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Thursday, Apr. 15, 2004

It is the latest in a string of victories for the Republican governor, and observers say the wins could allow him to dictate terms to the Democrat-controlled Legislature on virtually any issue.

"Everyone is giving a wide berth to this guy. He's now viewed as the man who can make miracles happen," said Larry Gerston, a political science professor at San Jose State University. "He carries tremendous sway with the public, and the Legislature is almost in awe of him."

Schwarzenegger and lawmakers reached the tentative deal on workers compensation reform Wednesday. A legislative committee overcame lingering differences and adopted the bill Thursday morning, setting the stage for a Friday vote in the full Legislature.

"There's no question this is not a perfect bill," said Assembly Speaker Fabian Nunez, a Los Angeles Democrat. "What it is is an attempt to reach a compromise on a workers compensation system that's broken, a system that doesn't serve injured workers very well and a system that is costing a great deal of money with premiums increasingly on the rise."

Officials widely credit the governor with pushing through key elements of the bill, including allowing insurers and employers to select pools of doctors injured workers must use.

As he has on other occasions, Schwarzenegger threatened Democrats into negotiating. Backed by an unprecedented fund-raising machine that has brought in nearly $11 million since the recall election, Schwarzenegger vowed he would take the issue to the ballot if Democrats did not come to terms.

The chairman of the California Democratic Party, Art Torres, questioned the effect of Schwarzenegger's growing influence.

"No governor has had at his command the rapt attention of the business community and the enormous donations to do as he wants," Torres said. "To use the initiative process and the strong-arm tactics that characterize this administration, I don't think it is right."

In the six months since he took office, Schwarzenegger has forced the Legislature to repeal a law giving driver's licenses to undocumented immigrants, approve more than $1 billion in midyear spending cuts and place a $15 billion bond measure and a spending cap on the ballot. He then convinced reluctant voters to approve the bonds.

Schwarzenegger still has a number of issues he plans to tackle, including curtailing what he considers abusive lawsuits and a campaign finance initiative. But first he will have to pass a budget, which most observers said will be his greatest challenge.

"The budget is next," said GOP consultant Dan Schnur. "But he's entering the budget fight in precisely the same way he's taken on each of his earlier battles. He's indicated his preferences, drawn a broad perimeter for debate and will end up getting most rather than all he asks for.

"Then he will declare victory and move on that much stronger," Schnur said.

Schwarzenegger will need the momentum, most analysts said, as debate over the budget picks up next month when he releases his revised spending plan.

Although voters approved the $15 billion in borrowing to wipe out the state's existing $9 billion deficit and help with next year's programs, spending remains badly out of balance with tax income. The Legislative Analyst's Office estimates the state faces a $17 billion shortfall in 2004-2005.

Schwarzenegger has proposed a variety of cuts to virtually all state programs as well as borrowing and one-time solutions to cover the gap. He remains opposed to raising taxes as part of the solution.

Democrats, who control both houses of the Legislature, say they would like a mix of cuts and tax increases but have yet to challenge the governor's spending plan in any formal way _ a showdown that most expect will eventually happen.

"The budget will be his true test," said Gerston, who expects that Schwarzenegger will eventually soften on the tax issue and force Democrats to accept a number of painful spending cuts.

If so, the governor will have once again achieved a compromise victory and enhanced his political mystique.

"Schwarzenegger understands that the best way to develop clout for his next fight is to win the last one," Schnur said.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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