Speech Sets Stage for a Tough Sell

In laying out his plan this week to revive California’s economy, Gov. Gray Davis has launched his struggle to survive the political fallout from raising taxes and cutting billions of dollars in programs.

Making the best of difficult circumstances, Davis and a revamped public-relations team have used the media spotlight of his inaugural week to trumpet the plan in a series of events that concluded Wednesday with the State of the State speech. Those events all set the stage for Friday, when Davis will release his budget for 2003-04.

A key part of the governor’s political strategy is to try to deflect blame for the colossal budget shortfall, which could force deep cuts in everything from schools and parks to highway repairs and cancer research.

His Republican foes say the fiscal crisis is due largely to a state spending binge during the dot-com boom of the governor’s first term. They also accuse Davis of hiding the severity of the budget shortfall until after his reelection in November -- and now exaggerating it to make the political climate more conducive to raising taxes.

But in his State of the State address, Davis portrayed California’s economic slowdown -- and its record budget gap of nearly $35 billion over 18 months -- as part of a national problem that is not his fault.

“A national recession has forced nearly every state into the red,” said Davis, who nonetheless took credit during his reelection campaign for creating 900,000 jobs and boasted as recently as Monday about the growth of California’s economy during his first term.

Borrowing a tactic of his Republican predecessor, Pete Wilson, who used President Clinton as a foil during the state’s last fiscal crisis, Davis has made President Bush a target. Davis said Tuesday that Bush’s new tax-cut proposals fall short of what California needs to escape its economic morass. He returned to that theme in his speech Wednesday, though he never mentioned Bush by name.

“Washington needs to step up to the plate and pass a real economic plan, one that puts Americans back to work this year,” he told state lawmakers and dignitaries gathered in the ornate Assembly chamber for his annual address.

In essence, Davis promises to fill what he sees as a national leadership vacuum by pursuing his own economic plan for California. He says it could create up to 500,000 jobs over the course of his second term.

“We will not sit around in California and simply wait” for an effective national plan, Davis said Monday in his inaugural speech, a line he reiterated Wednesday night.

The centerpiece of his economic agenda is to speed up state spending of $21 billion in borrowed money to build schools, housing, parks and water projects.

None of the money is newly proposed spending.

Yet by pledging to accelerate the construction pace, Davis has managed -- at least for a few days -- to cast himself as a champion of popular and expensive programs, drawing positive headlines and TV images before dropping his budget bomb Friday.

Starting with his inaugural speech Monday, Davis and his media advisors have choreographed a sequence of events to keep what they call his “jobs package” in the news.

Minutes after the inaugural speech, television news crews from the Bay Area and Sacramento followed Davis around a construction site near the Capitol as he told workers in hard hats how much his plan would help California.

“We believe we can generate a lot of jobs this year that on the natural would have occurred next year,” he said.

On Tuesday, the governor appeared in another setting that was equally evocative of his campaign advertising: a school construction site in a Sacramento suburb. A Davis aide rounded up more workers in hard hats to greet the governor amid a rumble of tractors and cement trucks. The scene, captured by eight television cameras, was in keeping with his use of education as a signature campaign issue, but starkly at odds with his proposal a few weeks after his reelection to cut $3.1 billion in school spending over 18 months. More school cuts could come Friday in his budget.

Dodging Questions

Behind the scenes, Davis made all of his major decisions on spending cuts and tax hikes weeks ago; he sent the budget to the printer the weekend before Christmas. But all week, he has dodged questions on the substance of his budget and focused instead on his overall economic recovery plan.

“You only have so much you can write, so I have to sort of space it out,” Davis joked to reporters at the muddy school construction site.

The spacing has been a matter of political calculations by Davis and his advisors. Garry South, the governor’s top political strategist, has been on extended holiday in France and Sweden since the Nov. 5 election. In his absence, Davis has turned to others to help shape his message, including Chris Lehane, an unpaid advisor based in San Francisco. Lehane was the chief spokesman for former Vice President Al Gore’s 2000 presidential campaign and a leader of the Clinton White House team that responded to media questions on scandals.

Davis also has relied on his new communications director, Peter Ragone, a battle-tested New York campaign operative who most recently handled media relations for former U.S. Housing Secretary Andrew Cuomo in his race for governor of New York.

Lehane and Ragone worked with longtime Davis aides in the governor’s office to develop the strategy for rolling out a budget that will mark one of the most important milestones of Davis’ 30-year career in California politics.

In his State of the State, Davis warned of “cuts in nearly every program,” but again named none of them. Instead, he resumed promotion of his plan to speed up bond spending on freeways, public transit projects and, above all, schools.

“All of these efforts add up to one thing: jobs,” Davis said. “Not jobs down the road, but right here, right now.”

In good times and bad, public debt floated for capital projects produces political windfalls for governors and mayors. Year after year, they boast of building roads, hospitals, libraries and schools, rarely lamenting the decades of debt that lie ahead. Given the scale of California’s fiscal troubles, Davis has been able to grasp capital spending as a device to rescue California from economic distress, or at least, his critics charge, to depict himself as doing so.

State Treasurer Phil Angelides, a Democrat who could run for governor in 2006, embraced the concept in his own inaugural address on Monday, invoking the Golden Gate Bridge and other public works projects of the Great Depression.

“Our response to California’s current challenges should be no less visionary,” Angelides told supporters from a dais outside the Capitol.

Though some Republicans criticized the Davis bond plan, others were hard-pressed to find fault with it despite their sharp disapproval of his overall stewardship of the budget and economy. Indeed, the Legislature’s top Republican, Sen. Jim Brulte of Rancho Cucamonga, said he urged the governor weeks ago to accelerate state construction projects.

Nonetheless, Republicans argue that Davis deserves a good part of the blame for the fiscal crisis and largely dismiss his economic agenda as a doomed attempt to inoculate himself from the political damage of his upcoming budget.

Republicans Critical

“They think they’re sandbagging against the bad news, but it’s too much,” said GOP strategist Dan Schnur, who was Wilson’s communications director during the fiscal crisis of the 1990s. “The tidal wave will just roll right over them.”

Republicans also renewed their vow to resist pressure to raise taxes, saying Davis failed to confront the budget shortfall while running for reelection. Now, they say, he overstates it. Among other things, Davis continually refers to the projected gap between spending and revenue over the next 18 months rather than over the traditional period of 12 months. The result is that the magnitude of the crisis appears bigger.

In addition, the shortfall figure reflects the gap between the state’s revenue and spending projections. Thus Davis himself can enlarge the shortfall by simply increasing his spending projections.

“He’s trying to jack up the number to scare the public and to scare the legislators,” said Sen. Dick Ackerman of Irvine, the ranking Republican on the Senate Budget Committee.

Davis spokesman Steven Maviglio denied that the governor had manipulated the size of the budget shortfall for political gain. But he acknowledged that Davis faces a tough season of political fights with the myriad groups that will urge the Legislature to restore the governor’s cuts.

“Everybody’s ox will be slightly gored,” he said. “Every dollar has a cult following, and there will be howls of protest for weeks to come.”

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Speech at a Glance

In address, Gov. Davis:

* Calls for restructuring the tax system to avoid wild fluctuations in state revenue.

* Pledges to make job creation his “most immediate” priority.

* Directs the small business advocate to review and recommend changes in regulations.

* Asks the Legislature to extend the $420-million “manufacturers’ investment credit” for businesses.