SACRAMENTO — Leon Panetta should have been governor. But at least his talent will be used trying to straighten out Sacramento.

Panetta and a new team of Capitol outsiders and periphery players have been staked with nearly $16 million by five foundations that are frustrated with the pathetic performance of Sacramento politicians.

Their three-year task will be to find ways to improve the political and government systems and sell the ideas to politicians or voters or both.

"The principal dysfunction of Sacramento," Panetta says, "is similar to what's happening in Washington: the inability of the elected leadership to come together and arrive at necessary compromises for solutions to the problems we face."

And how do the politicians get prodded into doing that? "Those who are elected have to be convinced that governing is more important than winning. They have to believe that good government is good politics. If they don't, they'll keep on fighting in trench warfare."

Panetta, 69, a former Democratic congressman from Monterey and chief of staff for President Clinton, is a co-chairman of a new outfit called California Forward. The other co-chairman is Thomas V. McKernan, 63, chief executive of the Automobile Club of Southern California and leader of a high-powered Republican donor group, the Orange County chapter of the New Majority.

Panetta and McKernan both are moderate pragmatists. Neither needs another honor, one more notch on his resume. But both are worried about the misguided direction of their native state.

California Forward will officially launch its ambitious effort during a five-hour public discussion Wednesday in downtown Sacramento.

A brief refresher course on Panetta:

He grew up admiring visionary governors Earl Warren and Pat Brown. Became a legislative aide to Republican U.S. Sen. Thomas H. Kuchel. Had the distinction of being fired by President Nixon as U.S. civil rights director when he was suspected of moving too fast on Southern school desegregation. Re-registered as a Democrat, ran for Congress and served eight terms, rising to House Budget Committee chairman. Negotiated spending cuts and tax hikes with presidents Reagan and Bush 1. Joined Clinton as budget director, then chief of staff. Came home in 1996 and seriously considered a 1998 race for governor.

But Panetta deferred to U.S. Sen. Dianne Feinstein, promising to support her if she ran. She vacillated. And by the time Feinstein decided against running, it was too late for the lesser-known Panetta to raise enough money to wage a successful campaign.

"I'd have had to raise anywhere from $20 million to $40 million," Panetta once told me. "I mean, my God!. . . . "

"This state cannot survive unless we open up the opportunity for more good people to run for office. You're either independently wealthy or you've got special interests backing you. People are just simply turned off about getting into the process. I honestly believe that some kind of public financing is essential."

He still believes that, and says his new group probably will consider it.

Back in 1998, Gray Davis was elected governor and everybody knows the tragic rest.

Panetta created a think tank -- the Panetta Institute -- at Cal State Monterey.

When the five foundations -- California Endowment, Haas Jr. Fund, Hewlett, James Irvine and Packard -- decided to bankroll California Forward, they turned to Panetta and McKernan to lead it.

"It's very frustrating that we don't appear to be able to govern ourselves," McKernan says. "They're so focused on internal bickering in the Legislature. . . . The far right and the far left don't sit down and compromise. . . .

"Most Californians are in the center. We're not as responsive to the center as we need to be."

One solution is to elect fewer righties and lefties.