Business Reassesses Stance on Governor

Key business interests are reassessing their lock-step support for Gov. Arnold Schwarzenegger and planning to redirect money to moderate Democrats in next year’s legislative races.

Last year, a political action committee linked to the California Chamber of Commerce spent more than $1.5 million aiding Schwarzenegger’s efforts to put Republicans in the Legislature, but the GOP picked up no seats. This year, business interests raised money for the governor, campaigned with him in the sharply partisan special election and were defeated.

The governor had pushed hard for a redistricting measure, Proposition 77, saying it would make legislative races more competitive and would moderate a Legislature that many contend is dominated by extremes. But Proposition 77 failed, and business advocates say they will try on their own, with campaign cash and the help of a prominent Democratic consultant, to get moderates elected.

The business interests say that they are not abandoning Republicans and that they still support major pieces of the governor’s agenda. They applaud his refusal to raise taxes, his veto of bills that would have raised the minimum wage and his overhaul of a workers’ compensation system that employers said was too costly.

“He is the one who protects our business interests, and that hasn’t changed,” said William Dombrowski, president of the California Retailers Assn.

But disaffection is evident. Casting the special election as a painful lesson, some business advocates talk privately of charting a more independent political course, clear of any partisan battles Schwarzenegger may wage.

“It is time to do an in-depth look at what is wrong,” a member of the Chamber of Commerce board said in a letter to associates last month.

The letter, dated two weeks after the special election, urged the group to reconsider its position in the wake of “terrible losses.” The correspondence, intended to be private, was given to The Times on the condition that the author not be named.

The writer expressed exasperation over an address that Schwarzenegger’s chief strategist, Mike Murphy, gave two days after the election. Speaking at a chamber event in Newport Beach, Murphy faulted business for not spending enough in the campaign.

Schwarzenegger raised $50 million in the special election, although his opponents, led by organized labor, raised more than twice that. Donations to the governor included $300,000 from Chevron, $290,000 from the California Retailers Assn., $275,000 from the California Grocers Assn., $200,000 from the California Farm Bureau and millions from other business interests, including many that belong to the Chamber of Commerce.

“Allowing the governor’s consultant to tell us the problem was not enough fundraising is simply outrageous,” the letter says.

Secretary of State Bruce McPherson, a Republican who was in the audience when Murphy spoke, said the strategist’s comment was met with groans.

“I think business did an awful lot,” Donna Tuttle, who will become chairwoman of the chamber next year, said in an interview. “We were supportive of the propositions and we raised a lot of money.... It was a very ambitious program and, in retrospect, too ambitious.”

Now, a political action committee sponsored by the chamber and the California Manufacturers and Technology Assn. is preparing an aggressive bid to elect moderate Democrats to the Assembly next year, focusing on the June primary.

Democratic consultant Darry Sragow, retained months ago to advise the committee, called Jobs PAC, said its goal would be to elect as many moderate Democrats as possible. He said he wouldn’t work to elect any Republicans.

Schwarzenegger, who might find it easier to work with a more moderate Legislature, has not endorsed Democratic legislative candidates, and his political aides say he is unlikely to do so.

“The business community needs to not tie its fate to any one officeholder or party,” said Sragow, an architect of the Democratic Party’s control of the state Assembly. “Certainly things are not going terribly well.... The governor is not popular, and the special election was a very expensive excursion.”

Democrats hold 48 of the Legislature’s 80 Assembly seats and 25 of the Senate’s 40 seats. Term limits will force many of the more liberal Democrats from office.

In the Assembly, Jobs PAC may target a dozen races, and in the Senate half a dozen, Sragow said.

Jobs PAC may spend hundreds of thousands of dollars in each district where it gets involved, Sragow said. Although the committee has given to Democrats in the past, that would be considerably more than the group has spent before. Since 2000, Jobs PAC spending in Democratic primaries has averaged about $32,000 per race.

Some of the Assembly districts in which the group may compete are in the San Fernando Valley, Inglewood and Marin County.

The deadline for becoming a candidate is March 10.

Rob Stutzman, the Schwarzenegger communications director who will soon leave his state job, said he has no fear that business interests will be anything less than full-throated supporters of the administration.

On Schwarzenegger’s watch, “the economy has flourished” and state coffers are filling “at a rate that is leading to a reduction in the [budget] deficit,” Stutzman said. “The business community will conclude this is a governor who has been fantastic for economic growth.”

Still, the letter sent by the chamber board member urged a wholesale review of the organization’s political policies, a “complete shakedown of the place in terms of its political strategies.”

The writer called for independent consultants to review recommendations made by the chamber’s president, Allan Zaremberg, a close ally of the governor and a former chief legislative advisor to Republican Govs. George Deukmejian and, briefly, Pete Wilson.

Zaremberg has not seen the letter, but he said in an interview that “there are obviously some people who want to know ... what happened” in the special election.

Zaremberg attended fundraising events with Schwarzenegger to collect money needed to qualify the governor’s initiatives for the special election ballot. But he said he played no role in managing the campaign.

He said that board members voted to endorse the governor’s initiatives and that his role was to “carry out the wishes of the board to do everything we could to help get them passed.”

Zaremberg said it was Jobs PAC members, and not the chamber, who drove spending decisions in last year’s legislative races.

Jobs PAC’s executive director is Michele Zschau, who is also a vice president of the chamber. She did not respond to requests for comment.

Meanwhile, some Democrats are skeptical that any alliance with business will work: The chamber has so entwined itself with Schwarzenegger that any Democratic candidate running with the support of business lobbyists may become a special target of organized labor.

Andrew Acosta, a Democratic consultant, said Jobs PAC’s role is to “elect business candidates and to support the governor.... Who would want a seal of approval from a group that wants to help the governor’s agenda?”