David Crane: Arnold's other Democratic adviser

The following appeared in Capitol Weekly today Much has been made about high-profile, high-powered Democrats in Gov. Arnold Schwarzenegger's administration, from his wife, Maria Shriver, to his chief of staff, Susan Kennedy. Then there's Bonnie Reiss, a close Schwarzenegger friend who serves as one of his most trusted senior advisers, and Daniel Zingale, Shriver's chief of staff. But there is another Democratic powerbroker in the Horseshoe, a long-time Schwarzenegger confidant who is as influential in the administration as he is invisible to the public: David Crane. "He is involved in all of the key deliberations that I have been a part of," said Sunne McPeak, secretary of the Department of Business, Transportation and Housing. "He is one of the key policy advisers the governor has brought in from the very beginning." Crane has also been appointed by the governor to the California State Teachers Retirement System (CalSTRS) board. But now, as he comes up for a confirmation vote before Senate Rules, Democrats say his nomination may be in jeopardy. So who is David Crane? His official position is special adviser to the governor for jobs and economic growth. It is a job that gives Crane, 51, a policy portfolio--the enomony--close to the governor's heart. But Crane's power is not derived from his job titles, but his relationship with Schwarzenegger. "Like a number of senior advisers, if he wants access he can get it," says Cassandra Pye, a former Schwarzenegger deputy chief-of-staff. Crane, who is almost universally regarded as both bright and abrasive, is one of only a small number of confidants that "Arnold and Maria." as he calls them, have in the Capitol. He has known the pair for more than two decades, debating with them about the finer points of public policy for just as long. Soon after Schwarzenegger was swept into office in 2003, he named Crane, a self-made multi-millionaire like the governor, to his transition team and then as his economic adviser. Though a Democrat, Crane's economic philosophy sounds distinctly libertarian. He advocates against government intervention in private business and touts his admiration for conservative economist Milton Friedman. "Governments don't create jobs, and if they are not careful they can kill jobs," Crane told an audience of business leaders at a San Francisco luncheon last summer. Charged with wooing new companies to the state, and preventing current companies from leaving, Crane decries government-given economic incentives for businesses. Instead, he advocates leveraging Schwarzenegger's celebrity and trying to sell the state as is, at no cost to taxpayers. He was a driving force behind the trade missions to both Japan and China. Free-market thinking deeply permeates Crane's vision of the world. He has called defined benefit pensions "non-market deals" and burdensome "special privileges." And though the governor is currently calling for a hike in the minimum wage, Crane has called the minimum wage a "œmarket distorting mechanism." When asked to prove his Democratic credentials, Crane points to the 1960 Democratic platform. "The 1960 Democrats were very much a pro-growth party and I am very much a pro-growth Democrat," he says. Crane's limited government economic philosophy is deeply rooted in his experience as a businessman, associates say. In 1979, he joined a small firm, Babcock & Brown, in San Francisco. At the time, the company had four employees and one office. Over the next two decades, it blossomed into a multi-national corporation with 18 offices, in 13 countries and 600 employees. Crane didn't do too poorly for himself, either. In filings with the Fair Political Practices Commission last year, Crane declared eleven separate investments worth more than $1 million. Rick Koffey, a former partner with Babcock & Brown who worked with Crane, says that he was central to the success of the firm. "David's judgment on investment decisions was critical to the growth and stability of Babcock & Brown," Koffey told Capitol Weekly. The company also has ties to Schwarzenegger. In 1997, Babcock brokered the governor's controversial jet-lease deal with Singapore Airlines, allowing the governor to defer paying taxes on millions in income. The company declined to comment on whether Crane worked on that account, though Crane has said that he and the governor "did some business together" in the past. Crane's main charge at Babcock & Brown was managing and investing the company's assets, a job that Koffey says Crane did extraordinarily well, and a likely reason he was appointed to the CalSTRS board. But Crane's confirmation, which had tentatively been scheduled for January 25, was postponed as the Senate continued to research his past. Senate sources say he is on the leadership's target list, and his confirmation looks uncertain, at best. As a CalSTRS trustee, Crane would help direct the investments of more than $130 billion in the teacher's retirement fund. But first Crane must pass through a hostile Senate Rules Committee that already rejected the lone Schwarzenegger nominee last year that supported a shift to a defined contributions pension system. Crane openly endorsed the governor's defined contribution pension proposal in 2005, beaming that he "just loved" Schwarzenegger's 2005 state of the state address. At the San Francisco luncheon he said, "All the governor proposed would be a limitation to some of these special privileges held by government employees…so I fully support the governor's agenda." Senate Democrats are not the only ones who have had their feathers ruffled by Crane. Critics and friends alike note his argumentative nature, and willingness to debate anyone about anything. "He will never retreat from an argument and debate, which can be enduring and perplexing at times," says McPeak, who works regularly with Crane. Pye calls him "excruciatingly honest" and "willing to argue with a wall." And those are his supporters. Crane's critics condemn his argumentative nature as a sign of hard headedness and arrogance. Economic development, they say, is government giving business the "helping hand, or extra push" it needs to succeed or stay in California. But Crane sees any government offered incentives as an impediment to the free-market. "We are as a state missing opportunities because we may not be able to raise it to the appropriate level of awareness in the governor's office," said one administration official, on the condition of anonymity. "He's right there: We have to go through humps and jumps to get that." Wayne Schell, president of the California Association for Local Economic Development, says that fewer of his member organizations are now going to Crane for assistance. "I don't hear from members who are happy with what he has done," said Schell. Schell summarizes what he sees as Crane's controversial approach to economic development:"If you lose one job, two more will follow, that's just the nature of California," said Schell. "I just don't agree with that. I don't want to lose the one. And those two that are behind? When are they coming?" Many officials at regional economic development organizations were unwilling to publicly criticize Crane, fearing they would alienate the administration's main conduit for state-level economic development help. But numerous people, all of whom spoke on condition of anonymity, all used the word "arrogant" to describe Crane. Former Schwarzenegger deputy chief of staff Pye, who is now a senior vice-president for APCO Worldwide, says some of the complaints are simply a result of Crane's free-market philosophy. "[The] classic economic development executive isn't necessary in business to promote that point of view," she said.