The state’s business interests that rushed to Gov. Arnold Schwarzenegger’s side in order to boost their agendas are growing concerned over recent missteps that have cut into his popularity and apparently doomed much of his reform agenda.

At stake in the short run are the two remaining business-backed measures that Schwarzenegger declared would be on a special-election ballot this November: a budget spending control initiative and a proposal to extend the threshold for teacher tenure.

The concern is that if the governor can’t get these proposals passed in November, he may be a spent political force, either declining to run for re-election or being ousted in his re-election attempt.

“None of the business lobbyists are happy with the way things are unraveling for the governor,” said Tony Quinn, co-editor of the California Target Book who used to lobby for business groups. “They had hoped to push an activist agenda. Now, they could be back at square one.”

What’s frustrating for many business lobbyists is a sense that much of the trouble appears to be self-inflicted. A series of political misjudgments led to the withdrawal of two of the original initiatives on the reform agenda: a state pension overhaul and enacting merit pay for teachers.

Another initiative to redo the redistricting process was ordered off the ballot last week because of discrepancies in wording between two drafts. Only the teacher tenure and the budget spending limit measure are unchallenged.

Business interests also back a third measure that made it to the ballot, restricting the use of union dues for political purposes, but the governor hasn’t signed on yet.

Schwarzenegger also has been dogged by conflict-of-interest charges surrounding his personal financial dealings. He was forced to drop a multimillion-dollar contract with the publisher of two men’s fitness magazines after the extent of the deal including a share of ad revenues from nutritional supplement makers was made public through Securities and Exchange Commission filings. Schwarzenegger vetoed a bill to regulate the sale of nutritional supplements to minors in California last year.

Last week, Democrats filed a complaint with the state Fair Political Practices Commission, alleging that the arrangement broke state conflict-of-interest laws.

Scrutiny has intensified about Schwarzenegger’s other financial dealings, including rent payments he collected from campaign committees using a Santa Monica building he owns.

All the while, the governor’s popularity has plummeted, with only 34 percent approving him in a Public Policy Institute of California poll released last week. Schwarzenegger drew favorable ratings in the mid-60s a year ago.

No active business lobbyists or advocates contacted for this story would be interviewed on the record. Several said they did not want to speak ill of a governor they still support publicly. But privately, they were sharply critical of both Schwarzenegger and his advisers for failing to see the mostly predictable stumbling blocks and failing to respond to them after the fact.

Schwarzenegger political consultant Todd Harris scoffed at the notion that special election measures are in trouble. “No one ever said reforms this big would be easy or be a smooth road. Yet the governor’s reform agenda is alive and well,” Harris said.

Rushed initiatives


Business lobbyists say Schwarzenegger’s decision to rush initiatives onto a special election ballot without proper vetting left the proposals open to numerous challenges.

“This all stems from his decision in January to make this a year of reform,” one business advocate said. “When that decision was made, there was no solid program behind it and there was no time to come up with one before the fast-approaching special election deadlines.”

Attorney General Bill Lockyer crafted ballot summary language for the pension overhaul measure that said it might deny payments to widows of police and firefighters killed on the job. While no such provision had been explicitly stated, there was no wording that refuted this interpretation. An uproar ensued and Schwarzenegger was forced to withdraw the measure.

Weeks later, the teacher merit pay initiative was quietly withdrawn, ostensibly because there wasn’t enough time to collect signatures. But many said that drafting flaws, such as barring the firing of teachers for alcoholism, doomed the measure.

Harris said that when the measures were being prepared, the governor had been barred under Proposition 34 from exerting any control over the committees doing the drafting. It was only after a state Supreme Court ruling in February that Schwarzenegger could assert any control over the process. By that time it was too late, given the late April deadlines for submitting signatures to the Secretary of State’s office.

Beyond the internal flubs is the public employee unions’ potent media campaign that the governor has struggled to counteract. “By not forcefully making his case right out of the starting gate, he basically allowed the opponents of these measures to define the message, which is precisely what they’ve done,” Quinn said.

Harris said that public employee unions have been helped by an infusion of between $25 million and $30 million, while the main committee backing the governor’s measures, Citizens to Save California, has raised about $10 million. “Contrary to public perception, we didn’t have tens of millions of dollars we could throw at this right away. We were still raising money to qualify the initiatives in the first place,” he said.

Bruce Cain, professor of political science at the University of California, Berkeley, said the problem is more basic. “Republicans believed that Arnold’s celebrity could help sell some things that otherwise might not sell in a largely Democratic state,” he said. “They saw how effective he was on the ballot measures last November just by making 30-second ads and public appearances and assumed he could do it again. There simply was no allowance for having to make arguments on the substance.”

While business groups are not throwing in the towel, there is disagreement on what was needed. One lobbyist said that Schwarzenegger needs to air his cases for the ballot measures as soon as possible to counter all the opposition. But Quinn said the better course would be to drop the measures altogether and seek compromises with the Legislature.

As of late last week, negotiations with the Legislature to try to reach such a compromise were continuing, but there was little chance for an all-encompassing deal, especially after Democrats filed their ethics complaint against Schwarzenegger.