Rough Terrain for Gov. in 2006

Humbled by his special election defeat, Gov. Arnold Schwarzenegger is counting on state lawmakers to let bygones be bygones next month as he refocuses his political efforts in the Capitol.

“He’s making every effort to work hand in hand with the Legislature,” said Margita Thompson, Schwarzenegger’s spokeswoman.

But California government, which Schwarzenegger declared last year was so dysfunctional that it required an overhaul by voters, is shaping up to be even more treacherous terrain for the governor in the coming election year.

“The power has shifted back to the Legislature,” said Assembly Majority Leader Dario Frommer (D-Glendale). “I think the Democrats are in the driver’s seat.”

Much of the core of the Democratic Party is disinclined to give the Republican governor any political victories that might help get him reelected next year, lawmakers and lobbyists say.

Labor unions, which have substantial influence over the Democratic majorities in the Assembly and Senate, are still furious with the governor for trying to weaken their benefits and political influence. Emboldened by their success in leading the fight against Schwarzenegger’s four initiatives last month, they are expected to adopt an even more aggressive posture when lawmakers return to Sacramento on Jan. 3.

“There’s going to be a lot of pressure not to do anything with the guy,” Frommer said. “You have a Legislature that, quite frankly, is not too happy with him. And you’ve got a Democratic Party and a lot of the constituencies that are pushing hard to keep the governor on the mat in order to set the stage for whomever the Democratic nominee is next year.”

The governor also is facing pressure from his right. Republican lawmakers and party activists are concerned about the way he has refocused his administration toward the center since his special election loss.

Since November, Schwarzenegger has appointed a former executive director of the Democratic Party as his chief of staff. And he endorsed an unprecedented borrowing program for public works, something that unnerves the party’s fiscal conservatives.

Most GOP lawmakers are more conservative than Schwarzenegger, but he needs their support because two-thirds of the Legislature is required to pass the state budget and to put measures on the statewide ballot.

“The reality is, nothing gets done unless Arnold Schwarzenegger can persuade at least six Republicans in the Assembly and two in the Senate to go along,” said Tim Hodson, director of the Center for California Studies at Cal State Sacramento.

Assembly Republican leader Kevin McCarthy of Bakersfield said his members “think they will have a bigger say than they have had in the past, because the bigger issues that are going to hit this year are all two-thirds votes.”

Schwarzenegger allies say the governor was not weakened by his November defeat.

“He’s got the same veto he had before,” said Allan Zaremberg, president of the California Chamber of Commerce, who was instrumental in helping the governor get his agenda on the special election ballot.

Schwarzenegger and Democratic leaders have outlined several common goals. All say they want to rebuild California’s roads, levees and rails by borrowing significantly.

Though the governor publicly said a bond issue to finance the projects could be as much as $50 billion -- five times the largest one in state history -- one administration official said it was more likely to be around $26 billion.

There also are early bipartisan negotiations within the Assembly to change the way election districts are drawn -- an issue Schwarzenegger tried to address in the special election with Proposition 77, which was rejected.

Assembly leaders are talking about a deal that would strip legislators of the power to draw district lines in exchange for changes in California’s term limits.

Senate President Pro Tem Don Perata (D-Oakland) said he considered 2005 a “rancorous, do-nothing year” and wanted the 2006 session to focus on less-partisan subjects. His agenda includes finding ways to train and recruit more teachers and nurses, give schools more flexibility in spending education aid, shore up hospital finances and improve the state’s ports.

“I’m looking for the greatest area of commonality,” Perata said. “If people want to pick a fight, beat their chests, I’m not interested.”

Assembly Speaker Fabian Nunez (D-Los Angeles) has a more openly combative agenda, which includes a raise in California’s $6.75-an-hour minimum wage -- something Schwarzenegger has vetoed for the last two years.

Nunez also wants to expand state-subsidized health coverage to include all California children and increase state education spending.

“I’m going to work with the governor, but I’m not going to roll over,” he said. “I’m going to lay out our agenda.”

Nunez said he plans to meet next month with Billy Tauzin, president of the Pharmaceutical Research and Manufacturers Assn., to try to negotiate lower prescription drug prices for the poor and middle class. Last year, the Legislature rejected a price deal Schwarzenegger made with the industry, and two competing initiatives that could have lowered drug costs -- one funded by companies and the other by unions -- failed in last month’s special election.

Once again, the biggest opposition against Schwarzenegger may come from California’s labor unions, which spent more than $100 million to defeat him in November. Unions representing teachers are demanding that the governor increase education funding by $5.5 billion. They say he promised them billions in late 2003 in exchange for their agreeing to defer some funds guaranteed for schools under Proposition 98.

The administration says no such promise was made. But unions made the issue a major part of their campaign against his special election agenda and consider his defeat a mandate for him to restore the money.

“I don’t know how the governor could possibly do the State of the State without addressing education funding and how he’s going to pay back the money that’s owed,” said Gale Kaufman, a political consultant for the California Teachers Assn. and the Assembly’s Democrats.

Perata and Nunez said Schwarzenegger needs to repay some of the education money this year.

Labor leaders also are planning to press the Legislature to revisit changes they made to California’s workers’ compensation insurance system in 2003 and 2004.

The changes are projected to lead to an estimated 38% drop in employer costs in the first two years, according to the state insurance commissioner. But unions complain that insurers have cut the benefits of injured workers too deeply while pocketing most of the savings.

Barry Broad, a lobbyist for the Teamsters and several other unions, said labor’s goal is to get new legislation passed and get rid of Schwarzenegger.

“This is a governor who went after us with hammer and saw, said very nasty things about labor unions and how they are to blame for the world’s problems,” Broad said. “We’re not likely to give up on any strongly held principles ... for this guy.”

Times staff writer Peter Nicholas contributed to this report.