GOVERNOR/42″/mike1st/mark2nd

By HOWARD FINE

Staff Reporter

California’s business agenda could be on the verge of getting a swift kick in the pants.

With Democratic Lt. Gov. Gray Davis holding on to a significant lead going into next week’s elections, and with the state Legislature likely to remain in Democratic hands, there is the very real possibility of Democratic domination in Sacramento for the first time in 16 years.

Such a prospect would change the policymaking landscape in major ways.

It means, first and foremost, that businesses in California would no longer be able to count on a Republican governor vetoing Democratic legislation to raise the minimum wage, restore daily overtime pay, or broaden corporate liability. (Davis has already said that he supports raising the minimum wage and restoring daily overtime pay.)

Nor could companies count on a Republican governor making business-friendly appointments to key bodies like the state Coastal Commission, which regulates coastal development, or the Industrial Welfare Commission, which sets wage-and-hour rules.

“The governor wields tremendous power,” said Assembly Speaker Antonio Villaraigosa. “He controls the budget process with his line-item veto and he has total control over the bureaucracy. He can really set the agenda.”

Certainly, a lot can change in the next few days. California’s Republican candidates for governor have been known to make dramatic last-minute charges a distinct possibility in a year that’s had more than its share of political gyrations. Heavy Republican turnout could also play a key role in the final results.

Still, many political watchers consider Davis to be in a good position both because he appears to have an adequate amount of cash in the last crucial days of the campaign, and because he has developed a broad coalition that includes labor, women, Latinos and African Americans.

A Davis victory wouldn’t necessarily be a disaster for business. Already, there appears to be some areas of common ground, such as more funding for higher education, research-and-development tax credits, and more trade with Mexico all of which Davis says he supports.

Still, Davis’ business agenda falls significantly short of the platform set by Lungren, who says he supports tort reform, lower state income and corporate tax rates, and reform of the state’s environmental laws. Those are all key items on the agendas of the state’s major business groups.

With no emotion-laden initiatives on the ballot, like propositions 187 or 209, and with no presidential election, voter turnout could play a larger-than-usual role. And how many voters come out on Nov. 3 is anyone’s guess. Just a few weeks ago, conventional wisdom held that the Clinton scandals in Washington would keep many Democrats at home and lead to a big advantage for the GOP. But with polls showing continued support for the president and weakening support for the Republican-led Congress all bets are off.

Meanwhile, labor unions and the state Democratic Party are pouring millions of dollars into campaigns up and down the state, especially for higher-office races. In fact, in most of the key races, including for governor and U.S. Senate, Democrats have raised more money than Republicans, giving them a substantial advantage in the campaign’s closing days.

By Sept. 30, Davis had raised $21 million compared with Lungren’s $17 million. Much of that funding has come from two traditional Democrat allies: organized labor and trial lawyers. Hollywood executives like Dreamworks SKG’s Jeffrey Katzenberg and Univision Communications Inc.’s A. Jerrold Perenchio also have chipped in with substantial contributions.

Lungren, meanwhile, has received contributions from some of the state’s biggest businesses, including Chevron Corp., Hilton Hotels Corp. and Edison International. He also has received substantial donations from the Republican Party and conservative groups like the Allied Business Political Action Committee.

In addition, the National Federation of Independent Business has endorsed Lungren after a poll of its members found overwhelming support. “Lungren is a guardian of small-business interests,” said state NFIB Director Martyn Hopper. “We like his views on taxes and his stand against raising the minimum wage. We also like his stand on tort reform.”

But according to Sacramento-based Republican consultant Tony Quinn, it may be too little, too late.

“Business is finally coming in for Lungren,” Quinn said. “With the Clinton scandal and with very little movement in the polls, business and the Republicans in general were slow in mobilizing their resources. The delay may have hurt Lungren, because it took him longer to get going.”

While Lungren is considered the preferred candidate, many businesses are contributing to both campaigns, because if Davis wins, they will have to play ball with him.

Political analysts and consultants say Lungren has not helped his own cause.

“Lungren was never able to achieve momentum, and there has been a growing sense of dissatisfaction among fellow Republicans with the way he has run his campaign,” said Steve Scott, political editor of the California Journal. “Part of the problem is that he never found an issue that really resonates with voters.”

Both candidates instead have focused extensively on education, which they perceive as the top issue among voters. Davis has been campaigning for more education funding, while Lungren has stressed his support of school vouchers and greater teacher accountability.

More mainstream business issues, on the other hand, have gotten short shrift, although the candidates have put out briefing papers on their business agendas.

Both Davis and Lungren support expanded research-and-development tax credits, as well as investment credits for businesses moving into or expanding in California. Both support a sharp reduction or outright elimination of the business tax paid by start-up companies. But, unlike Davis, Lungren supports reducing personal income tax levels and wants to eliminate the car tax.

On the trade front, Davis said he wants to meet with officials from Mexico and Pacific Rim states on a regular basis and set up annual trade missions to those and other countries. Davis has said he would try to repair relations with Mexico that were damaged by the passage of Proposition 187, which cut off benefits to illegal immigrants.

Lungren pointed to his strong support of the North American Free Trade Agreement and said he would lobby for similar agreements with other countries in Latin America and Asia.

On health care reform, both Lungren and Davis said they support setting up individual medical review boards to which patients could appeal treatment decisions made by their health maintenance organizations.

But Davis and Lungren part company on giving patients the right to sue their HMOs. Davis supports unlimited rights for patients to sue, while Lungren supports a more limited right to sue that would not include disputes over HMO coverage decisions.

Davis and Lungren also differ sharply on tort reform. Davis would back some curbs on frivolous lawsuits, but opposes the “loser pays” concept backed by the major business lobbies. Lungren, on the other hand, supports “loser pays” and caps on damages.

“The manipulation of our legal system is damaging to the business climate in California,” Lungren said.