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The San Francisco Chronicle
May 10, 2004 - 01:00 AM

by Christian Berthelsen, Chronicle Staff Writer

Chamber charmed by all-business governor;

Economic initiatives now at top of his list
Sacramento -- Gov. Arnold Schwarzenegger rushed back early from his Middle East tour last week so he could speak at a breakfast hosted by the California Chamber of Commerce.

"I tell you, it's really amazing to be here when just 18 hours ago I was with the king," Schwarzenegger said. "Not you, Allan Zaremberg. Jesus, what's the matter with you? With the king of Jordan, I'm talking about."

The line got a lot of laughs; Zaremberg is the president of the chamber. But the crack, and the fact that he flew through the night and landed at 5 a.m. so he could deliver it, spoke volumes about Schwarzenegger's relationship with the business community's most powerful lobbying group, and how deeply intertwined the two are.

That closeness is paying dividends for the chamber. After a spell in the political wilderness while Democrats in the Legislature controlled the agenda, the state's business leaders are finding a new governor in office who embraces their positions on a wide range of policy issues, from workers' compensation insurance to energy deregulation to civil litigation.

"His agenda mirrors our members' agenda, which is to make California a more attractive place to do business and create jobs," Zaremberg said in an interview, adding the shared goals are "the foundation of a continuing relationship."

Yet public interest groups are beginning to fear that the governor's efforts to pump up the economy and jump-start job growth may come at the expense of consumer protections and worker rights. His celebrity cachet and social centrism, some say, have been eclipsed by an emphatically free-market economic agenda.

"The chamber has been preaching the same anti-regulation, anti-litigation, pro-deregulation, 'job killer' gospel for 25 years, but now they've found a celebrity who can reach the public, and it doesn't sound disingenuous," said Jamie Court, of the Foundation for Taxpayer and Consumer Rights.

The governor's economic policy initiatives appear to be taking on a greater priority than his government reform proposals. Schwarzenegger campaigned to rein in campaign fund raising with a law prohibiting legislators and the governor from raising money during budget season, but the bill was withdrawn before it even got a hearing. Schwarzenegger also campaigned on greater access to the records of the Legislature, but the bill addressing this died in its first committee hearing.

In the coming months, the governor's top priorities are passing a budget that eliminates the deficit without tax increases, fixing the underfunded unemployment insurance system, backing legislation that restarts energy deregulation -- a top priority of manufacturers and other large businesses -- and going on tour to aggressively "sell" California to businesses.

Bruce Cain, director of the Institute of Governmental Studies at UC Berkeley, said Schwarzenegger was given a mandate by voters to make California more business-friendly, though he must be cautious of exceeding that mandate.

"What you don't know is whether the push for a business-friendly California will go too far," Cain said. "There are a number of ways this could go sour. Everything in politics has a cycle."

In remarks before the chamber, Schwarzenegger appeared to support a tort-reform ballot measure that would reduce people's ability to sue companies that violate the law. And Capitol watchers are also waiting to see whether he will campaign for a chamber ballot measure to repeal a law signed last year that requires companies with 250 or more employees to provide health care coverage.

When the chamber endorsed Schwarzenegger for governor during the recall campaign, it was the first time it had ever endorsed a gubernatorial candidate.

Since then, the chamber has played a pivotal role in supporting Schwarzenegger, helping him win fights in the Legislature. Three officials in Schwarzenegger's administration were hired directly from the chamber, and two of them -- Richard Costigan, the legislative affairs secretary, and Cassandra Pye, a deputy chief of staff for external affairs -- play significant roles in formulating his policy positions.

The workers' compensation changes were a big victory for the chamber. Schwarzenegger argued for a system that would rein in costs for businesses from all parts of the system that treats injured workers, yet did not demand that insurance providers bring down premiums to reflect the savings.

So far, other Democratic groups, including lawyers and unions, don't view the chamber as having any greater influence over the governor than other interest groups. Some also point out that the governor's victories on economic issues so far have been compromises, not total victories for business, as they have been perceived in some circles.

"I don't have any evidence that the governor showed unusual affinity for the Chamber of Commerce," said Barry Broad, a lobbyist for several top organized labor groups, including the California Teamsters Public Affairs Council. "That being said, he is a Republican, and he's going to take a more conservative point of view than many Democrats in his position."

Similarly, John Burton, D-San Francisco, the president pro tem of the Senate, said: "I think he writes his own agenda; I don't think other people do it for him."

But the similarity between the governor's priorities and those of big business are making consumer groups wary.

"It seems like his interest is in advancing a corporate agenda," said Richard Holober, a lobbyist for the Consumer Federation of California. While saying the group was in a "wait-and-see mode" about the governor's stance on consumer issues, he added: "There are some negative signals, but it's early."

Consumer groups are concerned about a fall ballot measure that would curtail Californians' ability to sue companies for unfair business practices. The initiative would require that plaintiffs be directly affected by the alleged wrongdoing, and the victims must suffer "lost money or property" as a result.

The chamber maintains that the unfair business practices law has been abused to "shake down" businesses, and that there have been cases in which unscrupulous law firms used the statute to wring thousands out of small businesses.

But the law has also been used to sue supermarkets for relabeling and selling old meat, oil companies for allowing contaminants to pollute drinking water, and banks for violating financial privacy guidelines.

Schwarzenegger told chamber members: "We will get rid of the shakedown lawsuits."

Observers are waiting to see which side Schwarzenegger will take on the ballot measure. But some figure his support for the chamber-backed measure is likely.

"It's his family," said Court, of the Foundation for Taxpayer and Consumer Rights. "You don't fly back from Israel early to go to just any old political breakfast. You do it to go to a family meeting."
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E-mail the writer at cberthelsen@sfchronicle.com




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