Dan Morain

Dan Morain: Timing might be right for Brown and a California rebound

There couldn't be a worse time for a new governor to take office, right?

The Legislative Analyst's Office just announced California's budget is $25 billion out of whack, a month after lawmakers approved what they claimed – though never believed – was a balanced budget, 100 days late.

Economists predict that California won't regain the jobs that have been lost during the recession until 2016. There's more. The state fund that pays unemployment benefits to 2.3 million jobless Californians faces a $20 billion deficit.

To outsiders, California might seem a little like the Monty Python character whose arms are chopped off in a sword fight and declares it's only a flesh wound.

But in a weird way, this could be an ideal time for Jerry Brown to return to the Capitol, as he will this week. Assuming the Big One doesn't hit and separate California farther from the rest of the nation, the situation can't get much worse.

For all the talk of doom, deficit and general decline, wealthy individuals still bet on California's future. In the process, they could provide Brown with a much needed hand.

One is Tom Steyer, a hedge fund billionaire from San Francisco who donated $5 million to defeat Proposition 23, the Texas and Kansas oil companies' failed initiative that sought to unravel California's law to combat climate change and reduce greenhouse gases.

Steyer intends to build on the political organization established to defeat Proposition 23, creating a nonprofit entity that would advocate on behalf of implementing the climate-change law, Assembly Bill 32.

Working with organized labor, Steyer will hold a press conference in San Francisco later this week announcing that he is donating $250,000 to train unemployed sales people who would persuade commercial building owners to make their buildings more energy-efficient. That in turn would help employ electrical workers and laborers.

Steyer, who has no financial stake in the future of AB 32, is not coordinating his effort with the governor-elect, but he did support Brown and is advised by Democratic strategist Chris Lehane, who worked for Brown's election. During the campaign, Brown never got particularly concrete about how he would solve California's economic problems, except to say that he'd capitalize on the requirements of AB 32 by pushing to create green-tech jobs.

"California has amazing resources and amazing spirit," said Steyer, founder of Farallon Capital Management in San Francisco. "Just because we're down, doesn't mean we're out. We can come out of this better than we've ever been. I do feel optimistic."

Separately, a second hedge fund billionaire, Nicholas Berggruen, has pledged to spend $20 million on a variety of efforts to overhaul California's dysfunctional government.

Berggruen is an unusual character, who doesn't own a home, preferring to stay in luxury hotels. The French-born globe-trotting "homeless billionaire" takes an interest in the operations of governments worldwide and has a special fascination with their constitutions.

Lately, he has become intrigued by California's governance and has teamed up with writer Nathan Gardels, who worked in Brown's first administration three decades ago. Gardels envisions working in conjunction with Brown on an array of issues, including taxation, and perhaps modifying the initiative process and term limits, all of which will emerge in time.

Operating from a Beverly Hills office, Berggruen's Think Long nonprofit corporation seeks to develop proposals intended to help right California. He counts as his advisers former secretaries of state George P. Shultz and Condoleezza Rice, former directors of the state Department of Finance, former Assembly speakers Willie Brown and Bob Hertzberg, former Gov. Gray Davis and business people including Google CEO Eric Schmidt.

The goals are lofty: Revive California, make it more competitive globally, create an example for the rest of the nation. Gardels figures someone needs to try.

"This squabbling and rancor and polarization – how long can this go on?" Gardels asked. "If we keep dithering around for another 20 years, we're going to be out of the game."

Over the years, there has been no shortage of high concepts and big plans to fix California's government structure, and there have been many false starts.

Hertzberg's group, California Forward, proposed a series of steps to refine the initiative and budgeting process. Gov. Arnold Schwarzenegger's tax commission issued a report calling for a major overhaul of the tax system. The Bay Area Council offered high-minded talk of a California constitutional convention.

They all fell flat. Wealthy interests that fund ballot measures simply don't get involved in concepts that implement other people's visions for improving government, seeing no direct reward for good government.

Berggruen could solve that fundamental problem – lack of money – with his checkbook.

Perhaps this time the timing is right. California's elected leaders need to make major changes if they are to solve the wreck that is the budget.

Senate President Pro Tem Darrell Steinberg says the only way to solve the budget mess is to realign state functions, handing off responsibilities to counties and cities, a concept Brown has embraced.

"State government is too large. It promises too much and can't consistently deliver," Steinberg said.

Schwarzenegger swaggered into town like a real-life action hero, vowing to "blow up the boxes" of government. But the movie-star governor was not larger than life, and like many before him he became mired in partisan battles.

Brown has gone out of his way to make few promises. At every opportunity, he dampens expectations. It's an old trick: Underpromise and overdeliver.

But with the help of a few new and old friends, Brown might be able to bring about significant improvements. The flesh wound can't get much worse.