountable.

He told a news conference Thursday: “I have said to you many times that it makes no difference to me if someone says, you know, ‘This was not as good as it could have been, and he pulled it back.’ ... What is important to me in the end is what’s best for the state of California.”

But in quiet forums -- closed-door meetings with opponents and private discussions between his aides and lawmakers -- the governor has retreated from the ambitious government overhaul he outlined.

A Flawed Initiative

The most dramatic instance came Thursday when the governor, facing the united opposition of public safety officials and families of slain police officers, abandoned an initiative that would have stripped death and disability benefits from the pension system, according to an analysis from the state attorney general’s office.

Schwarzenegger admitted he had supported an initiative unacceptably flawed because of perceptions that it would eliminate such benefits for deserving families of future public employees.

He had been using the measure to gain leverage in negotiations with lawmakers over his plan to curb pension costs. Now that club is gone, and Schwarzenegger is scrambling to reach a deal with lawmakers.

In his State of the State speech, he said California “must move” from a pension fund that provided guaranteed benefits to one modeled after the private sector 401(k) accounts that hinge on stock market returns.

But in a bow to political reality, Schwarzenegger aides are now telling public safety groups that the governor is open to a system that would preserve the set retirement benefits he had sought to eliminate -- or to a plan that combines the traditional benefit system with one that relies on market returns.

Were Schwarzenegger to insist on scrapping guaranteed benefits, he would risk a showdown with respected figures in law enforcement who wouldn’t accept such a plan.

“I’m representing the men and women who work for me, and in all good conscience, I can’t watch them be tossed to the winds of uncertainty,” said Los Angeles County Sheriff Lee Baca, a Republican.

Tackling Spending

The centerpiece of Schwarzenegger’s agenda was a proposal to restrain spending. He called for mandatory across-the-board spending cuts that would kick in if the budget slipped out of balance. That approach is gone.

The governor now backs an initiative reflecting a different vision put forward by a committee stocked with his political allies and business leaders. The panel, Citizens to Save California, wants to prevent sharp peaks and valleys in expenditures by limiting spending increases to the average growth in revenue over the previous three years.

The measure would empower the governor to make midyear budget cuts if the state moved toward a deficit, but he would have discretion in where to make the reductions.

Some Republicans and business leaders think the proposal falls short. They say spending won’t be controlled unless it is restricted to the inflation and population growth rates.

Even if the panel’s measure gets enough signatures to make the ballot in the possible special election this year, Schwarzenegger can’t expect full-throated support from fellow Republicans.

And he faces two further obstacles: timing and public perception.

State Atty. Gen. Bill Lockyer’s office released a summary last week of the spending measure that emphasized the potential harm it posed to education. The first two words of the title assigned by Lockyer were “school spending.” Half the summary is devoted to how the measure would alter Proposition 98, the voter-approved guarantee for school funding.

And signature-gathering on the measure did not begin until Wednesday. Supporters have about four weeks -- a brief span -- to get the 600,000 necessary names.

“You have a lot of signatures to collect in a very short period of time, and there is not solid support for this among the governor’s base, myself included,” said state Sen. John Campbell (R-Irvine), who is backing a separate, more stringent spending-cap initiative.

Teacher Pay, Tenure

Schwarzenegger’s main education thrust -- merit pay for public school teachers -- ran into resistance from teachers unions and their Democratic allies. He proposed that teachers be paid according to performance rather than seniority. The unions started underwriting television ads attacking the governor’s budget priorities. That forced him to respond with ads, paid for by the California Republican Party, defending his proposed education budget.

Now, the governor has turned instead to a proposal on teacher tenure. Discussions between his office and lawmakers are underway on a plan to give teachers tenure after five years rather than two, and it may include a provision for “combat pay” -- more money for working in troubled schools.

“His merit-pay initiative has been downgraded to a tenure issue,” said state Senate President Pro Tem Don Perata (D-Oakland), “and we’re in negotiations on that. And we believe we’ll come up with something along those lines.”

A Schwarzenegger official speaking on condition of anonymity conceded as much, saying a merit-pay initiative might prove “confusing” to voters.

Redrawing Districts

Yet another piece of the governor’s agenda is his plan to redraw state voting districts. Currently, the Legislature deter- mines district boundaries for its members and for California’s congressional delegation. Schwarzenegger wants to transfer that power to a panel of retired judges, so new districts can be carved. He hopes the change would create more competitive elections, producing a Legislature that might be a more amenable partner than the heavily Democratic one now.

The Schwarzenegger administration has been recently negotiating a deal with the Legislature, according to lawmakers’ aides. They say the governor may relent on his demand that districts be redrawn as early as next year.

Democratic lawmakers say they might be willing to accept retired judges as the architects of new districts -- in return for Schwarzenegger’s willingness to drop the accelerated timetable and wait until after the 2010 census, when new lines would normally be drawn.

An Imperfect Option

Try as he might to circumvent the Legislature, the governor may now be confronting the limits of that strategy.

Governing by ballot box is expensive and imperfect. Dealing with the Legislature is an unavoidable reality in Sacramento -- even for Arnold Schwarzenegger.

If he does call a special election this year, which experts say could cost as much as $70 million, his ballot agenda could be thin.

“You’re looking at a fairly sparse special election ballot, and the question will be whether that even justifies calling a special election,” said GOP consultant Gilliard.

Schwarzenegger may yet salvage some victories this year. But he will have to do it in a hostile climate, as teachers, nurses and a raft of other critics stage raucous protests outside his fundraising events. They are also airing TV and radio spots, posting billboards and coordinating with legislative allies in their efforts to thwart the administration’s agenda.

And the governor’s poll numbers have been dropping steadily.

But now that he has dropped the pension initiative, he has more money to pour into other efforts, such as gathering signatures to promote the alternative spending package he has embraced.

That Schwarzenegger reversed course on pensions is “admirable,” said Bill Brown, president of the California Police Chiefs Assn., who had several private meetings with him. “It took some real introspection on his part.”

Meanwhile, the governor’s foes have troubles of their own.

Unions are facing an expensive fight over two possible initiatives that would curtail their ability to collect dues. Fighting the so-called paycheck-protection measures is expected to drain millions of dollars from union coffers -- money they could use to combat Schwarzenegger.

The governor is also running an advertising campaign against the California Teachers Assn.’s proposed increased in dues, calling it a “teacher tax.”

“The protesters would have you believe the public is tired of Arnold Schwarzenegger as a salesman,” said Bill Whalen, a research fellow at Stanford University’s conservative Hoover Institution. But the lesson is not that the governor is a “bad door-to-door salesman; it’s that he had a bad product to sell.”