California voters' resounding defeat of Gov. Arnold Schwarzenegger's slate of ballot initiatives has liberal legislative leaders and their labor union allies feeling emboldened as they try to push their agendas through Sacramento.

That, in turn, has business interests concerned about more legislation and ballot measures targeting business next year legislation that Schwarzenegger might not veto and initiatives that the politically weakened Republicans may not be able to thwart.

Adding to their worries is the growing concern that Schwarzenegger could be defeated next November, returning Sacramento to one-party rule.

"When you begin to get some victories, you tend to get greedy. We are concerned that labor unions, in particular, are going to go for everything they've ever dreamed of," said Michael Shaw, assistant state director for the California chapter of the National Federation of Independent Business.

Already, legislative leaders have laid out an ambitious agenda for next year, including expanding health care coverage, legislation to reduce the price of prescription drugs, raising the minimum wage, restoring money that was previously promised to schools, going after tax cheats and putting together a multi-billion dollar infrastructure funding package.

"The governor has to put down his conservative agenda and find an agenda more palatable to the people," Assembly Majority Leader Dario Frommer, D-Los Angeles, told listeners of KCRW-FM's "Which Way, L.A.?" "Health care should be at the top of that agenda, as should be fighting for lower prices for prescription drugs, providing more money for transportation infrastructure, helping get more funding for higher education and helping to restore $2 billion in school funding."

Frommer said bills to raise the minimum wage, increase health insurance for children and crack down on tax cheats would be back on Schwarzenegger's desk next summer. The fate of other controversial bills, like granting driver's licenses to illegal immigrants, will be determined in caucus meetings over the next several weeks, he said.

Several of these measures, including a minimum wage hike and new health care mandates, are anathema to business interests, who maintain that they would add costly burdens at a time when costs are already spiraling out of control.

Democrat lawmakers are also talking about reopening workers' compensation reforms passed 18 months ago. They want to roll back benefit decreases to injured workers, cuts that some have labeled as draconian.

'More roads, bridges'
If there's any bright spot for business, it's the gathering momentum for a multi-billion dollar transportation infrastructure bond to be placed on the ballot next year, probably in June.

In his election night "concession speech," Schwarzenegger appeared to back such a measure. "We've got to rebuild our infrastructure. So much is needed," he told supporters in Beverly Hills on election night. "We need more roads, bridges, more schools, nurses, firefighters. We also need more bipartisan cooperation to make this all happen."

State Senate President Don Perata, D-Oakland, held a press conference 12 hours later to highlight his proposal for a $10 billion transportation infrastructure bond that he intends to reintroduce into the Legislature in January.

Business groups have long clamored for just such a bond, saying that the state is falling further behind each year in maintaining what once was the nation's top system of roads, bridges and water works.

"There's no question we have these huge infrastructure needs," said Bill Hauck, president and chief executive of the California Business Roundtable, a group composed of executives from many of the state's largest companies. "We've been living on the legacy of previous generations. This should not be a partisan issue."

Politically, getting a bipartisan agreement to place a transportation bond on the June or November ballot would bring benefits to both Schwarzenegger and the Democratic legislative leadership, just as both sides gear up for a fall showdown in the gubernatorial race.

But the window for getting an agreement is short.

"This really would have to be done during the first quarter of the year. After that, once the gubernatorial campaign really gets going, there's not going to be much incentive among Democrats to have Schwarzenegger get a lot of victories," said Barbara O'Connor, director of the Center for the Study of Politics and the Media at California State University Sacramento.

As the gubernatorial campaign heats up, Democrats will be more likely to pass measures designed to put Schwarzenegger in a tough political spot, forcing him to choose between retaining business supporters and recapturing his appeal to Democrats and independents.

In the last two years, Schwarzenegger has used his veto pen on virtually all the measures that business lobbyists labeled as "job-killers." But if he cannot regain any of his former popularity in coming months, the governor may not veto all these bills the next time around.

"The concern is that one or two of these might just slip through this time," Shaw said. "That's why it falls to the business community to make sure the governor understands the costs such bills would impose on business."

Reelection drama
Adding pressure on Schwarzenegger could be the prospect of several bills ending up as ballot initiatives next November including measures to increase the minimum wage and require employers to provide health insurance.

There's also actor Rob Reiner's proposed initiative to tax millionaires to fund universal preschool education, likely to be on the June ballot. Most business groups are either neutral or opposed, but in a surprise move last summer, the Los Angeles Area Chamber of Commerce board voted to endorse the measure.

Labor leaders last week did not publicly address the possibility of such initiatives. Instead, they focused on their next goal: defeating Schwarzenegger in next year's election.

"We need a governor who cares about the issues important to the lives of workers. Gov. Schwarzenegger has demonstrated that he does not care about the issues important to the lives of workers. Therefore, the labor community will work to defeat the governor," Los Angeles County Federation of Labor executive secretary Martin Ludlow said at a post-election news conference.

The possibility of losing Schwarzenegger as governor a prospect heightened with the sweeping defeat of his initiatives last week is perhaps most troubling to the business community.

"The unions will do everything they can to rid the state of Arnold next year," said Tony Quinn, a Sacramento political analyst who formerly consulted for business organizations. "They believe and rightly as of right now that the people want to get rid of him, too. If he's run out of office, we will be back to a one-party state that's openly hostile to business. There will be no one there to veto bills that are bad for business. The worry of Republicans and business on this score is very well-placed."

But Schwarzenegger supporters say it's still far too early to count him out. Hauck noted that former Gov. Pete Wilson was down 23 points in the polls to former state Treasurer Kathleen Brown one year before the 1994 election. Wilson ended up trouncing Brown by 10 points.

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