Can Jerry Brown Cut California Down to Size?

He's a master of political reincarnation. Can Jerry Brown, first elected governor of California in 1974 at the age of 36, double back to Sacramento and revive a state economy with the lowest bond rating in the U.S. and an unemployment rate clocking in at 12.6 percent?

With the state facing its third year of multibillion-dollar budget deficits—the gap for the fiscal year starting on July 1 is $19.1 billion—California's gubernatorial election is shaping up to be a referendum on who has the best strategy for fixing the Golden State's $1.8 trillion economy. The 72-year-old Brown, the state's attorney general and a Democrat, faces no serious challengers within his own party. He's also leading his potential Republican opponents, former eBay (EBAY) Chief Executive Officer Meg Whitman and state Insurance Commissioner Steve Poizner, a onetime Silicon Valley executive, according to a May 29 University of Southern California/Los Angeles Times poll. Brown led Whitman, 44 percent to 38 percent, and Poizner, 45 percent to 31 percent.

When it comes to understanding the intricacies of governing, few can match Brown's résumé. He served as California's secretary of state, governor for two terms, and mayor of Oakland. "The state is very messed up," Brown said in a June 1 interview. "The issues that we are facing are in some ways eerily similar to ones that I was focused on as governor. My central message then was that we were in an era of limits."

Whitman, who leads Poizner going into the June 8 Republican primary, says she'll cut business taxes, slash 40,000 state workers, and put future hires into 401(k)-like savings plans to cut pension costs. Brown says he would favor increasing retirement ages or workers' contributions to pensions but not elimination of state retirement plans. Overall he is vague on his policy.

Fund-Raising Challenge

One immediate challenge for Brown: how to compete in fund-raising with Whitman and Poizner, both of whom can draw from personal fortunes. Brown has raised $20 million so far, according to public records, less than a third of what Whitman has already spent in the primary. The state's labor unions are worried enough about a potential Whitman victory that they're forming independent committees to raise funds and run Whitman attack ads.

One, the California Working Families 2010 committee, is sponsored in part by the Service Employees International Union, the California Professional Firefighters, and Los Angeles investor Ron Burkle. It hopes to spend at least $30 million to portray Whitman as a heartless job slasher with Wall Street ties who'll give tax breaks to rich friends.

The heavy reliance on union money will make putting Sacramento's financial house in order tricky if Brown prevails. True, Brown's frugality is well known. As governor in the '70s, he shunned the official mansion and predecessor Ronald Reagan's Cadillac limousine in favor of a two-bedroom apartment across from the capitol and a state-issued Plymouth Satellite. "He reduced salaries when he came to office," says Gray Davis, who served as Brown's chief of staff in the 1970s and was ousted as governor in a 2003 recall. "He will perform as necessary."

When Brown ran California, state spending doubled during his eight years in office, though it increased at a higher rate under Reagan. The state's workforce, as a percentage of California's total population, actually shrank. He ran surpluses early in his administration, but the 1982 recession resulted in deficits. Whitman, who plans to spend $150 million to win the election, has already been criticizing Brown as a tax-and-spend liberal who set the stage for public-sector bloat by signing legislation in the 1970s that gave teachers and state workers the right to bargain collectively. "She's going to run a very classic, Reaganesque campaign," says Whitman's chief campaign strategist, Mike Murphy. "We are going to be getting everybody who is tired of the Sacramento political system that Jerry Brown is the alpha-male dog of." The California Chamber of Commerce has already produced an ad criticizing Brown for his early opposition to the 1978 Proposition 13 voter initiative, which limited the growth in property taxes, and his spending record as Oakland mayor.

Admirers in Business

That said, Brown does have admirers in the business community. Martin J. Wygod, the chairman of New York-based WebMD Health (WBMD) and an independent, says he recently hosted a lunch meeting between Brown and Gerald L. Parsky, a Los Angeles money manager who chaired a commission on tax reform for Republican Governor Arnold Schwarzenegger. The two talked about ways to reconfigure the state's tax structure for nearly four hours. "He only has one agenda, which is to try to help the state," Wygod says of Brown.

Some think Brown's long record of public service, a negative across much of the country this year, will actually be a plus in California, where a charismatic figure like Schwarzenegger couldn't deal effectively with a legislature controlled by Democrats. "If Arnold couldn't deal with this legislature, given his personality and being a moderate Republican, I don't know how Meg Whitman could really govern," says Los Angeles billionaire Eli Broad, a longtime Democratic Party supporter.

Rick Caruso, a Republican mall developer in Los Angeles, says he is supporting Brown because he is the candidate most likely to make positive changes. "I don't think he wants to end his political career as Governor Moonbeam," Caruso says, referring to Brown's '70s-era nickname.

Brown says one of his biggest qualifications is that he truly wants the job. "These wannabe governors have Potomac fever," says Brown, who ran for President unsuccessfully three times. "I have been there myself."

The bottom line Brown's efforts to portray himself as a centrist won't go unchallenged by California Republicans who call him a tax-and-spend Democrat.

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