Gov. Turns Attention to Troubled Workers’ Comp

SACRAMENTO —  Leaving little time to savor passage of two ballot measures, Gov. Arnold Schwarzenegger devoted Wednesday to possibly an even more complex and daunting task: overhauling the state’s costly workers’ compensation system.

Schwarzenegger met privately in the Capitol with the four Republican and Democratic legislative leaders, briskly pivoting to an issue that has long eluded compromise in Sacramento and is widely blamed for chasing business to states where insurance costs are stable.

The governor’s advisors are confident that Tuesday’s election results renewed the message that Schwarzenegger is the capital’s dominant political figure, and if lawmakers reject his attempt to revamp workers’ comp, he will marshal his popularity in waging the same sort of aggressive, well-financed ballot campaign that yielded a decisive victory on Propositions 57 and 58.

“What it means is his personal prestige, his persuasiveness all have been enhanced, and the Legislature, I think, is having to deal with a very different governor than in Gray Davis,” Gov. Pete Wilson, a Republican, said in an interview Tuesday night at Schwarzenegger’s victory celebration in Santa Monica. “Not just philosophically, but in terms of the necessity for them to respect the kind of power this governor really has.”

The governor is rolling out his agenda in discrete stages, hoping to notch an unbroken string of victories during his first year in office. Part One of the playbook was passage of Propositions 57 and 58, a $15-billion deficit bond measure and a balanced-budget amendment to the state Constitution.

Now comes workers’ compensation. By mid-June he hopes to pass a state budget, avoiding the disputes and missed deadlines of past budget seasons that have stretched into the fall. The idea is that each victory makes the next one a bit easier.

Leading Democratic lawmakers insisted Wednesday that they would not be cowed in the negotiations now starting to intensify -- despite Tuesday’s election results.

Senate President Pro Tem John Burton (D-San Francisco) noted that Propositions 57 and 58 never would have even reached the ballot had his fellow Democrats not worked to salvage a legislative deal that briefly fell apart in December.

“If Democrats didn’t think that was in the best interests of the state -- and if Democrats thought somehow this would make Arnold the king and they came out and opposed this -- it would have gone down the tubes,” Burton said. “But it was in the best interests of the state. There were some who said, ‘You’re helping Arnold.’ And I said: ‘No, we’re helping the state.’ ”

After legislative leaders met with Schwarzenegger on Wednesday, Burton emerged to say: “We made progress today. I’m very hopeful we’ll have a workers’ comp package.”

He added that a compromise was “doable” because “once you agree on something, it’s ‘bing, bang, boom.’ ”

State finance officials will rush to sell the bonds approved Tuesday as quickly as possible. They hope to secure the money in time to cover $14 billion in short-term loans that the state must repay to a syndicate of banks in June.

They have already formed a working group that includes Schwarzenegger’s finance director, the state controller, the treasurer and others, and will map out how to get the state the best interest rates on any borrowing, which would be repaid over the next eight to 14 years.

This week the state will name a finance team of underwriters, bond counsel and financial advisors to push the bond sale. State Treasurer Phil Angelides said it would be “the largest municipal bond sale in U.S. history.”

Wall Street rating agencies on Wednesday applauded California voters for approving the deficit bond issue, raising their outlook on California finances -- although not the state’s credit ratings. But they urged lawmakers to quickly close the gap between what the state spends and what it takes in.

Until the Legislature and Schwarzenegger pare the structural deficit that has plagued the state budget for the last three years, the rating agencies said, California cannot expect to see improvement in its worst-in-the-nation credit standing.

Even with Tuesday’s vote, “The state’s increased ability to sell bonds to fund current operations merely postpones the difficult taxation or expenditure reduction decisions,” said Standard & Poor’s analyst David Hitchcock. “They’ve bought themselves some time. We’ll see how they make use of it.”

Without decisive steps toward shrinking the structural deficit, Hitchcock said, the state could again find itself in a serious cash crisis.

Joel Fox is the official proponent of the workers’ compensation ballot measure that Schwarzenegger would support in November if he could not make a legislative deal to his liking. Citing the victory of Propositions 57 and 58, Fox said he thought it would make it easier for Schwarzenegger to make a deal. “It’s evident he can take an issue to the people and sell them on it,” Fox said.

Fox, who is president of the Small Business Action Committee, predicted that the governor would find a legislative compromise. Asked what compromise would persuade him to keep his measure off the ballot, Fox said: “If we can save over 25% of the cost of workers’ comp, we’d be happy with that.”

Fox had hoped to begin gathering signatures for the ballot measure Wednesday; instead, the process will begin Friday because of a delay in giving an official title and number to the measure. It includes a constitutional amendment that would need 8% of the number of votes Schwarzenegger got in last fall’s gubernatorial election -- more than 500,000 signatures.

Fox said his goal was to gather about 950,000 signatures, so there would be breathing room if some were disqualified.

One member of the governor’s political team indicated that they would pay signature gatherers $1.50 per name.

But with lawmakers still absorbing the results of Tuesday’s vote, some predicted that legislators would eagerly strike a deal, in hopes of avoiding charges that they were obstructing a popular governor.

If Schwarzenegger’s attention is riveted now to workers’ comp, corners of his administration are preoccupied with other pieces of his agenda.

The governor’s office is attempting to negotiate compacts with Indian tribes that would guarantee the state a bigger share of gambling revenue.

Times staff writers Evan Halper, Eric Bailey, Patt Morrison and Marc Lifsher contributed to this report.