Agenda of State Businesses Dealt a Blow at Ballot Box

Chalk up another potential casualty of Tuesday’s special election: corporate California’s chances for achieving its agenda in the state capital.

Business leaders backed Gov. Arnold Schwarzenegger in his failed effort to pass four ballot measures sharply opposed by organized labor, teachers, firefighters and nurses. Within hours of the polls’ close, Schwarzenegger dropped the combative stance he adopted during the campaign and pledged “to find common ground” with the Democrats who control the state Legislature and their labor allies.

But a move by the governor toward the political center could be bad news for business, which is counting on Schwarzenegger to block attempts by lawmakers to raise the minimum wage, hike workers’ compensation insurance benefits or pass other legislation that business leaders believe is bad for the state’s corporate climate.

In the wake of the special election results, “he’s got to work with a broader group,” said Art Pulaski, executive secretary treasurer of the California Labor Federation.

Business leaders, however, said they were confident that Schwarzenegger wouldn’t desert them.

“The governor may be temporarily weakened, but he is still the governor and can still veto whatever is sent him,” said Jack Stewart, president of the California Manufacturers and Technology Assn.

Since his election in October 2003, Schwarzenegger has been a close ally of the state Chamber of Commerce and other business groups. Concerned that California’s tax structure and regulatory system were driving companies out of the state, he has twice vetoed bills aimed at raising the minimum wage, engineered a sweeping overhaul of the workers’ compensation system that lowered insurance rates for businesses and vetoed a bill that would have required employers to provide health insurance for employees’ children.

Even before the special election, Democratic leaders in the Legislature were planning to revisit several issues next year that are opposed by business. In particular, Assembly Speaker Fabian Nunez (D-Los Angeles) has said the workers’ comp overhaul went too far in lowering costs for businesses at the expense of cutting medical and disability benefits for workers.

Plans are afoot to dust off last year’s bills to increase the minimum wage and to extend employer-provided health coverage, Pulaski said. And despite doubts about the governor’s pledge to be more bipartisan, Democrats are hopeful that some of the items on their wish list may escape his veto pen.

Schwarzenegger says he’ll “work with anybody who wants to work for California,” said Pulaski of the labor federation. “We’ll give him proposals and give him legislation and say ‘Here, let’s see if you are willing to sign a bill.’ ”

Stewart of the California Manufacturers and Technology Assn. said his members might be willing to discuss raising the minimum wage or extending insurance coverage, but they would draw the line at raising taxes or agreeing to tougher environmental regulations -- moves they believe would hurt the state’s business climate.

And a Schwarzenegger spokesman indicated Wednesday that, even with a more bipartisan approach, the Republican governor wouldn’t simply roll over for Democratic lawmakers.

“The governor wants to make Sacramento work,” said Rob Stutzman, Schwarzenegger’s communications director. “It’s going to take some cajoling to get the Legislature to do that with him.”

One area in which businesses and the Legislature may find common ground is spending on public works. The governor’s office, legislative Democrats and labor leaders said they hoped to get an agreement early next year to ask voters to approve billions of dollars in borrowing to upgrade highways, toughen port security and improve state-owned aqueducts and reservoirs.

“Infrastructure is a good place to start,” said Barry Broad, a lobbyist for the Teamsters union. “Everyone likes to build stuff we need built.”

The governor would look “weak ... if he backed away on fundamental principles,” said Ken Khachigian, a Republican consultant from Orange County, but “he could look at things that nobody disagrees with, like building highways and retrofitting hospitals.”

In the meantime, many business lobbyists and executives are reevaluating their political strategy after spending more than $50 million to back Schwarzenegger’s failed initiative package, which would have reduced the Democrat’s power in crafting the state’s budget and watered down the ability of public employee unions to use members’ dues to fund political campaigns.

But their commitment to Schwarzenegger appeared unshaken.

He is “the governor, and I expect he’ll be the governor for the next five years,” said Allan Zaremberg, president of the California Chamber of Commerce. “His opponents should not be shortsighted.”