California's business climate, so central a theme in Gov. Arnold Schwarzenegger's first State of the State speech, got barely a mention the second time around.


The governor's 30-minute address scarcely included initiatives to streamline the regulatory process nor did he say anything about daily overtime pay, regulatory review of regulations for their business impact or reducing health care mandates on businesses and insurers.


Still, business groups heaped praise on Schwarzenegger. Both the California Chamber of Commerce and the California Manufacturers & Technology Association issued press releases saying they would support the governor's reform agenda.


"We're not at all disappointed with the governor's speech," said Michael Shaw, assistant director of the National Federation of Independent Business. "He did reaffirm his pledge not to raise taxes and he did promise some regulatory reform."


Shaw and other business representatives say that Schwarzenegger's focus on budget and pension reform, merit pay for teachers, redistricting reform, and consolidation of state boards and commissions are worthy goals that will indirectly benefit the state's business climate.


"Like any small business, the state needs to bring spending in line with revenues it takes in. Otherwise, it can't provide the services and build the infrastructure that all residents and businesses need," Shaw said.


No doubt the good will towards Schwarzenegger is a reflection of his actions last year, when he vetoed virtually every measure regarded as anti-business. Many of those measures have been reintroduced this year including raising the minimum wage and expanding health insurance mandates but business groups believe that Schwarzenegger will take out his veto pen once more.


They also may also be positioning themselves for what is looking increasingly like a free-for-all at the ballot box later this year. The governor has promised to take his reforms to the voters if the Legislature doesn't act on them. And Democrats have said they intend to put their own measures on the ballot, including the minimum wage increase.


"Given his track record with the voters, you want the governor on your side on the issues that matter to you," Shaw said.


War Against Unions


If there was one "enemy" in the governor's State of the State speech last week, it was public employee unions. His proposals for merit pay for teachers and public pension reform prompted a virtual declaration of war from union leaders.


Since it's unlikely that Democrats in the Legislature will pass these proposals, Schwarzenegger might need to go directly to the ballot box with a special election, probably in late summer or early fall.


In doing so, he is not only betting that his popularity will carry the day, but apparently crafting a way to put many of the proposals in a single package.


"If you did these things one by one, the impacted public employee unions would be able to do an effective job in mobilizing against them," said John Ellwood, professor of public policy at the University of California Berkeley. "But if this is set up as an entire package, where it's 'Me vs. all the special interests in Sacramento,' it may stand a better chance of passing.


"And don't forget, probably the biggest draw for this election would be redistricting," Ellwood added. "This would bring out Republican voters more likely to join with the governor in taking on the unions."


Sales Tax Gambit


A political consultant is voicing skepticism over the latest plan to get sales tax funds for more cops.


Harvey Englander, who has successfully managed campaigns for previous sales tax hikes, said that L.A. City Council President Alex Padilla's creative solution to the quandary might not do the trick.


Faced with the failure last November of a countywide sales tax increase for the hiring of more cops, Padilla last week came up with another strategy to get around the two-thirds vote requirement.


He wants to split the sales tax proposal into two separate ballot measures, each requiring only a simple majority of 50 percent plus one. One would be a general-purpose citywide half-cent sales tax increase, while the other would earmark the tax revenues for public safety.


Under Proposition 218, a general-purpose sales tax increase only needs a simple majority vote, while a sales tax hike earmarked for a specific purpose needs a two-thirds vote.


Even if it withstood likely legal challenges, there's a good chance the Padilla proposal would also come up short at the polls.


"Because of the way it would have to be written, this proposal has no guarantees on how the money can be spent," Englander said. "That's going to make it a lot harder to pass, even at the new, lower 50 percent threshold."


Also, Englander said, "there will be the impression that this is a sneaky way of trying to get this past the voters."


Englander said a better approach would be to take another swipe at a countywide sales tax increase. Last November's Measure A fell just short, with 60 percent support.


"The campaign for Measure A didn't get the proper level of support in areas where it should have, like South L.A.," Englander said. "If a future campaign can do a better job getting out the message in those communities, it can win."


Staff reporter Howard Fine can be reached by phone at (323) 549-5225, ext. 227, or by e-mail at hfine@labusinessjournal.com .

For reprint and licensing requests for this article, CLICK HERE.