Assembly Speaker Fabian Nu & #324;ez, D-Los Angeles, recently spoke with Business Journal reporters and editors on a variety of topics.

Question: How have you been able to work with the governor?
Answer: In my first year as Speaker, I will admit I didn't have a great relationship with the governor. It was rocky at times. But at the end of that first year, with John Burton gone in the Senate, I learned that in order to get things done, you have to develop a relationship with the governor. I got to know him on a personal level.

Q: How did you do that?
A: At the end of last year, after the elections in which the governor and his allies targeted Democrat lawmakers in marginal seats and failed to defeat any of them, I didn't hold any press conference to gloat. Instead, I picked up the phone and called him and said, "You vetoed all my bills, took on all my endorsed candidates and you were tough. I want to work with you." He said, "Fine," and we got together. And from that moment on, we spent more and more time together. We went to dinner, smoked cigars, got our families together and we got to know each other. The irony is that things have gotten worse in Sacramento just as my relationship with the governor has gotten better.

Q: How has that relationship helped things?
A: Two months before the deadline to declare a special election, he and I were working quietly to try to negotiate the deals. He kept getting pulled in one direction from his allies and the Republican Party and I got pulled in the other direction. At the end, he brought in Bob Hertzberg as a mediator and we got very, very close to cutting a deal.

Q: So what happened?
A: Honestly, the deal would have upset the unions and would have made a lot of people very unhappy. We were ready to do some pretty challenging things for Democrats, including mid-year budget cuts. And some Republicans thought he would look too much like a Democrat if he did this.

Q: You staked a lot on getting that tax credit package through for filmmakers. Why did that collapse?
A: The negative editorials that we received up and down the state weren't helpful. But if folks in California want a strong business climate in this state, it's going to cost us. The competition for film dollars is enormous today. We're losing those dollars to other states. If they are allowed to set up their infrastructure, we could end up losing a whole lot more so that in a few years, only 15 percent or 20 percent of film production takes place here. That's not what we want.

Q: Did the fact that Hurricane Katrina dealt a body blow to Louisiana's film industry play into this at all?
A: No. It really came down to the fact that we knew a few Democrats weren't going to go along with this, so we needed to pick up a couple Republican votes. And we just couldn't get them.

Q: You plan to bring this back next year. Why do you think its chances will be better then?
A: I have a commitment from all the legislative leaders including the two Republican leaders that we would deal with the issue of tax credits for Hollywood productions. If we don't deal with this in legislation, we'll deal with this in the budget.

Q: Is the governor on board?
A: We can't do this without the governor.

Q: What about bringing back the manufacturer's tax credit and other measures to help business in the state?
A: I'm open to considering these things. We as Democrats believe that we must improve the quality of life for all our people. That can be married with the Republican belief that we need a strong economy. You can't fund education, health care and social services if you don't have a strong economy that generates revenues.

Q: What is your take on the special election?
A: I think all the governor's initiatives end up losing, as do a couple of other initiatives that some folks would like to see passed. I think turnout will be around 40 percent. People know about this election, but they're not responding to it positively.

Q: What about the governor next year?
A: After all his initiatives go down, I thing the governor rehabilitates himself. He's smart and he's a fighter. He's going to reach out to us. And we Democrats have got to work with the governor. We've got to sit down and figure out what we do on transportation and on health care. The bullying has got to stop.

Q: Almost sounds like you think he'll be reelected.
A: I'm endorsing Phil Angelides and I think he will be the next governor. Just because the governor has a strategy to rehabilitate himself doesn't mean he'll win the election. Angelides has enthusiasm and can mobilize the party. Also, business is not afraid of him, despite his rhetoric. They know he's a business guy, too.

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