[THURSDAY NOTE: Sometimes deciphering what the governor says is quite a task. I've noticed that a few of my newspaper colleagues thought the above quote was actually, "I never get stuck in a mode." Works either way for me, although the official transcript sent out this morning also says the word was "mold". But honestly, he's probably the only one who knows for sure.--JM]

If ever a news conference could be whittled down into one thought, that quote from Governor Arnold Schwarzenegger-- in today's announcement of his new top aide-- pretty much says it all.

The governor took to the podium in the Capitol briefing room to make official the worst kept secret in Sacramento: he has tapped Susan Kennedy as his new chief of staff, a former deputy chief of staff to former Governor Gray Davis and the former executive director of the California Democratic Party.

Kennedy, 45, has served on the California Public Utilities Commission since 2003. She replaces Republican Pat Clarey as the leader of the governor's administration inside the secluded executive offices known as the "Horseshoe."

Both Schwarzenegger and Kennedy knew what they were going to be asked by reporters in the room: what message does it send when a Republican governor hands over the reins of his administration to a powerful Democrat?

The governor tried to make it clear: he's not jettisoning his current approach to the job.

"She's willing to take her Democratic philosophy aside," said Schwarzenegger, "and to do the job, and to fulfill my vision, and to work and to implement my vision."

The clamor from the diehard GOP has been, to say the least, not positive. Republicans took to the Internet all night and morning in blog postings criticizing the decision. One group has already launched a website, StopSusanKennedy.com, to try and convince the governor to cancel the deal.

But in a comment aimed directly at some of those critics (the governor said he's personally called about 30 people), Schwarzenegger said, "they still don't understand me enough, that I make decisions a lot of the time that are out of the ordinary."

For her part, Kennedy took aim at Democrats who may think she's sold out by working for the man they fought in this month's special election. In fact, Kennedy said she supported and voted for every one of the governor's initiatives.

"I'm tired of the partisanship," said Kennedy. "I'm tired of the intolerance that has resulted in gridlock. And I felt it was time for me, as a Democrat, to put up or shut up."

Meantime, the governor denied that this was the start of a big staff shakeup. But he also sounded a little mixed about whether the current team would be on much longer... saying at one point that "Everyone else is going to stay in their position"... and then just a few moments later adding, "There might be some changes as time goes on."

California's campaign watchdog agency appears poised to change the way the state's political parties funnel cash to candidates, a change that stems from accusations of money laundering just days before the November 2002 election.

Staffers at the Fair Political Practices Commission are expected to recommend at this Thursday's meeting that the commissioners force political parties to change the way they handle money spent to elect (or defeat) legislative candidates.

First, some background. Right before voters went to the polls in November 2002, 21st Century Insurance Group handed out a total of about $1 million dollars, spread among 15 different county Republican committees. Many of the county organizations then handed over the exact same amount they received from 21st Century to GOP candidates in close legislative races. These were often singular contributions in the tens of thousands of dollars. And what it made it even more suspicious was that these were usually GOP candidates who hailed from a different county than the political committee.

A subsequent FPPC investigation determined two big violations. First, the scheme (in some cases) effectively violated the limits on any single donation that a political party can accept for candidate efforts. And second, because 21st Century's money appeared to be ending up with particular GOP candidates, the money shuffle effectively violated the contribution limit the company would have been held to had it written a check directly to that candidate.

This week's FPPC staff report says the investigation into the 2002 allegations was hindered, in part, because county political committees often have only one bank account that pays for both candidate and non-candidate expenses.

As a result, the proposed new regulations would force political parties to create an entirely separate "candidate support" bank account, so that money in-- and out-- can be more closely tracked.

The staff report also recommends that once a political party organization accepts a "non-candidate support" contribution (translation: money to be spent for activities like voter turnout, etc.), then that money can't become "candidate cash" merely by it being transferred to a different county's organization.

If nothing else, the 2002 case... and the proposed new regulation... highlight a loophole voters never saw when they approved the campaign finance reform measure, Proposition 34, in 2000.

With very little on the political or policy front now that the holiday is in swing, a small chuckle to pass along from Governor Schwarzenegger's visit to the Sacramento Food Bank.

The following is courtesy of the print pool report of the event, as provided to reporters by the governor's office from Peter Hecht of the Sacramento Bee:

Sara Ferris of Sacramento expressed a hint of disappointment when she stopped to size up the movie star-turned California's chief executive.

"Hi, nice to meet you," the governor said.

"I thought you would be taller," Farris answered back.

Guess you can't please everyone.

Happy Thanksgiving.

A new report from the California Budget Project seems to paint a pciture of California 15 years from now that is even more ethnically diverse than today, while also older and less skilled for the workplace... trends which will likely present serious challenges for policymakers.

The report is online here. CBP is a non-profit research organization that advocates for programs affecting low and middle-income citizens.

The study takes government data and draws some interesting conclusions:

* By 2020, California's single largest ethnic group will be Latino... 43% of the population, versus 33.7% Caucasian, 12.7% Asian, and 6.7% African American. The shift appears to be the culmination of a trend that's been shaping up over the last few decades.

* One third of the Latino population in 2020 will be under the age of 20, a larger percentage of young citizens than any other single ethnicity.

* California will also become more "gray", with a whopping 71% increase in citizens over the age of 65 between 2000 and 2020. The racial group that is getting oldest the fastest: Caucasians.

* The recent massive growth of students in grades K-12 will soon dramatically slow down. CBP estimates only a 7.3% growth in enrollment between 2000 and 2010, compared to the 21.1% increase that occurred between 1990 and 2000. And by 2013, the report estimates that 6 of every 10 California school children will be either Latino or African American-- with a sizable number of those being English language learners.

* The CBP report also raises concerns about how few Latinos, for example, have obtained college degrees from the UC and CSU system in recent years, compared to their Caucasian classmates. Given its projections of dramatic growth in the Latino population, the report concludes that enrollment and graduation rates among students other than whites must increase, if California is to meet its future workforce needs.

There's a lot of time between now and the June primary. And for some of the candidates whose names will be on the ballot, a new poll shows they need all the time they can get.

Today's Field Poll tested voter recognition of 28 men and women who either are announced candidates for statewide office, or rumored to have an interest. Of those, only 6 candidates elicited any opinion at all from a majority of those surveyed.

Three of those were possible candidates for governor: Governor Arnold Schwarzenegger, and actor/directors Warren Beatty and Rob Reiner.

The other three candidates who sparked an opinion in at least 50% of those surveyed: Lt. Governor Cruz Bustamante, running for the Democratic nomination for insurance commissioner... Oakland Mayor Jerry Brown, seeking the Democratic nomination for attorney general... and Sen. Tom McClintock, a candidate for the GOP nomination for lieutenant governor.

After that, the candidates interested in statewide office seemed to draw a collective response of... "who?"

The candidate for higher office who drew the most blank looks appears to have been Assemblymember Dario Frommer (D-Glendale), who's seeking his party's nomination for state controller in 2006. Frommer elicited an opinion from only 9% of those surveyed.

[The poll is here]

Other tidbits:

* Reiner apparently has higher favorables than Beatty among Democrats (37% vs. 27%), and slightly more than Treasurer Phil Angelides (33%), with Controller Steve Westly slightly behind Beatty at 24%.

* Among non-partisan voters... a key segment of the vote... Schwarzenegger was still slightly above the entire Democratic pack.

* And now, the disclaimer: all of this might mean exactly squat. Almost none of these candidates have even begun to mount a serious campaign with visible public events. Of course, if nothing else, the numbers show that some of these candidates have a lot of work ahead of them in the next 6 months before the June primary.

In a projection that promises to substantially reshape next year's policy and political debate here at the Capitol, Legislative Analyst Elizabeth Hill now says the state's finances will be in the black for 2006-7, and not the red.

[You can read her fiscal report here]

Even so, Hill projects that the state will still spend $4 billion more than it takes in next year. So how, you ask, does that not add up to a deficit?

In a nutshell: an unexpected surplus of cash from past budget years.

Hill's analysis says that revenues are up dramatically since the LAO's report this past summer. Higher personal and corporate income taxes-- many of which are counted as part of the fiscal year in which they were earned-- will brighten the revenue side of the state's ledger by some $3.9 billion.

The LAO analysis also projects reduced spending this year, largely due to the politically controversial decision to keep school funding lower than required under Proposition 98.

So when you add the "surplus of cash from years past" to the "lower than expected spending" this year... the deficit is apparently erased. Hill's reports concludes that the state budget can be balanced in the 2006-7 fiscal year "without any new program reductions or added revenues."

Before anyone starts handing out cigars at the Capitol, Hill says the good news isn't likely to last. Deficits are expected to return over the next few years, due to the budget's structural imbalance between revenues and expenditures.

So what will all of this mean, if it comes true, for the year ahead? Will efforts to reform the budget process lose steam as a result? Or will this allow Governor Schwarzenegger and legislative leaders some breathing room to search for compromise on other issues? Granted, the new projections are just that... projections. But they are likely to spark some different atmospherics once lawmakers return in about 6 weeks time.

A big policy discussion now appears headed to the June 2006 ballot: should the state raise taxes on higher-income earners, and use the proceeds to provide preschool education for every California child?

The initiative, which has been spearheaded by actor/director/activist Rob Reiner, reportedly now has 1 million signatures-- more than enough to qualify for next year's primary ballot. A formal announcement is being made Thursday morning in San Francisco.

In a nutshell, the initiative would provide part-day preschool for every 4 year old California child. The program wouldn't be required to begin until the 2010-11 school year, except for some preschool expansion next year. After that, its requirements would be phased in over the next decade.

To pay for all this, the initiative would raise taxes on single filing adults who make $400,000 or more, and couples earning $800,000 or more.

Of course, these more affluent taxpayers are also being eyed by some in the Capitol who say a similar tax increase is needed to help solve the state's chronic budget deficits. In fact, the initiative says if lawmakers raise taxes on the same group prior to the June election, the initiative's tax hike will be delayed by 3 years. But at that point, it would add the preschool tax on top of the already higher tax rate.

All of this leaves policy makers, and voters, in a thorny situation. Is universal preschool a higher priority than existing state programs that might need those new tax revenues? And what will voters do, when faced with something they usually support (education), versus something they usually oppose (higher taxes)?

Governor Arnold Schwarzenegger's most important task in the coming year may be simple to understand, but much harder to achieve: get back to the political "center" of California.

Former governor Jerry Brown likened it to paddling a canoe a little left, then a little right. His successors as chief executive all also tried to balance themselves in the middle of the political spectrum. And even after winning a second term, the most recent ex-governor-- Gray Davis--was fired by the voters after his centrist reputation was eroded by a shift to the left.

On this weekend's newsmagazine edition of The California Report, we look at how the voters seem to think Schwarzenegger is to the right-of-center... and his prospects for realigning himself in the middle.

[NOTE: This posting was originally written on Friday, but tech issues kept it down until Saturday... audio from this story is now online here]

One of the people interviewed for the story knows all too well how hard that will be, even as he will be one of the forces trying to keep Schwarzenegger off balance. Garry South, former Governor Davis' top political consigliere, admits that once Davis was thrown by the energy crisis of 2001, he had nowhere to go... but leftward.

"If my experience with Governor Davis is any guide," says South, "once you fall down as low as [Schwarzenegger] has fallen, and your public approval ratings are in the 30s, and about all you have left is your partisan base, it is very difficult through nuanced actions thereafter to ever recover your public standing."

Of course, some die-hard Republicans have long been suspicious of the socially moderate Schwarzenegger... and they may not be happy, either.

"Conservatives don't like him, they don't think he's conservative enough," says GOP political consultant Richard Temple. Temple and his partner Ray McNally actually worked on the campaign against Team Arnold's initiatives. "And pragmatic Republicans don't like him, because he's a loser," says Temple. "You put those together, and there's not a lot [for the governor] to be gleeful about."

So where can Schwarzenegger turn? Field Poll director Mark DiCamillo says he might want to plug back in to voters who have unplugged from political parties: voters registered as "decline to state."

"That's where I think the balance of power lies," says DiCamillo. "And I think if you look at the prevailing political winds, following the opinions and attitudes of non-partisans really will show you where the middle of California politics is."

Governor Arnold Schwarzenegger's evolution from tough talk to humble pie today swung towards the familiar... but probably effective... mea culpa.

"I take full responsibility for this election," the governor said at an afternoon news conference at the Capitol. "I take full responsibility for its failure. I take full responsibility for everything."

Those comments came at the end of a day that Schwarzenegger's supporters clearly hope will show he heard the voters on Tuesday. A highly publicized meeting of the governor and legislative leaders this morning apparently didn't get into specifics on issues facing the state, but may send the message that the governor will try the traditional route of governing for a while.

Schwarzenegger told reporters that he realizes he needs to be more patient in government than he might have been in bodybuilding and in Hollywood, though he apparently couldn't resist another comparison to politics and show business: the audience is never wrong.

"If one of the movies goes in the toilet, you know that was the wrong story," he said.

The governor seemed to quell the swirling Capitol rumors of a shakeup in either his political team or his administration... saying he's probably never fired anyone in his life.

And Schwarzenegger seemed to strike a more pensive tone policy-wise, too.. For instance, he wouldn't pledge to veto a tax increase if it was sent to his desk by the Legislature (unlikely, because even get to his desk, the tax hike would need GOP legislative support).

Today was clearly the first day of what Governor Schwarzenegger seems to hope is a new chapter. He even pledged to call the leaders of the unions that fought him these last few months, in an effort at seeking consensus.

And the Schwarzenegger sense of humor also crept in by the end. In a line that you'll hear on TV over and over again tonight, he was asked what he would do differently if he could.

"If I would do another Terminator movie," he said, "I would have Terminator travel back in time to tell Arnold not to have a special election."

Like many political junkies, I'm forever addicted to the color-coded maps distributed on Election Night through the Secretary of State's website. And while you can't draw too many conclusions from a county by county glance, there were some trends worth noting from Tuesday (even with still unofficial results).

*Biggest Splits: The traditional liberal/conservative split in California seems to have reappeared in the battle over three of the initiatives: Proposition 73 (parental abortion notification), Proposition 74 (teacher tenure), and Proposition 75 (union dues). Each of these measures apparently carried 33 of California's 58 counties. Of course, the counties that voted "no" have more voters and are usually more liberal.

*Biggest Routs: The remaining five initiatives were pretty much landslides for the "no" votes on Tuesday. But that includes two of Governor Schwarzenegger's key proposals, which may be an indication of how little support there was for those measures even among his base. Proposition 76 (budget), the centerpiece of the governor's reform proposal, lost in a whopping 53 counties. So, too, did Proposition 77 (redistricting).

* Swimming Upstream: You'd be hard pressed to find many similarities between San Francisco and Imperial counties. But both showed an independent streak on Tuesday: they were each the lone holdout on different ballot initiatives.

Imperial appears to have been the only county in the state to approve Proposition 78, the pharmaceutical industry's prescription drug initiative. (Prop 79, the consumer groups alternative, actually won in 3 counties)

San Francisco, meanwhile, was the only place in the state where the confusing (and almost politically invisible) energy regulation initiative, Proposition 80, passed. In fact, more than 1 of every 3 "yes" votes for Prop 80 in California came from the City By The Bay.