Sacramento Report

The arrival of a new legislative year prompts a look back at the political events of the past 12 months. Apartment owners had a good 2005 in Sacramento; no bills that the Apartment Association California Southern Cities opposed became law, several legislative compromises were achieved to clarify and improve the laws affecting property management, and the defeat of SB 51 (Kuehl) led to the expiration on January 1, 2006 of the 60-day notice requirement for tenants of more than one-year occupancy with the law now reverted back to the long-standing policy of 30-days notice. Broader political trends suggest that significant new challenges will emerge during 2006.

Any discussion of California politics should begin with an evaluation of Arnold Schwarzenegger. His 2005 did not turn out as well as he had planned. Remember that just 12 months ago the Governor reigned supreme in Sacramento. He commanded broad political support with his approval ratings exceeding sixty percent -- double the level of support that registered for the state legislature. And that support had already translated into significant political accomplishments. Schwarzenegger’s debt consolidation bond had won approval on the March 2004 ballot. Voters had similarly in the November 2004 elections backed the Governor’s calls to limit business practice lawsuits, retain the 3-Strikes Law in place, and repeal the mandate on employers to provide health insurance. The workers’ compensation reforms that he had propelled through the legislature were already producing a tangible drop in insurance premiums. Just over one year into office, Schwarzenegger had silenced the political commentators who during the Davis and later years of the Wilson Administrations had argued that California was too complex and disparate to govern.

When Schwarzenegger delivered his 2005 “State of the State” address from the Assembly Chamber last January, by all appearances he possessed the political capital to back his demands for new and further political change. He challenged legislative leaders to reform legislative redistricting, restructure the public employee pension system, alter the funding schedule for public schools, and add spending restraints to the budget process. The Governor made it clear that if legislators did not cooperate on these issues he would take his agenda to the people in a special election. At first the speech delivered its intended effect; the Schwarzenegger agenda dominated the legislative discussion. But for the first time in his tenure the Governor did not carry the day.

Undetected by most observers – including the Governor’s political advisors – some cracks had appeared in the Schwarzenegger political façade. It was true, as referenced above, that the voters in the 2004 primary and general elections had sided with the Governor in the initiative battles. But that same electorate had denied him any political coattails; Schwarzenegger’s campaign to elect more Republican legislators had fallen on deaf ears as Democrats retained all their seats in the state Senate and Assembly. Republicans shrugged off their failure to gain seats as a byproduct of California’s dissatisfaction with President Bush, who led the ticket that all the Republican candidates had run on. Democrats nonetheless felt emboldened by their electoral successes. Silent during 2004 when first confronted by Schwarzenegger, the Democratic legislative leadership interpreted the election results to mean that they could survive Schwarzenegger and – more important – sustain a broad opposition to his proposals. They decided to fight.

Democrats enjoyed two advantages in their legislative battles with the Governor. Some technical blunders in the drafting process required that the Governor withdraw his proposed pension-reform initiative. At the same time, Democratic constituencies – the California Labor Federation, AFL-CIO, the California Nurses Association, and the California Teachers Association chief among them – mounted a political attack in the media against the Governor. During 2005 any Californian with normal television viewing habits saw tens and perhaps even hundreds of TV spots criticizing Schwarzenegger. The opposition, which had become alienated from the administration during 2004, lent ballast to the Democrats’ stance in the legislature. During the first quarter of 2005 the legislature rejected each of the Governor’s four reforms, leaving Schwarzenegger to confront his own promise that he would take these issues to the people if the Assembly and Senate failed to act.
Hindsight is 20/20, but in retrospect it appears obvious that Schwarzenegger never had a chance. The particulars are well known; the Governor followed through on his threat first delivered last January and called a special election to consider his reform proposals. At the ballot box the voters delivered a quite stinging – and for Schwarzenegger his first – political defeat. Exit polls indicated that voters objected as much if not more to the process of a special election as they did to the particular content of the proposals offered. For apartment owners the political events of 2005 amounted to political theatre; as citizens you had an interest in the initiatives being decided but the results did not exert a direct effect on your businesses. That could change.

The threshold question regarding the 2006 session of the California Legislature concerns “what’s next?” Will the Democrats and their allies continue to focus their energies on attacking Schwarzenegger with an eye toward driving him from office come November? Or, with the balance of power in Sacramento now weighted more in their direction, will Democrats attempt to engage Schwarzenegger on a reform agenda more to their liking? The posture Democrats take will, as much as anything, shape the general debate on issues – including apartment issues – during 2006. An escalation in partisanship could require business friendly Democrats to follow their leadership and vote a more liberal line. That would upset the coalition of moderate Democrats and Republicans that delivered the winning votes on apartment issues this year. Events during the next few months will likely answer this question.

Schwarzenegger too remains a work in progress; what lessons will he draw from his 2005 experiences? The eclectic nature of his operation – a democrat now serving as his chief of staff, an increasingly influential First Lady, a new team of Republican political consultants coming on board – suggests that he will be getting different and differing feedback this year. The smart money says that the Governor will look for a return to the bi-partisan characteristics of his earliest days in office. That’s what has worked for him and politicians – particularly during election years – seek the comfort of past successes. He’s never been a rock-solid pro-business governor in the mold of George Deukmejian but his life experiences have given him a core sense that the best economic policy is to foster a favorable business climate. By and large he is and will remain sympathetic to the business interests of apartment owners.

During this coming year the apartment owners lobby should seek to protect its moderate votes. That means not simply applying the usual tools of politics – campaign and media support for allies – but also working issues generically. Our efforts will begin with the goal of keeping apartment issues out of the broader political maelstrom. If partisanship returns to a boil the Democrat leadership likely would begin to look for issues that could be used to drive a wedge between the governor and his business supporters. Staying off that list means staying out of that fight.
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