The Race for State Treasurer

Steve Scott
Copyright 1994, California Journal

Two political up and comers vie to become the state's banker

Of all the milestones people pass as their lives progress, the one that,
for many, produces the most ambiguous feelings is hitting age 40. When a
friend or acquaintance reaches age 40, most people find themselves in the
position of comforting that person, rather than congratulating them. In
politics, however, it's a different story. Notwithstanding the relative
youth of the current national administration, 40 is considered young in
political terms. Nowhere is that more evident than in the race for state
treasurer. For Democrat Phil Angelides and Republican Matt Fong, political
life begins at 40. Although neither Angelides nor Fong have an election
victory to their name, both are positioned to kickstart promising careers in
electoral politics with a victory. For Angelides, a win would cap an
astonishing three year run of political success which began with his
chairmanship of the state Democratic Party. For Fong, a victory would ratify
the GOP bona fides of a man who, 12 years ago, was running the campaign of
one of the state's most popular Democratic leaders, who also happened to be
his mother.

It's no mystery as to what attracts two rising stars to the treasurer's
job, for it involves the two things most coveted in any elective office:
money and power. The treasurer rides herd, in one fashion or another, over
the state's entire investment portfolio, negotiating bond sales, defending
the state's credit rating, and helping to manage billions in pension fund

"It's high finance," says Donna Lucas, who was an aide to former GOP
Treasurer Tom Hayes. "Every morning, the treasurer invests billions and
billions of dollars. You're representing the state of California to the most
powerful people in the country. That's a lot of power."

The late Democratic Treasurer Jesse Unruh leveraged that power into his
own little fund raising dynasty, in the process transforming a sleepy
ministerial post into a political powerhouse. The Securities and Exchange
Commission has cracked down on the practice of raising money from bond
underwriters, but current incumbent Kathleen Brown's bid for governor
demonstrates that the job still has potential as a springboard to higher
office. In fact, Brown's victory over Hayes four years ago was the best
indication of the transformation the job has undergone. Hayes, the fiscal
professional uncomfortable with the partisan rough and tumble, lost to Brown,
the political professional with the famous name.

Unlike Brown and Hayes, who were as different as two candidates can be,
Angelides and Fong have some general similarities. Both began their political
careers fairly traditionally, but at a crucial juncture, each took the
unpredictable detours that eventually led them to this point. A graduate of
Harvard, Angelides worked as a legislative and gubernatorial staffer in the
1970s and early 1980s, focusing largely on housing issues. His sudden change
of direction came in 1983, when he quit the Legislature to go to work for
Sacramento developer Angelo Tsakopolous. He soon formed his own development
company and cashed in on the Sacramento real estate boom of the 1980s. His
"defining" project Laguna West received national attention for its
model of a suburban community that emphasized walking over driving, and
interaction over isolation.

As a wealthy developer, Angelides suddenly became a hot property in
Democratic circles, and he's credited with a significant contribution to the
Democratic success in the 1992 elections through his work as chairman of the
state Democratic Party. Armed with a basket full of chits, Angelides began
shopping around for a place to spend them, and after being chased out of a
run for lieutenant governor by Gray Davis, he settled on treasurer as his
next step.

The primary battle against former state Senate President pro Tempore
David Roberti was one of the more unusual in recent memory. Term limited out
of his Senate seat, Roberti took a chance challenging the well funded
Angelides. He was then broadsided by a recall in his Senate district,
tied to his authorship of the state's assault weapons ban. The recall
froze the treasurer's campaign, and Roberti's victory cast him as a
dragon slayer among those Democrats who were watching. Unfortunately for
Roberti, a good reputation is no substitute for money, and the recall
drained his resources. He couldn't counter the $2 million ad blitz by
Angelides, who came from behind to blow past Roberti and win the primary
going away.

Fong's path to the race includes an even more unusual twist. He started
out traditionally enough, graduating from the Air Force Academy and then
starting his own import/export company while at the same time going to law
school. While all this was going on, Fong was building political chits by
running campaigns for his mother, Democratic Secretary of State March Fong
Eu. With such a well liked and successful political leader as his mother,
Fong was already groomed to receive any torch she might pass. There was just
one problem Fong didn't want to be a Democrat. He wanted to be a

In 1988 he made the switch official, after sitting through a political
"Mom, guess what?" session with Eu and her political advisers. Fong's
political background greased his path in the GOP, but not without grumbling
from some hardliners, who wanted him thrown out for not endorsing his
mother's 1990 GOP opponent. Fong was on the ballot that year, too, losing to
Gray Davis in the state controller's race. The 1990 campaign gave Fong some
valuable experience, however, and Governor Pete Wilson gave him a further
boost by appointing him to a vacancy on the state Board of Equalization.
Fong has served as vice chairman of the board, and when he decided to run for
treasurer, the field was clear.

Talk to them about what they'd do as state treasurer, and the two sound
very similar. Both Fong and Angelides propose using the investment power of
the treasurer's office to help bring jobs into California. Fong suggests
setting aside 3 percent of the Public Employees Retirement System (PERS)
fund's investment and targeting it toward development and job creation in the

"Twenty two pension funds from other states target their own state," says
Fong. "We could create an additional 250,000 jobs that are now being
allocated outside our state."

Angelides' job creation estimates are more modest, in the 100,000 range
he suggested the figure, he jokes, "before job creation numbers became
fashionable." Still, he says Fong's proposal is "too conservative," and
argues for making California business the priority across the whole range of
state investments, including the State Teachers Retirement System (STRS).
Fong derides what he calls "social investment," which would favor
environmental or political causes, but Angelides doesn't make a big deal
about that either, and both insist their first responsibility is to get the
best return on the state's investments.

With their perspectives of the job reasonably close, the campaign will
likely be about the men themselves. As one might expect in an era of
disengagement from the electoral process, each is trying to paint the other
as "politics as usual," while portraying himself as an "agent of change."

"My basic question about Matt Fong is 'who is he?'" says Angelides.
"What is he other than a guy who ... was a lawyer for a couple of years, ran
for controller, and then was appointed to the Board of Equalization by Pete
Wilson." Angelides says his 11 years as a developer give him the practical,
"real world" experience that Fong, who has spent most of his career as a
lawyer, lacks. "The job of a treasurer is to invest capital," he says.
"That's a lot different from sitting on a tax board." Fong counters with a
career time line, showing himself in business while Angelides was still
toiling as a legislative staffer. While he concedes his import/export
business was modest, Fong says his specialization as a business lawyer
and as a member of a state tax board give him a financial expertise
Angelides can't match.

"I have a track record from serving three years on the state Board of
Equalization," he notes. "Voters are looking for somebody who can take their
money and get more bang for the buck." Fong also notes that, while Angelides
doesn't hold public office, his stewardship of the state Democratic Party
makes him no less a product of traditional politics than any elected

As they try to define themselves, expect both Fong and Angelides to pick
at each other's political scabs, and try to dig up as much dirt as possible.
Fong makes no secret of his willingness to bring up questions about
Angelides' development business that were raised by Roberti in the primary.
Roberti suggested Angelides benefited from a sweetheart deal in the
construction of a Sacramento library, and that Angelides had sneaked out of
his financial stake in Laguna West just before part of it was taken back by
Bank of America. Fong may also chip at the mystique of Laguna West itself
which, five years after its conception, remains largely a dream unfulfilled.

Angelides dismisses the conflict of interest accusation, saying his
involvement in the library came only after the original developer backed out.
Regarding his Laguna West investment, Angelides says the bank seizure was the
result of the merger of Bank of America with Security Pacific, the original
lender. As for Laguna West's slow start, Angelides says the explanation is
simple: The project started just as the recession hit.

"Did I go through the 'recession depression' of '89 to '93? You bet I
did," says Angelides. "So did every other person in the private sector."
Fong also plans to exploit the controversy that surrounded Angelides' primary
campaign against Roberti. Angelides hit Roberti with what may have been the
most notorious spot of the year so far, juxtaposing Roberti's picture with
scenes of the funeral of a Florida physician who was murdered because he
performed abortions. While the script talked of Roberti's opposition to a
federal clinic bombing law, many believed the ad implied that the
staunchly Catholic Roberti somehow condoned the murder. Fong says the spot
was "sleazy," and he is not alone, as Angelides earned editorial scorn up and
down the state. "It is inappropriate for someone who once held the position
of party chair to conduct such a divisive campaign," said former state
Democratic Party Chairman Peter Kelly.

Although he is clearly unsettled by the reaction to the spot, Angelides
offers no excuses or mea culpas. "There was a simple resolution before the
Legislature that asked 'Do you want to support the [federal clinic bill]?'
David Roberti abstained from it three times. An abstention means a 'no.'"
Angelides insists neither the spot nor the controversy surrounding it have
affected his fund raising, and he maintains whatever wounds the ad may have
inflicted on the party "have been healed." There is evidence, however, that
the ads had some effect. In a July Field Poll on the race, Angelides'
favorable/unfavorable ratings were about even, while Fong's were
three to one, favorable.

"I really have very little room to countenance people who won't stand up
for a woman's right to choose," Angelides says. "I believe I spoke up for

While Angelides says he likely won't make abortion a major issue in the
fall campaign, it could be one of Fong's soft spots, not so much for his
position but for his lack of one. Fong steadfastly refuses to announce his
stand on abortion rights, insisting it has "nothing to do with the job of
being treasurer." While his statement is factually correct, Fong faces
charges that he is ducking a major issue in the public debate. Despite the
tactical risks, however, Fong remains unmoved.

Angelides also suggests that Fong himself is not immune to charges of
conflict of interest. Fong reportedly vowed never to take contributions from
interests that had issues before the Board of Equalization, which adjudicates
tax disputes. "He wholly violated his pledge," says Angelides, who promises
more specifics as the campaign proceeds. Fong, meanwhile, points out that
Angelides took money from bond underwriters before the practice became the
subject of inquiry by the Securities and Exchange Commission. "I believe
taking money from underwriters is an absolute conflict," he says.

Finding money to finance their respective campaigns shouldn't be
difficult for either candidate. Angelides has been steadily mining his
contacts in the Greek American community, as well as those he made while
party chair, and he's already spent more than $3 million. Fong also
boasts an ethnic funding base, in the Asian community, and has even
managed to get some help from Democratic friends from his days working
for his mother. The July Field Poll showed Fong ahead of Angelides by 11
points 36 percent to 25 percent with 39 percent undecided. Angelides
concedes he's the underdog, but reminds anyone who will listen that he
overcame a larger deficit in knocking off Roberti. Roberti, however,
didn't have the money to respond to Angelides' attacks. Fong will.

One thing is certain. For one of these two 40 year olds, 41 is going to
be a good year.


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