Los Angeles

It was a real Hollywood moment on April 7, when California’s hard-charging, seemingly invincible Governator stood before the news cameras and rather meekly announced he was giving up, for the time being, on his proposal to shift public employee pensions into private accounts. No accident that his dramatic backdown came the same day a major poll showed his job-approval rating slipping below 50 percent for the first time since he took office. That was only the topping on a mounting heap of bad news for the governor. For the past several weeks, Schwarzenegger’s public appearances have brought out crowds–sometimes in the thousands–of rowdy demonstrators, mostly from the ranks of organized labor. Even some of his onetime allies in police and public-safety unions joined the protests. The noisy demonstrations and falling poll numbers have boldly underlined the governor’s precipitous political decline and his now uncertain future in office.

After Schwarzenegger replaced his highly unpopular predecessor, Gray Davis, in late 2003, he was buoyed by significant bipartisan support and stratospheric popularity ratings. The Democrat-controlled California legislature, which had been irked by the departing Davis, worked closely with Schwarzenegger to fashion measures on the budget and on reform of workers’ compensation. This past summer, Schwarzenegger was even able to enlist powerful liberal unions in his successful renegotiation of state compacts with wealthy Indian gambling tribes.

Things started heading in a more problematic and confrontational direction a few months ago when the governor seemed to start obsessing about nurses, teachers and other public employees. Apart from the pension privatization scheme, Schwarzenegger was also proposing a merit pay plan for teachers and an erosion of their tenure, as well as diverting $2 billion away from public school funding. The celebrity hero who came to power promising to sweep Sacramento of special interests was now not only raising more millions from industry than any previous governor but also seemed to be picking only on organized labor.

“It was a classic rookie mistake,” says veteran GOP consultant Allen Hoffenblum. “Arnold didn’t understand that in California the nurses, the teachers, the cops, the sheriffs are all really unions”–by which he means their members are powerful and generally liked. “For years we Republicans have tried to figure out how to take on these unions without looking like we’re trashing individual teachers and police widows. What we concluded is that we couldn’t! Someone should have told this to Arnold.”

Schwarzenegger has been raising the big bucks and collecting hundreds of thousands of signatures in a threat to hold a special election this fall. If the legislature doesn’t meet his terms, he vows, he will go directly to the voters and ask them to approve his teacher merit-pay plan, the private pension proposal, a political redistricting measure and a budget spending cap. So his sudden pullback of the private pension plan is the first serious crack in the Terminator’s armor, an implicit recognition by him that he was losing the initiative and had been outflanked by his mad-as-hornets union opposition. While Schwarzenegger was still only in the planning phase for the possible November election, his energized labor-based opposition had already escalated into campaign mode.

Schwarzenegger’s falter has emboldened the Democratic legislature, which might now be willing to call the governor’s bluff and go head-to-head with him in the special election he has threatened. In any case, Schwarzenegger’s next round of negotiations with state lawmakers will find him holding a markedly weakened hand.