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Schwarzenegger Has Long To-Do List to Boost Business

Fresh from workers' comp overhaul, the governor aims to increase jobs and keep companies in California.

April 20, 2004|Marc Lifsher | Times Staff Writer

SACRAMENTO — One down, many more to go.

After signing a massive workers' compensation insurance overhaul bill Monday, Gov. Arnold Schwarzenegger now is turning his persuasive powers to the next steps he deems necessary to bring clear skies to California's business climate.

Executives and economists are heartened. They want the governor to keep the job-creation momentum going by balancing the state's deficit-ridden budget, refinancing the unemployment insurance program and streamlining regulatory and permitting processes.

And, if that's not enough, Schwarzenegger has committed his administration to guaranteeing supplies of affordable electricity, boosting affordable housing and reining in costly anti-business lawsuits.

At a bill-signing ceremony at a Boeing Co. plant in Long Beach, the governor proclaimed that last week's passage of the workers' comp overhaul sent "a message to the rest of the country and the world ... that California is open for business" and is "once again a powerful, job-creating machine."

The governor's fans in the business community are certainly impressed.

"It's a huge step in the right direction," said Gene Voiland, president of Aera Energy of Bakersfield, the state's biggest crude oil producer. "The governor has inspired a feeling of hope that we're not going to go down the tubes ... that we're going to try to make California more competitive."

But bringing rationality to a troubled program for aiding injured workers -- tagged by business as the No. 1 "job killer" -- doesn't mean that Republican Schwarzenegger can easily deliver on all the promises he made during last fall's campaign to replace Democrat Gray Davis.

Despite his popularity, the governor could face tough political opposition from a Democratic-controlled Legislature. And some trade-offs in the budget process could slice into programs that businesses want to make the state more business-friendly.

The governor also may need to take stands on other tough issues, such as whether to repeal a new law requiring small businesses to provide health insurance.

Schwarzenegger's next priorities are:

* Closing the budget shortfall.

His backers definitely want him to fill a $14-billion hole in next year's budget. But while they demand a balanced, on-time budget, business groups remain adamant about not paying higher taxes or cutting deeply into spending for transportation and higher education, which help companies find capable workers and move products to market.

"The budget is the biggest test.... Choices become tougher because there are more stakeholders," said Jean Ross, director of the California Budget Project, a liberal-leaning think tank in Sacramento.

Edward Leamer, director of economic forecasting at UCLA's Anderson School of Management, warns that Schwarzenegger can expect "the next couple of months to be a difficult period in Sacramento."

Seeing a budget passed without cutting important state services to the bone is going to require Schwarzenegger to seriously consider some tax increase, predicted Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento). The governor will look at a larger picture than just catering to businesses' wish list, he said.

"We're going to have to cut, no question about it. But we can harm the economy in a significant way if we cut transportation and higher education," he said.

Business and the governor have to realize that "there is a disconnect between what we want and what we know we need and our willingness to pay for what we need," Steinberg explained. "The business community needs to help bridge that disconnect."

Politically tough decisions had an uncanny way of looking easy during Schwarzenegger's first few months in office. The governor has a knack of using his powerful personality and movie stardom to get things done that eluded his more pedestrian predecessors, longtime Sacramento insiders said.

"He has an ability to reach to the individual Californian and resonate incredibly on boring complex issues such as workers' compensation," said Martyn Hopper, state director of the National Federation of Independent Business. "He's been tremendously successful because of the way he's been able to concentrate on one issue at a time."

Picking off issue after issue, whether it's lowering the car registration tax, getting voter approval for debt bonds or crafting a compromise on workers' comp, is the secret of Schwarzenegger's negotiating strategy, said Michael Dardia, an economist with the Sphere Institute, a nonprofit think tank in Burlingame, Calif. Combine that doggedness with flexibility and a charm that works on diverse groups like labor and management, and deals come together, he said.

"He's certainly shown he's on a roll," Dardia said. "The string of victories enables him to be successful in substantial negotiations. He's earned the trust of business."

* Boosting energy supplies.

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