Gov.’s plans stir up business rift

SACRAMENTO —  As the 2007 Legislature dives into another session of lawmaking, business lobbyists are on alert.

They have new lawmakers to meet, of course, along with new committee chairs to brief, new legislation to push and bills to kill. But this year, California businesses have another challenge: an activist second-term governor with an ambitious -- some call it overextended -- agenda.

Gov. Arnold Schwarzenegger is offering sweeping proposals on universal healthcare, global warming, transportation and prison construction this year, and some in the business community who last year embraced him during his election campaign now have their doubts.

“I think there’s some very real concern that he’s changing his position on a lot things that got him elected,” said Christopher Wysocki, executive director of the Consumer Alliance for a Strong Economy, a Sacramento-based advocacy group that says it represents 9,000 small-business owners, farmers and consumers.

The governor’s push for new programs is a bit unsettling to many business executives, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “My sense is that, yes, you’re starting to get some dissatisfaction with some of the governor’s proposals,” he said. “There’s a nervousness about the healthcare provisions, the global warming thing.”

But Schwarzenegger’s plans are still unfolding, evolving and subject to much review and compromise in the months ahead. His spokesman Adam Mendelsohn predicted that the outcome would be good for business.

“All the new ideas he’s developing are done with the consideration of how he is going to increase jobs and the economic growth of California,” he said.

This year’s early grumbling contrasts with the halcyon days that followed Schwarzenegger’s victory in the October 2003 recall election that ousted Democratic Gov. Gray Davis.

During his first year in office, the Republican gave business its biggest boost in years by overhauling the state’s troubled workers’ compensation insurance system, saving employers more than $8 billion. That fall, he ended his first full legislative session by vetoing all the “job killer bills” identified by the California Chamber of Commerce.

Business has rewarded him handsomely since the 2003 recall, contributing more than $114 million to the governor’s various political campaigns and propelling him to reelection in November.

But now, some business leaders are voicing nervousness about Schwarzenegger’s aggressive moves. They say they see an ever-expanding state bureaucracy and they take note of the close relationship he’s forged with the Democrats who control the Legislature. And they wonder whether he broke a political promise for no new taxes when he suggested new fees to pay for universal health insurance.

“This could be a burden on the majority of small business,” said Joel Fox, an anti-tax activist who heads the Sacramento-based Small Business Action Committee. “We don’t know how this is going to turn.”

The first hints of business skittishness with the governor surfaced late last year.

Some corporate executives and small-business owners fought Schwarzenegger’s landmark law regulating carbon emissions that contribute to global warming.

Many also griped when he signed a bill, strongly opposed by restaurateurs and small retailers, that raised the minimum wage by nearly 19%.

But in January, Schwarzenegger went a lot further toward enlarging government’s role in healthcare. He proposed a $12-billion universal health insurance plan that would impose a 4% payroll tax on employers who don’t provide coverage. The proposal also would hit hospitals, including those that are nonprofit, and physicians with new taxes.

The sweeping nature of the proposal is the source of a major division in the business community.

Many executives of big businesses that already provide health insurance to workers would like to see other employers carry some of the load by contributing to a universal health insurance program. And they worry that the governor’s plan doesn’t do enough to contain soaring medical costs.

Safeway Inc. Chief Executive Steve Burd said he was particularly enthusiastic about the governor’s call for “shared responsibility” among employers, government and medical providers to cover more of the state’s 6.5-million uninsured residents.

Some business groups see it all as just too expensive.

“We are concerned that the new costs mandated by this plan will far outstrip anticipated resources,” said Allan Zaremberg, president of the California Chamber of Commerce.

Representatives of small enterprises such as the Consumer Alliance for a Strong Economy are outspoken in their opposition. The advocacy group is airing television commercials that criticize the governor’s health insurance plan.

The current spot, featuring a quacking, yellow duck, urges viewers to call the governor to complain. “If his plan looks like a tax and sounds like a tax, it must be a tax. One that Californians cannot afford,” the ad says.

Refineries and electric utilities fret about the expense of regulating carbon dioxide emissions, road contractors are concerned about how money will be spent on highways, and trucking companies don’t like the governor’s support for toll roads.

In recent weeks, Schwarzenegger has crisscrossed the state, meeting regularly with business groups -- often behind closed doors -- to discuss his healthcare plan.

But “he’s going to have to spend a lot more time explaining to his allies in the business community exactly how this is going to help them,” said Mark Baldassare, president of the Public Policy Institute of California, a nonpartisan think tank.

Although there may be heightened tension between Schwarzenegger and business allies, their mutual admiration pact of recent years hasn’t crumbled, Sacramento watchers say.

It’s “more like a lovers’ spat than a breakup,” said Dan Schnur, a Republican political consultant who advises companies and nonprofit organizations.

“There’s no question that Schwarzenegger has taken some political positions that business is not thrilled with,” Schnur said. “But on the other hand, the economy is still growing.”

Business must broaden its horizons if it wants to keep working closely with Schwarzenegger, said John Bryson, chairman and chief executive of Edison International, the Rosemead-based corporate parent of Southern California Edison Co.

Businesses need a governor who thinks big and challenges the Legislature to work with him, Bryson said, and not get mired in crises, such as the electricity blackouts, budget deficits and skyrocketing workers’ compensation insurance costs that bedeviled his predecessor.

“We do not want to see impasses; we do not want to see stagnation,” Bryson said. “We do not want to see timidity in addressing problems that only grow through neglect.”

marc.lifsher@latimes.com