SACRAMENTO — Business leaders descended on the capital Tuesday for the 21st annual California Business Legislative Summit hosted by the California Chamber of Commerce


CalChamber president Allen Zaremberg opened the conference at the Sacramento Convention Center, outlining the three issues that are at or near the top of the pro-business organization’s priorities list this year: education, water delivery and health insurance reform. As has often been the case in the last several years, however, the state budget burden was the central theme. To place California’s financial challenges in context, Zaremberg introduced longtime

Legislative Analyst Elizabeth Hill, political strategist Dan Schnur and Sacramento Bee columnist Dan Weintraub

for their perspectives. It wasn’t a pretty picture.

First, Zaremberg offered some stark figures: Tax revenues have risen 18 percent, state spending has increased 30 percent and, according to

Gov. Arnold Schwarzenegger’s revised May budget

, California is facing a $15 billion deficit. Zaremberg did provide a sardonic ray of hope by noting that a $15 billion deficit doesn’t necessarily mean $15 billion in actual cuts are necessary. Only in government, he said, is it considered a budget cut when the same amount of money is spent as the year before.

“Holding spending at a ‘constant’ is not considered a cut in the business world. It’s,” he paused, “a constant.”

Hill, who is stepping down later this year after nearly 20 years in office, said she was disappointed by Schwarzenegger’s latest budget proposal, primarily because it does nothing to solve the structural problems of California’s budgeting process. For instance, she said, Schwarzenegger’s plan to “securitize” the California Lottery by floating $18.4 billion in bonds that would be repaid from “larger future lottery profits” adds significant debt and risk at a time when the state can ill afford it.

And it is “borrowing,” she said, “not securitizing.” Further, she noted that historic lottery sales and patterns don’t support assumptions that lottery profits can be doubled.

In response to the revision and the worsening fiscal situation, Hill and her office released their own

alternative spending blueprint

that emphasizes simpler budget reform, a less risky lottery overhaul, an increase in reserve funding, and achieves a balanced budget through 2012. She said California faces some difficult choices and she argued that revenue increases — ie., tax hikes — likely will be necessary, but she also said spending must be brought under control and reduced, and she called on the Legislature to unlock “all these formulas that are tying up so much of our budget.”

Weintraub, considered one of the foremost experts on the arcane budgeting process, said the Legislature’s majority Democrats should be looking for ways to build a reserve fund so they can forgo the boom-and-bust cycle that has plagued the state and, as a result, caused more pain for many of the party’s core constituency groups. But they can’t bring themselves to do it, he said.

“They cannot not spend every dollar instead of saving it,” he said.

As for Schwarzenegger, he noted the irony of a Republican governor first elected to deal with — almost exclusively — the issue of California’s sorry financial affairs but who continues to make the same mistakes even as the problem has grown ever larger under his watch.

“You would think he would be more concerned about fixing the problem,” Weintraub said.

Schnur said he wasn’t surprised.

“In my 18 years in California,” he said, “I’ve experienced three cataclysmic, apocalyptic budget crises. And yet governors always seem to find a way to get through them. … They paper over the problem until you (the business community) can do what you do to get us out of these messes (through revenue generation).”

Schnur pointed out how California’s economy rebounded after the meltdowns of the defense and high-tech industries and predicted the housing slump would likely take the same route. All of the recoveries, he said, were led by business innovation, with state government only along for the ride.

Schwarzenegger himself will address the CalChamber conferees Wednesday and he is expected to make a vigorous defense of his budget plans.

Meanwhile, Rob Lapsley, the CalChamber’s vice president of public affairs, provided an overview of California’s tumultuous election year, which will see voters go to the polls three times in nine months.

A record 8.7 million Californians, or 55 percent of those eligible, voted in February’s presidential primary, with 46 percent voting by absentee ballot. For the June 3 election, however, a record low 20 percent to 30 percent are expected to cast ballots, with 55 percent of them voting absentee. When turnout is that low, Lapsley cautioned, it’s a safe bet that a vast majority are the hyperpartisan voters who tend to represent the extremes of each party.

In line with national trends, he said, projected turnout for the Nov. 4 general election is a staggering 78 percent to 80 percent. Between now and then, an estimated 800,000 new California voters are expected to register and the number easily could top 1 million, he said.

This election year is an exciting one, but how does it affect the business community, Lapsley asked. The stakes, he said, could not be higher.

State Senate President Pro Tem Don Perata, D-Oakland, is trying to lock in a veto-proof, two-thirds majority for Senate Democrats. Although they currently enjoy a commanding 25-15 lead in the Senate, the Democrats are two seats short of being able to pass a budget and raise taxes without a Republican vote. Such a majority, Lapsley said, would be catastrophic for California businesses, large and small.

Lapsley said the two-thirds majority is the real reason Perata launched a recall campaign against Sen. Jeff Denham, R-Salinas. Democrats outnumber Republicans in Denham’s district, 46 percent to 36 percent, which makes it an inviting pickup target. Lapsley noted, however, that the Perata move may have have backfired and that Denham now appears to be coasting to a comfortable June victory.

There are only a few other competitive seats in the Senate, Lapsley said, and the biggest prize in November is the 19th District seat being vacated by Sen. Tom McClintock, R-Thousand Oaks. That race — between former Assemblywoman

Hannah-Beth Jackson, D-Santa Barbara, and former Assemblyman Tony Strickland

, R-Moorpark — is expected to see spending levels of $6 million to $8 million, figures that a few years ago would fund a decent statewide campaign, he said. As much as $3 million is expected to be raised from within the 19th District, which sprawls over Santa Barbara and Ventura counties.

Tuesday’s keynote speaker was

George Stephanopolous, chief Washington correspondent of ABC News

and a former top aide to then-President Bill Clinton. With this year’s presidential election already such a hot topic, the crowd had high expectations and Stephanopolous did not disappoint.

He started out by noting that all three campaigns — Sens. Hillary Clinton and Barack Obama for the Democrats and Sen. John McCain for the Republicans — are being followed on the Internet at unprecedented levels and that ABC polling shows awareness of the race in the 85 percent range, a figure that usually isn’t reached until the party conventions in late summer.

All indications, Stephanopolous said, point to a call for a change of direction. What’s more, he said, 2008 will be, without a doubt, a banner year for Democrats across the board.

“And yet with all that momentum,” Stephanopolous said, “the Democrats have found the only two people in America who actually could lose.”

Clinton’s collapse, he said, has been marked by blunder after blunder.

“She was up 50 points one year ago, as the first woman candidate,” he said. “But she wrongly emphasized her strength and experience at a time when voters just wanted a change of direction.”

He said voters also were put off by her “extremely high unfavorables” and a number of inexplicable moves by her experienced staff, including a senior aide’s apparent ignorance that California’s Democratic delegates are awarded proportionally and not winner-take-all.

In addition, he said, Bill Clinton transformed himself from an asset to a liability. In many respects, he added, the outcome has been a particularly difficult one for the former president to accept.

“Bill Clinton needed her to win for his own legacy,” Stephanopolous said. “You can’t be seen as a great or a near-great president unless you can elect your successor. He couldn’t elect Al Gore and now Hillary appears to have lost.”

While Clinton’s campaign has been marked by what has gone wrong, the hallmark of Obama’s campaign is what has gone right.

“Obama,” Stephanopolous said, “is the candidate who best matches the political climate of change.”

Obama also learns from his mistakes, he said, and he’s a vastly improved candidate than the obviously inexperienced one who began campaigning nearly two years ago. Most important, he said, has been Obama’s near perfect handling of the Democratic Party’s complex caucus organization combined with a deft appeal to the super-delegates who are critical to the nomination.

“After every setback, he’s been able to follow up the next day with a key endorsement that steals Hillary’s thunder,” Stephanopolous said.

The road ahead is not without obstacles for the presumptive Democratic nominee, however, and Obama must still “unify the very fractured party” that has seen a schism between distinct voting blocks that account for almost a 50-50 split between the two candidates.

McCain, meanwhile, is the most improbable candidate and Stephanopolous suggested that his success is due to a combination of grit, determination, and the incredible misfortune that befell each of his opponents in the Republican primary. He observed that the personal strength and character McCain demonstrated during his five years as a Vietnam War prisoner will carry more weight with voters than many pundits might expect, but he added that his challenge remains uphill. McCain, he said, must find a way to divorce himself from the Republican base while holding on to it. His best strategy against Obama, he said, is “to disqualify Obama as a simply unacceptable candidate.”

A large delegation from the Carpinteria Valley and Goleta Valley chambers of commerce are in Sacramento for the CalChamber conference and the

Regional Legislative Alliance summit, which takes place Wednesday. Those in attendance are Kristen Amyx, president and CEO of the Goleta Valley chamber; Tom Blabey, the chamber’s public policy director; Mark Dispenza, an associate at Holmes & Holmes Insurance Agency Inc.; Joanne Funari, president of Business First Bank; Steve Greig of Venoco Inc.; Jim Knight, Goleta Valley board chairman and a consultant with Flir; Lynda Lang, president and CEO of the Carpinteria Valley chamber; Bill Macfadyen, Noozhawk publisher and CEO; Earl McCutcheon of ATK Space Systems; Don Oparah, director of the UCSB Venture Acceleration Initiative; Bob Poole, South Coast district director of the Western States Petroleum Association; Lisa Rivas, RLA executive director; and Suzanne Scar, owner of Central Coast Imaging Solutions Inc.


Noozhawk publisher Bill Macfadyen can be reached at

Bill Macfadyen is Noozhawk’s founder and publisher. Contact him at, and follow him on Instagram: @bill.macfadyen. The opinions expressed are his own.