Desperate Davis Takes a Gamble on Wild Man Steve Peace

Sacramento —  Sacramento

Want bold from Gov. Gray Davis? You got it Wednesday.

Maybe some drama, too. Even fun.

A bold move for desperate times.

For a governor, it doesn’t get much more desperate than being perched on the precipice of a deficit hole that’s 45% of your general fund. That would be a $35-billion gaping canyon -- roughly 60% bigger than last month’s best estimate.

Unprecedented. Not even Gov. Pete Wilson peered into such fiscal straits.

Even if you shut down all of state government, that wouldn’t come close to solving the problem. Remember, 70% of the general fund flows to schools and local government.

Sound the bugle and call for: Steve Peace. Truly brilliant. Truly a wild man.

Truly the opposite of Gray Davis.

Here’s a quickie sketch of Peace, 49, the governor’s new finance director-designate:

* A Democratic legislator from San Diego for 20 years. Chairman of the Senate Budget Committee before being booted by term limits this year.

* Produced the cult film “Attack of the Killer Tomatoes.” It’s entertaining and a must mention in any profile.

* He gets blamed more than any other legislator for the infamous electricity deregulation back in 1996. It’s largely a bum rap. He headed the conference committee and negotiated a better bill for consumers than what Wilson and his Public Utilities Commission had wanted.

* As an assemblyman, he was a rebel. Literally. He conspired with four colleagues -- they called themselves “The Gang of Five” -- and tried to muscle out Speaker Willie Brown. They almost succeeded.

* He’s a wound-up workaholic, incessant talker and frequent pain in the backside who never stops thinking, analyzing, visualizing.

* Loves public policy -- a lot more than politics. Most politicians are exactly the opposite.

Like Davis, Peace can be labeled a moderate.

Unlike Davis, he’s not risk-averse.

And he’s a social animal.

Uncharacteristically, Davis took a gamble here. Maybe he was out of cards. He wanted to replace Finance Director Tim Gage, a loyal, soft-spoken former legislative aide who had served him for four years. The governor preferred another former lawmaker, but that pick turned down the offer.

Peace had unquestioned credentials and was eager for the challenge.

Here’s why it’s a gamble and potentially a brilliant move for Davis to make Peace his No. 1 budget guy:

* Peace, unlike most Davis aides, won’t be afraid to speak up and say what he thinks. The governor will get an earful of his budget chief’s best advice. The risk is he’ll get it over and over -- long after they should have moved on to another subject.

* Davis has a lousy relationship with the Legislature. He has developed few loyal allies there and has no real friendships. Peace can help. He understands the legislative mind. And, unlike Gage, he’ll be treated as a peer rather than a staffer.

* Besides knowing the budget A to Z, Peace is a visionary. If Davis is, he hasn’t shown it. Davis can learn a lot by listening. The risk is Peace will push his own agenda more than Davis’.

Peace has thought extensively about how California should restructure its tax system to make it less volatile. Make it less vulnerable to hard times -- and act less like a Super Lotto jackpot during boom periods.

“It’s going to be done,” Peace told me recently. “Otherwise, we don’t need the earthquake. We’re going to fall into the ocean by ourselves.”

He says, “Republicans have got to stop praying to Prop. 13. Democrats have to stop resisting capital gains breaks.”

The problem of unpredictable tax revenues -- from the Capitol to courthouses -- “is all traceable to Prop. 13,” he says.

Proposition 13 in 1978 drastically cut property taxes and forced California governments to rely more on sales and state income taxes. The sales tax led to more sprawl -- urban shopping malls replaced residential housing -- and the income tax resembles a roller coaster.

Peace believes businesses should pay higher property taxes because their land turns over and gets reassessed much less often than residential dwellings.

But right now, he says, the Legislature should get busy chopping programs. “Health care is going to get hammered.”

Peace isn’t afraid to say cut back on grandma’s medical care and raise taxes. Even attack sacred cow Prop. 13.

It’ll be fascinating to see how long these two opposites last together. If they do last, it’s likely to change government. For the better.