Wheel of Fortune Turns in Capitol

By all conventional wisdom, the fortunes of organized labor and Indian tribes, the biggest spenders against the recall of Gray Davis, will take a turn for the worse under Gov.-elect Arnold Schwarzenegger’s administration, and those of business groups will rise.

But there are sure to be surprises in a new administration run by a political novice.

Adding to the unpredictability, the actor-turned-politician will be able to use his celebrity to leap over the heads of old Capitol warriors and appeal directly to the electorate to generate support for his causes, possibly diminishing the power of lobbyists.

“He has the potential to be a transformative governor,” said Steve Merksamer, who was chief of staff to Republican Gov. George Deukmejian and whose political law firm and lobby firm have a blue-chip clientele.

In the days since his election, Schwarzenegger has made several gestures to suggest he intends to be inclusive. He tapped former Assembly Speaker Willie Brown, a Democrat, and Brown’s longtime rival, former Gov. Pete Wilson, a Republican, to serve on the transition team.

But Schwarzenegger won with heavy support from major Republican donors and businesses. Concepts dear to the GOP could be back in vogue.

Schwarzenegger’s transition team also includes Pacific Research Institute director Sally Pipes, a free-market advocate who urges that private enterprise take over many government functions.

Still, there will be losers. Trial attorneys could be near the top of the list. They spent almost $2 million to fight the recall and help Lt. Gov. Cruz Bustamante, said attorney Bruce M. Brusavich, president of the Consumer Attorneys of California.

And Schwarzenegger singled out trial lawyers during the campaign, saying their litigious ways are a cause of the state’s economic troubles. He called for limits on the right to sue over what are called unfair business practices, and restrictions on the ability of fired workers to sue their ex-employers.

To bring significant change in laws affecting litigation on other business issues, Schwarzenegger must win passage of legislation -- he can’t go to the ballot for everything -- and Democrats remain firmly in control of the Legislature. Nearly all of them, and some Republicans, regularly side with trial attorneys on an array of issues.

“I’m hoping it was campaign rhetoric,” Brusavich said.

Also standing in Schwarzenegger’s way are Davis appointees who will dominate important boards and commissions for at least the next three years.

Businesses, for example, decry the current electricity rate schedule.

However, Davis appointees control the California Public Utilities Commission and could blunt any move by Schwarzenegger to alter the state’s electricity and telecommunications systems.

Schwarzenegger is expected to try to follow through on his pledge to overhaul the costly workers’ compensation system, a move that, if successful, would help business. Additionally, 14% of the $11.9 million he raised from outside sources came from real estate interests. Developers could benefit if he can lower fees they routinely pay. But many businesses simply hope that their costs don’t escalate.

“Stop the bleeding. Do no more harm. That is the first step,” said Allan Zaremberg, president of the California Chamber of Commerce.

The governor-elect has pledged to roll back the vehicle license fee.

That would save California motorists -- and cost government -- $4 billion a year.

Davis restored the tax this year to higher 1999 levels in an effort to close California’s budget deficit.

On a new $20,000 car, the increased tax is $400. It would be $135 if Schwarzenegger succeeds in his effort. But while individual car owners would save an average of $158 a year, businesses also would benefit.

Car dealers, who donated almost $800,000 to Schwarzenegger’s campaign, might see an increase in sales, or perhaps consumers could afford slightly more expensive cars. Other major beneficiaries would include rental car companies and other businesses that own fleets of vehicles. The legislative analyst’s office estimates that a third of the car tax is paid by businesses.

A cut in the fee could hurt local government, which traditionally receives the bulk of the revenue. An end to those payments to local government could force cuts to local services. Union leaders who represent local police and firefighters are preparing to fight such a move.

“That absolutely affects us,” said Carroll Wills, communications director for the California Professional Firefighters, an umbrella group representing firefighters’ unions. The unions gave $470,000 to fight the recall.

“The downside of picking a fight with firefighters is that firefighters are probably still more popular than Arnold Schwarzenegger,” Wills said.

While he is new to elective office, Schwarzenegger followed a long-cherished tradition, leading up to his candidacy, by courting inside players who have a stake in what takes place inside the Capitol.

The process dates to his campaign for Proposition 49, his 2002 initiative to provide after-school programs in public schools.

Schwarzenegger won endorsements from heavyweights such as the California Medical Assn., the California Correctional Peace Officers Assn. and the California Teachers Assn.

The teachers union leans heavily Democratic. It often feuded with Schwarzenegger’s recall campaign co-chairman, Gov. Pete Wilson, and it spent $500,000 to defeat the recall. But the union never was close to Davis.

More important, the union’s political director, John Hein, struck up a relationship with the governor-elect during the Proposition 49 campaign by helping to write the initiative. The union spent $530,000 to ensure its passage.

“It was a very good working relationship,” Hein said. On Thursday, Schwarzenegger placed Hein on his transition team.

Public employee unions spent at least $3 million in direct donations to defeat the recall and elect Bustamante. The Service Employees International Union, which represents workers in government and in private enterprise, spent another $1 million.

While public employee unions may take hits -- in pay cuts, or in having their functions turned over to private enterprise -- unions in the construction trades could do fine, particularly if the new administration increases spending on transportation projects.

And some public employee unions also may be protected. The California Correctional Peace Officers Assn. is positioned well. Although the prison workers union gave $1.4 million to Davis in his first term, it spent nothing on the recall campaign. And the union’s leaders were close to Wilson.

Schwarzenegger spoke last year at a convention of the California Correctional Peace Officers Assn., and then posed for pictures with union members. The line stretched outside the hall in San Diego where they were meeting.

Since Tuesday’s election, representatives of the governor-elect and the union’s leadership have been in contact.

“We know they want to renegotiate contracts,” said Lance Corcoran, prison union executive vice president. “We will pin down exactly what they want from us, and determine whether it is something we can live with.”

Altogether, unions representing public employees and workers in private enterprise spent $10 million to defeat the recall. Indian tribes that own casinos at least matched that sum. But just as some unions stayed out of the fray, some tribes held back.

“We wanted to keep all the lines of communication open,” said lobbyist Barry Brokaw, who represents the Agua Caliente Band of Cahuilla Indians. The Palm Springs tribe operates two of the state’s busiest casinos, and spent no money on the recall.

Schwarzenegger attacked the tribes for paying nothing in taxes on their gambling revenue, and criticized politicians for accepting millions in campaign donations from them. But while he vowed to alter that equation, he also appears to have no qualms about tribal casino expansion, as long as they pay their “fair share” to the state.

Indeed, before entering politics, the actor invested in an off-and-on venture by Planet Hollywood in the mid-1990s to open a casino in Las Vegas.

“I came here to Vegas many times,” he said at a 1996 ground-breaking for a casino project in Las Vegas, “and gambled in someone else’s casino, and I said, ‘ ... I want my own casino.’ ”

Some tribal representatives say they are willing to negotiate over payments to the state, as long as they can expand the number of slot machines beyond the current cap of 2,000 per casino. Sacramento attorney Howard Dickstein, who represents half a dozen tribes that own casinos, said his clients “are confident” about such negotiations.

“The tribes I represent,” Dickstein said, “are business-oriented. He is business-oriented. We’re looking forward to it. I think things will work out well.”