Survival Mode

With a recharged recall effort rapidly bearing down on him and California’s record state-budget deficit getting even worse, embattled Governor Gray Davis is on red alert. He’s conjuring political moves and contemplating budget maneuvers that to many are as “unthinkable” as rolling over much of the deficit to future years seemed just two months ago.

Car-alarm mogul–turned–conservative congressman Darrell Issa’s new Davis recall team says it is collecting 100,000 signatures a week on the street. Issa’s forces just mailed recall petitions to 1 million homes. Issa is running for governor with a new campaign headquarters in Orange County. And movie superstar Arnold Schwarzenegger told an Australian newspaper that he will explore a gubernatorial run after he opens Terminator 3 on July 2, just days before Issa’s team plans to turn in the 1.2 million signatures — 900,000 valid registered voters are needed to qualify. (The deadline is September 2, but Issa wants to turn them in faster to trigger a special election dominated by more conservative voters. Otherwise the recall election would be on next March’s presidential-primary ballot.)

The $38 billion deficit dwarfs other state issues, driving Davis’ job rating to historic lows, spurring the recall. Davis needs to break the logjam caused by Democratic opposition to many cuts and Republican opposition to tax increases, which must pass by a two-thirds majority.

A few veteran Capitol string pullers predicted that chaos would reign without a partial rollover of the deficit. So Davis proposed that nearly $11 billion of the 2003-2004 budget deficit be transferred to future years with the state peddling “deficit bonds” to Wall Street. (The state may have to borrow another $11 billion from Wall Street just to get through this fiscal year.)

This call to invest in failure will only add to what is the highest state bonded indebtedness in U.S. history even before the deficit bonds scheme, so high that Treasurer Phil Angelides has called a moratorium on new bond issues. Republicans want the rollover financed by future cuts, Davis by a half-cent sales tax.

Either way it’s not enough to get the needed Republican votes. Now the insiders who were prescient about the rollover say that Davis and Democrats must put something more on the table: tort reform (limitations on lawsuits) or workers’-compensation reform (less money for middlemen and injured workers).

Some Republicans think they want spending caps. But that ignores what their business patrons — many of whom are okay with some tax increases — want. Spending caps may help the state’s bottom line but do little for their bottom line.

Davis and Democrats would have to choose between disappointing two “anchor tenants” — former Assembly Speaker Willie Brown’s highly descriptive term — of the party: trial lawyers and labor unions. But if the alternative is losing the governorship, hard choices become much easier.

California’s workers’-compensation system is widely derided as wasteful and inefficient. But business wants more than just cleaning out the thicket of expensive middlemen. It wants injured workers to get back to work sooner, complaining that costs for time off work have doubled since the mid-’90s. The Republican legislators privately talking about budget compromise with Davis would love to deliver that to their business patrons.

With disaster looming, Davis is already ramping up his anti-recall campaign. Labor Secretary Steve Smith is leaving the Cabinet to direct the anti-recall committee. Another committee, more high-minded and detached from Davis, is in the works. A petition countering the recall drive is moving forward. That effort can hire signature gatherers who might work for the recall, which might delay qualification of the recall long enough to move the election to next March’s presidential primary, expected to be dominated by the Democratic contest. It is in the sum of such dicey maneuvers, budgetary and political, that Davis may survive.


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