Bus Company Lobbies as State Spins Wheels Over Budget

At the center of California’s stalled budget negotiations is an out-of-state school bus company that could get millions of dollars in new business, depending on the outcome of a last-minute spat between Republicans and Democrats.

The conflict erupted last week when GOP lawmakers and Gov. Arnold Schwarzenegger insisted that any budget agreement include repeal of a 2-year-old law that requires all school district bus drivers -- public or private -- to be paid union-scale wages. Republicans have been pushing for the change since January as a money-saver.

No firm is playing a bigger role in the dispute than Laidlaw International, which hauls thousands of children to school every day across California.

A coalition of school officials financed mostly by Laidlaw has hired a political strategist close to Schwarzenegger. The company has hired several Sacramento lobbyists, and lawmakers themselves are using draft legislation written on Laidlaw stationery in their negotiations.

“What this issue comes down to is one private bus company: Laidlaw,” said Assembly Speaker Fabian Nunez (D-Los Angeles). “They are who benefits.”

But Republicans and the Schwarzenegger administration resent suggestions that they are too cozy with the bus company. Their goal is to help school districts, they say, when budgets are tight across the state.

“This is about giving school districts the power to save money,” said Assembly Republican leader Kevin McCarthy of Bakersfield. “The more savings they can generate, the more money that is available to the classrooms. It doesn’t say you have to contract out. But it gives schools the option.”

At issue is a law Democrats say is needed to ensure that school workers get a living wage. Republicans argue the law forces school districts to pay unnecessarily high labor costs, even if private companies can do the job cheaper.

Laidlaw supports repeal because it would allow the company to bid for hundreds of bus contracts it could not get under the existing law. If the law is repealed, the Naperville, Ill., firm could bid for contracts to operate many of the 15,396 buses now owned and operated directly by school districts. Those represent hundreds of millions of dollars in potential business.

With a nationwide fleet of 40,588 buses, Laidlaw is the largest school bus company in the country. The company emerged from bankruptcy in June 2003. In 2002, Laidlaw bus drivers in Los Angeles staged a 26-day walkout over pay and healthcare issues, a strike affecting 20,000 Los Angeles Unified School District students.

The company operates 4,000 buses in California, nearly half of all privately owned school buses in the state -- all of which were contracted out before the the law took effect. The rest of the contracts are shared by more than a dozen other companies.

The contracting law remained largely on the margins of legislative debate for months. But it took center stage last week in a budget impasse that threatened to affect all Californians.

In recent appearances, the governor has said the repeal is vital to helping schools run more efficiently and improving California’s business climate.

Unions are aggressively fighting back.

The California School Employees Assn. has begun a radio advertising campaign warning that a repeal would take jobs away from struggling families.

“They shouldn’t have to lose their jobs just because the politicians in Sacramento won’t do theirs,” the ad says. “Call the governor; ask him to stand up to Republican legislators. Stop playing politics with our jobs. We’ve had enough of your games.”

In the state’s huge budget, the issue involves relatively few dollars, but it looms large ideologically for both parties.

“We have gotten down to philosophy in these negotiations,” said John Ellwood, a professor of public policy at UC Berkeley. “The only budget issues left out there now have small dollar amounts but have huge symbolism attached to them.”

How Laidlaw ended up in the middle of the budget morass is a matter of some dispute.

McCarthy, the Assembly Republican leader, said Nunez invited the company into discussions. But Nunez, a union loyalist and a staunch opponent of the repeal, says he did so because McCarthy told him there would be no GOP agreement without Laidlaw’s approval. Nunez is calling the legislation the “McCarthy/Laidlaw” bill.

Of the draft legislation written on Laidlaw stationery, McCarthy said, “That doesn’t come from me, and Laidlaw didn’t give it to me.”

He acknowledged, however, that the company’s proposal was being used by lawmakers as a framework for closed-door discussions.

Some Democrats say they can handle dealing with Laidlaw because most of its drivers are represented by unions. But negotiations hit a wall when Democrats tried to include language that would require that all drivers be given retirement benefits.

“We just don’t think that is something that should be put into a law,” said Ron Kinney, Laidlaw director of marketing development. “That should be negotiated at the local level.”

“There is no way we can compete” with the retirement benefits school employees currently receive, he said.

Laidlaw officials take no responsibility for the budget impasse and assert that this is an education issue, not a special favor to business.

“I don’t know that we would gain anything from it directly,” Kinney said. “What it does is give school districts a choice to contract out. And if they chose to, we could bid.”

The measure pushed by Republicans was far more sweeping until last week. It initially would have allowed contracting out not just for transportation, but also for custodial, maintenance and other services.

For Laidlaw, the last several months have been busy in Sacramento. It has hired lobbyists and campaign consultants with ties to both Democrats and Republicans.

Laidlaw and other private bus companies also mounted a major public relations campaign on the contracting issue. They hired Randle Communications to organize a coalition of education groups and school officials.

But now some of the education groups that support privatization are unhappy that their effort is holding up the state budget.

The governor is unimpressed with critics of his push to repeal the contracting law, said state Department of Finance spokesman H.D. Palmer.

“Regardless of who is blaming who on what,” he said, “the governor has made clear since January that this is something that needs to be done.”

*

Times staff writer Marc Lifsher contributed to this report.