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The Orange County Register
Sep 27, 2004 - 01:00 AM


Governor seems to be of two minds

He ran as a bipartisan outsider, but critics see a captive of business.
SACRAMENTO -- Californians were about to get a three-day "cooling off" period to return a used car when Gov. Arnold Schwarzenegger weighed in.

In the waning hours of this year's legislative session, Schwarzenegger's aides told Senate Leader John Burton that the governor would veto a so-called "Car Buyer's Bill of Rights" unless lawmakers dropped the portion letting buyers return a car in three days, Burton said. Auto dealers - among the governor's biggest backers - opposed the provision.

The bill passed - without the three-day return policy.

The veto warning, a speck in the chaos of the Legislature's final days, adds to a growing list of actions and policies that critics say run counter to Schwarzenegger's campaign vow to govern as a bipartisan outsider willing to take on Sacramento's entrenched interests for the good of all Californians.

Evaluating Schwarzenegger's first year in office, environmentalists and consumer advocates say they see a Republican insider who takes millions in contributions from California's largest corporations and shapes his agenda to please the state's business elite.

Schwarzenegger aides said the opposite is true: The governor's pro-business agenda of streamlining government and promoting job creation is exactly how he promised to rescue California's struggling economy and generate more state revenue.

"It's not a matter of the business community having an influence over him," said communications director Rob Stutzman. "The governor's following through on what he said he would do when he campaigned: Work to strip away regulation, certainly not to add regulation starting primarily with fixing workers' compensation, which we think we made great strides on this year."

But critics said Schwarzenegger bows to corporate contributors even when there is no demonstrated threat to the economy.

Schwarzenegger is "the people's governor unless it conflicts with big business, and I might say some of the worst elements of big business," said Burton, a San Francisco Democrat. "When you're put in office and you say one thing and act as if you're one thing and then do something diametrically opposed to it, it has a way of coming back and biting you."

Critics point to the following issues:

Pharmaceuticals: Lawmakers this year sought to help Californians buy cheaper drugs from Canada. Schwarzenegger rolled out an alternative policy that would cost drug companies less and allow them to place their logos on state brochures marketing the plan.

Energy: Lawmakers passed a bill to streamline electric utilities' ability to build their own power plants. Schwarzenegger advocated a policy that could prove a windfall to private energy supplier Calpine Corp., a campaign contributor that hired one of Schwarzenegger's top political advisers to wage a media campaign against the utility-backed bill. Schwarzenegger vetoed the bill on Saturday.

Tort reform: Schwarzenegger told environmentalists last month that he preferred legislative fine-tuning rather than a ballot initiative to curtail an unfair competition law. The law, used to sue polluters, is opposed by businesses who say unscrupulous lawyers use it to squeeze settlements out of companies for technical violations. A few weeks later, Schwarzenegger abruptly reversed course and endorsed the initiative.

"It was an eye-opener," said environmentalist Mike Schmitz. "So far on most major contentious issues, where the Chamber (of Commerce) and big corporate interests are on one side and consumer and environmental interests are on the other, we've come out on the short end of that."

Stutzman said that in each case cited by critics, Schwarzenegger has evaluated policies based on their overall effect on California's economy and quality of life.

Legislation such as the car-buyers' bill, though well-intentioned, was largely written by trial lawyers to expand opportunities for litigation, said Stutzman.

Attempts to head off the tort-reform initiative were similarly impeded by trial-lawyer intransigence, Stutzman said. As for energy, Stutzman said the main elements of Schwarzenegger's plan were crafted and endorsed several years ago by the Legislature and are designed to increase supplies and lower prices, not benefit individual companies.

Schwarzenegger "obviously was very taken by the free-market writings of Milton Friedman as he was exploring those back in the '70s," Stutzman said. "He's quite the entrepreneur himself, obviously. And specifically he's talked about the regulatory nature of California."

Aides said Schwarzenegger solicits economic advice from a bipartisan array of advisers ranging from former Secretary of State George Schulz to Leon Panetta, Bill Clinton's former chief of staff.

He wards off conflicts of interest between political advisers and corporate clients by maintaining a list - kept by Chief of Staff Pat Clarey - of who hires which adviser. Auto dealers, for instance, recently hired Schwarzenegger's top fund raiser to wage a campaign against the used-car bill.

"None of (the governor's) consultants have ever lobbied on behalf of a client," Stutzman said.

Still, Schwarzenegger himself has begun adopting the language of corporate backers. At a recent public appearance in Los Angeles, he referred to a bill to boost the minimum wage as a "job killer" - a phrase used by the state Chamber of Commerce in lobbying alerts to describe 10 bills considered harmful to the economy, including the minimum-wage bill, the used-car bill and proposals to limit outsourcing of California jobs.

Economists said such labels are frequently unproven by economic data.

Proponents of Prop. 64, which would curtail the unfair-competition law, said there is no official tally of the number of suits filed under the law - or the number of businesses hurt each year by so-called "shakedown" suits.

Opponents of the measure point out that much of its financial support comes from large corporations, such as oil companies and HMOs, that have been successfully sued for breaking state pollution or fraud laws.

"Fiscally, (Schwarzenegger) wants to take the state in a Reaganite direction, and I think that's good," said Christopher Thornberg, a senior economist with the UCLA Anderson Forecast, which issues periodic reports on the California economy.

But. "There is no outmigration of jobs from California. That's a bunch of nonsense. ... In politics you succeed by simplifying and exaggerating. That's what (Schwarzenegger) is doing. The reality is that nuances don't get you headlines. They don't get you political support."

California gained 69,900 jobs in the first six months of 2004, according to the Anderson Forecast. The unemployment rate was 6.1 percent in July, about half a percentage point higher than the nation's.

Business leaders say Schwarzenegger is on the right track.

"The business community in California was fed up with a political climate that was anti-business and needed a new direction," said Alan Zar emberg, executive director of the state Chamber of Commerce, whose top leaders and affiliated companies have given Schwarzenegger $2.1 million.

The chamber, which broke a 112-year tradition of not endorsing candidates to support Schwarzenegger's bid for governor, has treated top administration officials - including Richard Costigan, a former chamber lobbyist who is now Schwarzenegger's top legislative adviser - to a dozen receptions or luncheons costing a total of $207,000, according to lobbying reports.

Among the most expensive of these events was a $30,000 legislative summit in May where speakers extolled volunteers who had collected signatures for a chamber-backed ballot measure, Prop. 72, that would repeal a law requiring companies such as Wal-Mart to provide health insurance to employees. A few months later, Schwarzenegger endorsed the chamber position on the initiative.

Brian Maas, a lobbyist for car dealers, said dealers - who have contributed more than $900,000 to Schwarzenegger - "supported a change in the government because they felt that Mr. Schwarzenegger would better listen to their concerns, and he's had an open door."

During the final week of the legislative session, Democrat Cindy Montanez of San Fernando couldn't get a meeting with Schwarzenegger's chief of staff and transportation secretary to nail down the administration's position on her used-car bill. That same week, auto industry lobbyists sat down with Costigan and aired their concerns.

"The meeting went well," reads an e-mail circulated among industry lobbyists.

Maas said dealers objected to the three-day waiting period and other provisions that could expose dealers to expensive litigation and hurt consumers by limiting dealers' ability to offer competitive financing packages.

Following the meeting with lobbyists, administration officials presented several of those objections to Montanez as their own.

"They were willing to listen to what we had to say and were understanding of our concerns," Maas said. "He's a different kind of governor, but one we think we can make a fair case to, and he'll decide the bills on the merits."

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