The Blog

Arnold the Strong

Governor Schwarzenegger forces his way through California's fiscal mess--and there's nothing anyone can do to stop him.

12:00 AM, Apr 20, 2004 • By BILL WHALEN
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HIS ONE-YEAR "paper" anniversary isn't for another seven months, but yesterday Arnold Schwarzenegger got a piece of paper he's long coveted. The Governator signed a workers' compensation reform bill that's as much a testament to his political skills as his promise to improve California's business climate.

Schwarzenegger campaigned for workers' comp reform during last fall's recall campaign. He raised the topic again in his January State of the State Address, throwing down the gauntlet in the form of a March 1 deadline for the legislature to act. "Modest reform is not enough," Schwarzenegger declared. "If modest reform is all that lands on my desk, I am prepared to take my workers' comp solution directly to the people and I will put it on the ballot in November."

But March came and went in Sacramento without the legislature heeding his warning. Still, workers' comp didn't end up on the November ballot. Why? Because, in post-recall California, it's Arnold's game and Arnold's rules.

And here's how the Governator played this particular game.

SCHWARZENEGGER IMPOSED different March deadlines for the legislature to complete its work. However, they were flexible deadlines. The only one that wasn't subject to change was last Friday's--the final day for turning in signatures to qualify an initiative for the November ballot. Not coincidentally, that's the same day the legislature finalized the reform measure.

Behind closed doors, his staff worked with the legislative leadership. When the progress slowed, Schwarzenegger would leave the Capitol--to visit Costco stores in Sacramento and Los Angeles--to mug for the cameras and collect signatures for his potential initiative. Message to the legislature: I won big at the ballot in March; I'll do it again if need be.

Even when he left California for some quiet time with his family, Schwarzenegger played mind games with the folks in the Capitol. While on a Maui vacation in early April, the Governator casually suggested that it might be best for all concerned if California's full-time legislature, seemingly unable to do its job, was relegated to part-time status. Message to the legislature: you don't want to see me angry.

By working with Schwarzenegger, lawmakers got a workers' comp bill that placated the two parties. The Governator persuaded Democrats to give up their demand that insurers lower the rates they charge businesses. Instead, Democrats will pursue that through separate legislation, which Schwarzenegger may or may not support. By taking rate regulation off the table, Schwarzenegger won over Republicans who otherwise wanted tougher limits on job-related medical and legal claims.

California, in turn, got the promise of billions in savings to the state's 90-year-old workers' comp system--music to the ears of many California businesses, which currently suffer under rates double the national average. One preliminary estimate, by UC-Berkeley's Survey Research Center, predicts an overall reduction of $13.5 billion, thanks to medical-cost containment measures and other reforms, from a system that otherwise would have skyrocketed to $30 billion in 2006 without the change.

SO WHAT TO MAKE of this latest Schwarzenegger success? It may be his most impressive accomplishment to date, given that he used leverage rather than brute force, as he did in winning recall and passing Proposition 57 and 58 in last month's primary.

Let's assume the Governator didn't really want to take workers' comp to the ballot--it would have cost both sides up to $60 million; and there was an outside chance that Schwarzenegger, for the first time, might have lost a political battle. Still, he kept alive the prospect of the initiative as a means of goading the legislature into action. Why? Because he was shrewd enough to recognize that Democrats also wanted to avoid a fight. The left-leaning unions already fear him--as witnessed by the California Teachers Association's decision to drop a November initiative that would have raised business property taxes to pay for preschool programs and higher teachers' salaries. Schwarzenegger opposed the measure; CTA didn't want to wager $20 million that they could defeat him in a popularity contest. With workers' comp settled, unions will put their muscle behind a November initiative that mandates healthcare coverage for California small businesses.