Davis Warns of ‘Hard Choices’

Gov. Gray Davis began his second term as the state’s 37th governor in subdued fashion Monday, pledging to improve California’s weak economy while warning of “hard choices” as the state confronts a huge budget gap.

The 60-year-old Democrat took the oath of office just before 12:30 p.m., his left hand resting on a 16th century French Bible as more than 2,000 invited guests looked on at Sacramento’s Memorial Auditorium.

In a concise inaugural address, less than 30 minutes in length, Davis said he would focus his second-term efforts on “creating new jobs and improving California’s economy.”

He set a goal of 500,000 new jobs over the next four years, and said he would release the details of a new “California Jobs Plan” in the coming days.

But four years after declaring a new “era of higher expectations,” Davis also bluntly warned that the state’s budget crisis “threatens the unprecedented progress we’ve made together” in his first term.

“We must tighten our belts without hardening our hearts,” he said. “And, to the extent possible, protect our progress in public education, public safety and children’s health insurance.”

Davis will detail his second-term plans further in his State of the State speech Wednesday to the Legislature. On Friday, he will unveil his budget proposal for 2003-04, which is expected to include tax increases as a partial remedy for closing a projected $34.8-billion shortfall over the next 18 months.

In his inaugural address, Davis attributed the budget crisis to a national economic slowdown and called on the Bush administration to enact an economic stimulus plan “that puts Americans back to work.” President Bush is scheduled to announce a stimulus plan today.

While expressing continued support for public education and social programs, Davis also reached out to the California business community.

Business groups have been both a source of support and criticism for Davis, who has attempted to bridge the gap between his party’s liberal wing and business interests.

Davis pledged to “make California more small-business friendly” by eliminating “unreasonable regulatory hurdles.”

The audience interrupted Davis with applause several times. Afterward, Democrats praised the governor for setting an appropriate tone for what promises to be a challenging second term. “I thought he struck a number of notes that needed to be struck,” said state Sen. Sheila Kuehl (D-Santa Monica). “It was very optimistic, but cautionary about the budget. I was very pleased with the tone.”

Republicans, however, criticized Davis for blaming a national economic downturn for the state’s fiscal crisis. They also questioned his job-creation credentials. “The national economy did not create the overspending by California,” said Senate Republican Leader Jim Brulte of Rancho Cucamonga.

He said Davis should impose an immediate moratorium on new legislation and regulations that would increase business costs in California, then repeal the “anti-business legislation and regulations that have marked the last four years.”

Freshman Assemblyman Todd Spitzer (R-Orange) dismissed the Davis address as “long on spin, but short on substance.”

“I think he would have earned a lot of respect and a lot of accolades ... if he had acknowledged his role in this mess,” Spitzer said. “He blamed the national economy, which says to me he’s looking for a scapegoat. That’s not the way to get out of this crisis.”

The Republican criticism offers a preview of the struggle Davis faces in his second term, especially in bridging the historic budget gap. The budget must be approved by a two-thirds vote in each house of the Legislature, and that will require the support of least two Republicans in the state Senate and six Republicans in the Assembly.

Davis won reelection in November by five percentage points, despite heavily outspending his error-prone Republican opponent, Bill Simon Jr. Davis’ popularity plummeted during his first term, in large part because of perceptions that he had mishandled the 2000-01 energy crisis and because of criticism of his fund-raising efforts, analysts said.

Declaring that California “has regained its rightful place as the premier state in America and the envy of much of the world” during his first term, Davis vowed to defend Democratic initiatives from political opponents.

“The battle lines have already been drawn between us and those who contaminate our air and water, between us and those who would put illegal weapons on our streets, between us and those who manipulate our energy market and cheat us out of billions of dollars,” he said. “Mark my words: I will stand shoulder to shoulder with you and fight against these forces of reversal and retrenchment.”

Monday marked the first time in modern history that Democrats assumed control of every statewide office.

Second inaugurals are typically more low-key than a change of administrations, but Monday’s inaugural speech and ceremony were toned down even more than usual by the governor and his advisors, in recognition of the state’s financial crisis.

Four years ago, Davis took office at a time of budget bounty and Democratic euphoria after ending 16 years of Republican governors. Davis devoted much of Monday’s address to the sobering fiscal crisis California confronts. “We have to find a way to wean state government off the feast-and-famine budgeting it’s experienced for more than 25 years,” he said. “Our task is far greater than balancing the books. We must rewrite the book on California budgets.”

Once the day’s ceremonial functions were over, politicians, lobbyists and hundreds of other Californians celebrated at a variety of festive parties throughout the capital. Though somewhat less grand than inaugural fetes of four years ago, when state coffers were flush, the events -- financed by private donations and ticket sales -- drew crowds of people who paid for a chance to eat, mingle and dance into the night.

The largest party was a casual affair hosted by Davis in a cavernous exhibit hall at the Sacramento Convention Center. As a string of musical acts performed, partygoers endured long lines for a glass of Chardonnay and the chance to snap a Polaroid with someone dressed as Sea World’s killer whale Shamu or a wax figure of Willie Brown, the legendary mayor of San Francisco and former Assembly speaker.

Across the street at a hotel, Lt. Gov. Cruz Bustamante threw a more dressy affair, featuring tables piled high with lavish food and the night’s hottest musical draw, Los Lobos.

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Times staff writer Jenifer Warren contributed to this report.