If It Gets Results, Governor Is Willing to Compromise

In reaching a tentative agreement last week to revamp the $20-billion California workers’ compensation system, Gov. Arnold Schwarzenegger resisted voices within the Republican Party that wanted steep cuts in employee benefits. He did it for a simple and, by this time, familiar reason: He wanted a deal.

The drive to show results -- to sidestep the partisan infighting that paralyzed the Legislature in recent years -- has underpinned Schwarzenegger’s approach in every major issue he’s confronted since taking office.

When the choice is between placating party conservatives or steering negotiations to a delicate compromise, the governor’s instinct is to reach for consensus. He did it in crafting a spending limit earlier in his term. He did it in embracing a $15-billion borrowing plan. And he is doing it with workers’ comp.

If the agreement forged late last week becomes law, Schwarzenegger will have tacked conspicuously since the talks began. At one time he supported a business-backed bill by Sen. Charles Poochigian (R-Fresno) that called for more drastic reductions in disability benefits than the current proposal.

The Poochigian bill became the template for a workers’ comp ballot initiative the governor is keeping in reserve in case a legislative solution collapses.

According to people close to the negotiations, the governor’s biggest compromise came on the question of how best to determine the root cause of an employee injury.

Republicans and business groups wanted to slash benefits for workers if an injury was primarily caused by an off-the-job accident or preexisting condition.

Democrats argued that the standard could make it impossible for pregnant women or elderly workers to get benefits for workplace injuries where pregnancy or age might have been factors in an accident. The issue has now been dropped, with the governor’s blessing, according to people familiar with the negotiations.

The governor also dismissed a Republican demand that all treatment for injured workers be provided by company doctors. The proposed agreement would allow workers to seek permission from a panel of independent doctors if they wanted to be treated by a physician of their choice. A variation on the plan might allow the worker to choose from a list of available doctors.

A hint of the governor’s pliability came at a private breakfast meeting recently in his hotel suite. Over orange juice and pastries, Schwarzenegger went around the room asking Republican lawmakers about an idea he knew they would dislike: What if the state capped the rates insurance companies could charge for workers’ comp coverage?

The question yielded lively discussion but no immediate breakthrough. Yet it was revealing both for what it said about Schwarzenegger’s governing style as well as his willingness to veer from cherished economic doctrine in the pragmatic pursuit of a compromise.

If he wanted, the governor could have abandoned the talks and put before the voters a more partisan ballot initiative in November. But he preferred a quicker and cheaper legislative fix. So, he has been using the initiative campaign as a prod. And he kept the talks moving through an approach similar to other skirmishes in his first four months in office: calling the major players in to frequent meetings, invoking his days as an entertainer and bodybuilder to lighten the mood; and -- most important -- showing flexibility when it becomes clear that unbending devotion to principle isn’t bringing the two sides closer.

“I would say that I have a certain philosophy ... but at the same time, what’s important to me in the end is that it has to work,” Schwarzenegger said in an interview last week. “Sometimes the philosophy falls apart. I’ve seen it over and over, being out there in the trenches with schools and after-school programs, where a certain way I thought, certain principles, certain philosophy, I saw it in front of my very eyes falling apart. And if that is the case, I will not stick to the principles. I’d rather stick to what’s right for the state.”

Some would say principle has already been a casualty in the workers’ comp debate.

At the breakfast meeting, Assemblyman Ray Haynes (R-Murietta) recommended a book to the governor: “Capitalism and Freedom” by Milton Friedman, the pro-free-market economist. That Schwarzenegger would need it is a sign of just how much his thinking has evolved amid the pressures of office.

At one time, Schwarzenegger was an unwavering fan of Friedman, so much so that he gave an introduction to a video of a PBS series on his work. When “the government stepped back and let the free enterprise system do its work,” Schwarzenegger told viewers, “the more robust the economy grew, the better I did, and the better my business grew.”

Yet those certitudes were gone as he maneuvered to revamp a high-cost insurance system blamed for driving jobs and businesses out of California.

On Friday, Schwarzenegger was so confident that a deal was at hand that he left for a week’s vacation in Hawaii. Some details of the agreement are still to be worked out by aides in the week ahead. At this point, the question of whether to cap insurance premiums is still unresolved.

Democrats want rate regulation as part of any workers’ comp overhaul -- so that insurance companies can’t pocket extra profits from the savings that result. To the degree that they resist, Republicans risk scuttling the deal and sending the issue to the November ballot in what threatens to be a contested campaign that the governor could easily lose.

“He said, ‘My concern is, I want to get real cuts in the premiums,’ ” recalled Haynes. “And my response was, the best rate regulation is competition.... He kind of nodded and listened. And it was my sense that he was testing, just testing concepts.

“The good news about this governor,” Haynes said, “is he listens to everybody and he doesn’t rule out anything. And in this case, if he ruled out rate regulations, the Democrats would walk out of the room. And he wouldn’t have negotiations. He wants negotiations to go forward.”

New to elective office, Schwarzenegger has little in the way of a record with which to assess his ideological leanings. The assumption has been that he is moderate on social issues, conservative on economic matters. The only clear pattern to emerge since he took office is that the governor demands movement:

* Before taking office in November, he promised a hard legislative spending cap that would lock in frugality. But he wound up embracing a more flexible balanced budget amendment when it became clear that Democrats wouldn’t go along.

* He pledged to restore money to social programs that were cut to achieve savings -- a position at odds with voices within his own administration who hew to the classic conservative position that decisions about where to spend money should be made by ordinary people, not government.

* He all but promised not to raise taxes, but told The Times last week that the goal of avoiding new taxes might be “wishful thinking.”

“Arnold Schwarzenegger is a work in progress,” said Bill Whalen, a research fellow at the Hoover Institution at Stanford University who has consulted with the governor on speeches and policy. “Most politicians who become governor arrive at that position after years of public service, years of voting on issues and dealing with special interests and firsthand political battles. Arnold Schwarzenegger arrives in many cases in the same way he arrived in the ‘Terminator’ movies: fresh to the planet.”

Whalen added: “He wants ‘action, action, action.’ He wants to keep busy.”

Schwarzenegger does not typically come into negotiating sessions with a predetermined position, according to some participants in the workers’ comp reform discussions. They said he appeared to be working through issues in his mind, drawing on his experiences as an actor and businessman, and using those real-world examples to get points across.

State Sen. Jim Brulte (R-Rancho Cucamonga) is the Senate’s GOP leader, one of four legislative leaders who meet most often with the governor. For Schwarzenegger, Brulte said, workers’ comp “is not a theoretical discussion.” As an action movie star, Schwarzenegger has “worked,” Brulte said. “He’s been injured doing that work. He’s had medical treatment related to that injury. He understands.”

Brulte recounted a conversation between Schwarzenegger and Senate President Pro Tem John Burton (D-San Francisco). “John said that if the insurance companies miss a payment, then the injured worker loses his house or gets evicted,” Brulte said. “Arnold goes: ‘John, I own apartments. You can’t evict anyone in California. I guarantee you don’t get evicted.’ ”

“It’s real-world knowledge of the subject area, which is essential if you’re going to try to cut through the theoretical,” Brulte said.

The governor broke away from the Capitol recently for a well-publicized trip to a suburban Costco, encouraging the people gathering signatures for the proposed workers’ comp ballot measure. But some negotiators believe the gesture was largely symbolic. Few want to risk a trip to the ballot.

So the governor continued to summon people to meetings, to listen and to talk. Basic as it sounds, it’s something that the governor’s office hasn’t seen much of in recent years.

Former Republican Gov. Pete Wilson “would make his decisions, and then he’d come talk to the Legislature and push them through,” Haynes said. “This governor is much more open to input. He solicits ideas from lots of different people, and you oftentimes don’t know his bottom line in negotiations until you have a deal. In Pete Wilson’s case, he’d say, ‘This is what I’m going to get. This is what’s going to happen.’ And he just drove the debate until he got it. This governor tends to be a little less headstrong.”

Art Azevedo, who represents attorneys who are hired to file applications on behalf of injured workers, described a recent half-hour meeting in the governor’s office. Schwarzenegger, he said, was skeptical of workers’ comp cases based on complaints of pain. A former prize-winning bodybuilder, the governor mentioned his work in the gym.

“He feels that complaints of pain are probably fraudulent,” Azevedo said. “Here’s a man who probably has gutted a lot of pain as a person who lifts weights.... He said he goes to the gym and he knows there are people there on workers’ comp, and they can bench press as much as he can.”

Azevedo said he did not agree that complaints of pain were uniformly invalid, but he described Schwarzenegger’s approach to the talks as refreshing.

Former Gov. Gray Davis “didn’t operate that way. You negotiated through staff. And he would come in at the last moment.” Schwarzenegger, he added, “is there and he’s hands-on.”

Something else struck Azevedo as unusual: being invited to see the governor in the first place.

“I mentioned to the governor that the last time this Democrat had been in the governor’s office was when Ronald Reagan” was in office, he said.

*

Times staff writers Marc Lifsher and Robert Salladay contributed to this report.