Gov.’s Campaign Is in Debt

Gov. Arnold Schwarzenegger is entering his reelection campaign $410,000 in debt, while his Democratic rivals and union foes are armed with more than $50 million.

He also continued supplementing his aides’ government salaries by paying them additional sums in campaign money, according to campaign reports filed with the state Tuesday.

Schwarzenegger spent $8.2 million of his own money, and tens of millions more of his contributors’ money, on his ill-fated special election effort to change state government. Altogether, his campaign cost more than $45 million, depleting his accounts.

Although his opponents spent almost $100 million to defeat the initiatives Schwarzenegger championed in the November vote, many of them emerged with hefty bank accounts.

Controller Steve Westly and Treasurer Phil Angelides, who are competing in the Democratic primary to face the Republican governor next November, started the new year with $24 million and $17.1 million respectively, their reports show.

At $59.8 million, the California Teachers Assn. was the biggest spender in 2005, leading the effort to upend Schwarzenegger’s special election initiatives. But the union, which represents more than 330,000 public schoolteachers, nevertheless started the new year with $11.6 million.

The California Correctional Peace Officers’ Assn., the prison officers’ union that also worked to defeat the governor’s measures, reported having at least $5.3 million. And the State Council of Service Employees, a union representing many government employees, spent $20.1 million against Schwarzenegger’s initiatives and has $675,000 heading into the 2006 election.

Schwarzenegger’s reelection campaign account had $147,000 in cash and $557,000 in debt as of Dec. 31. Donors generally cannot give more than $22,300 each to a gubernatorial candidate. Schwarzenegger is allowed to spend unlimited sums of his own money on his campaign.

The governor has a separate fund for promoting and opposing ballot initiatives. After he spent $45 million for that account, it had $503,000 in cash and debt of $278,000.

Marty Wilson, who oversees fund-raising for the governor, said Schwarzenegger had begun raising money for his campaign. “I’m confident we’ll have the funds necessary,” Wilson said.

Angelides and Westly need war chests for the primary fight, while Schwarzenegger probably won’t have a June challenger.

Meanwhile, the reports show that Schwarzenegger paid his chief of staff, Susan Kennedy, $25,000 on Dec. 5 from his campaign account. At the time, she had not yet joined the governor’s staff, and still was a member of the California Public Utilities Commission -- the state’s chief regulator of utilities, telephone companies and private water companies.

Kennedy’s annual PUC pay was $114,000; her pay as chief of staff is $131,000.

Rick Hasen, an election law expert at Loyola Law School, said that mixing two such jobs -- campaign advisor and government official dealing with public policy -- is questionable.

Kennedy’s campaign salary is funded largely by corporate donors, many of whom have business before the governor’s office and the PUC.

“I think it is very hard for the person to separate the two tasks,” Hasen said. “Inevitably, if you are doing government work, you are going to be thinking about its effect on the campaign.”

In December, Kennedy worked in the governor’s office vetting political appointments and helping set government policy, although she was not yet receiving her government salary as chief of staff. Schwarzenegger spokesman Adam Mendelsohn said Kennedy volunteered her time to the governor in December, adding, “She was here focusing on the transition.”

Schwarzenegger’s political attorney, Tom Hiltachk, said Kennedy would receive a smaller stipend from campaign funds this year: in the future: $7,500 a month from the campaign in 2006, plus her government pay. The higher amount paid in December was fair, Hiltachk said, because it was a “critical month” of preparing for the reelection campaign without the major distractions of being chief of staff full time.

“I have no qualms about the amounts we have paid our consultants, whether they are in the [government offices] or outside. Frankly, most of them have been underpaid,” Hiltachk said.

Dan Eaton, chief of staff to Assembly Speaker Fabian Nunez (D-Los Angeles), received about $100,000 in 2005 for campaign work on the special election and on 2004 Assembly campaigns.

Eaton’s annual government salary is $170,000, according to the speaker’s office. Eaton declined to comment.

“The speaker believes it is perfectly appropriate for someone to take a leave of absence to work on a campaign,” said Nunez spokesman Steve Maviglio. He said Eaton took unpaid leave to work on Democratic campaigns.

In other reports filed Tuesday, the California Democratic Party reported having $6 million in the bank, after spending $8.7 million last year. The California Republican Party, which spent $15 million last year, had $917,000 in the bank -- with debt of $637,000. Senate President Pro Tem Don Perata (D-Oakland) had $1.19 million in various accounts he controls, after having spent $2.7 million last year.

Perata, who faces a federal investigation into his political affairs, also reported spending $742,000 last year on his lawyers, private investigators and others helping him fend off the probe.

“The investigation certainly seems to be going nowhere,” said Perata’s spokesman, Jason Kinney. He said Perata and his legal team are “prepared for any conceivable scenario.”

Campaign reports disclose that some donors who gave hefty sums to the governor in the months leading up to the November election gave generously to Democrats once it became clear that the governor’s initiatives were headed for defeat.

For example, Ameriquest Capital Corp., the Orange County-based lender, gave $300,000 to the California Democratic Party in November and December, after having given $350,000 to the governor’s campaigns. Other reports filed on Tuesday show:

* Donors gave $2.4 million to an initiative that has qualified for the upcoming June ballot, a measure to guarantee universal preschool for all 4-year-old children by raising income taxes on the richest Californians. The measure’s main proponent, Hollywood producer and director Rob Reiner, gave $326,000 to support it. His father, Carl, gave $500,000 to the effort.

* Oakland Mayor and former Gov. Jerry Brown, seeking the Democratic nomination for California attorney general, ended the year with $3.6 million in the bank, after raising $2.5 million last year. Sen. Chuck Poochigian (R-Fresno), the main Republican seeking the post, had $2.6 million in the bank, after raising $2.1 million in 2005.

Brown’s opponent, Los Angeles City Atty. Rocky Delgadillo, had $2.3 million.