California government has changed dramatically over the last 15 years. Everything from term limits to restrictions on political campaign contributions has changed the way the business of politics works. Meanwhile, technological changes have altered the media business and fundamentally changed the way California citizens receive their information.

These factors have all changed the way the state’s public affairs and political campaign industry operates. New super firms like California Strategies and Mercury Public Affairs, have appeared on the political landscape, snatching up former legislative leaders and seasoned political staffers to help build up their client lists.

Much of the work these firms do is invisible. And that is by design. Often, a firm’s job is to keep a client out of the press. Other times, firms get pieces of larger campaigns out of the limelight or public eye. Client lists for these firms is proprietary, and unless they are working formal political campaigns and receiving direct payments from a political committee, their work is not reportable or open to any public disclosure.

Some say the changing nature of California governance has accelerated the  growth of the public affairs business. And some of that may have to do with Arnold Schwarzenegger.

From the beginning of his governorship in 2003, Arnold Schwarzenegger has consistently used the outside political process, and the threat of ballot initiatives, as a governing tool. From the very beginning, he threatened an initiative of workers compensation reform that spurred the Legislature to action, and used voter-approved deficit bonds to balance the state’s books. This pattern has continued through his disasterous 2005 special election, his infrastructure bonds in 2006, the passage of Proposition 11 earlier this year, and the need for a 2009 special election to implement his budget reform proposals and lottery borrowing plan.

The governor’s communications strategy has accelerated the need for a private communications team, both to sell these plans, and for his opponents to respond to them.

“The governor changed politics,” says Jason Kinney, a California Strategies partner who also serves as the firm’s spokesman. “If you look at the Arnold Schwarzenegger model, or the (Sacramento Mayor) Kevin Johnson model, or the model being used by legislative leaders, each group is relying on an outside, kitchen cabinet group” to guide their political agenda.

Kinney says he thinks of his firm as “a 21st Century public affairs firm. That parallels what Arnold Schwarzenegger has done,” and how he has changed the nature of the governor’s office.

The governor has more directly spawned the creation of offices of major political and PR firms in California. Former Schwarzenegger political adviser Mike Murphy established an arm of his Navigators firm in Sacramento, and set up shop in California as he was advising the governor.

More recently, Schwarzenegger’s former communications  director Adam Mendelsohn joined forces with consultant Steve Schmidt, who ran the governor’s 2006 reelection campaign, to open an office of Mercury Public Affairs. Mendelsohn and Mercury are still integral parts of the governor’s political team, and just added former Assembly Speaker Fabian Nunez as a partner.

But others say that while there have been some changes among the players in the industry, the industry itself has not changed all that much.

“I don’t think it’s new,” says Dan Schnur, Director of the Jesse M. Unruh Institute of Politics at the University of Southern California. “Before there was Bob White there was Donna Lucas. Before that there was Bobbi Metzger.” So the model of the well connected political insider cashing in as an outside strategist has been around for a long time.

But the growth, and monetary success of these firms has accelerated the revolving door between politics and the big money in the private sector. Coupled with the constant churn of term limits, there are more and more former members and staffers looking for jobs, and an expectation among many that there will be big money to be made on the outside once their public service has expired.  
All of the most successful firms are built on the reputation of people who have served inside the halls of power before going to the private sector. Whether it’s Neilsen-Merksamer, founded by former George Deukmejian chief of staff Steve Merkasmer, or newer firms like Acosta/Salazar, founded by former Capitol staffer and campaign operative Andrew Acosta, and former Gray Davis spokesman Roger Salazar.

But it can be a tough market for outsiders to crack. California is, in many ways, an elusive trophy for national public relations firms. Because there is a well-established, and in some ways insular, political community in the state, many national firms have found it difficult to succeed in the state’s political PR business. Firms like Edelman and APCO have had success, but the list of firms that have failed is much larger.

Local Sacramento firms have carved out much of the public affairs and political markets. Firms like Randle Communications, Perry Communications and Bicker, Castillo and Fairbanks have bridged the public relations and political worlds, while stalwarts like Gale Kaufman, McNally-Temple and Gilliard-Blanning-Wysocki have more established, political operations.

“There’s always some number of groups that emerge – the APCOs, the Ogilvys. They see California, they see big contracts and issues, think they can take a piece of that market. And some of them stay, and some of them go,” says Gale Kaufman, who opened her campaign consulting firm in 1987.

Rob Stutzman, the surviving member of Navigators in Sacramento, which tried to cash in on early relationships with Gov. Schwarzenegger’s recall election, says “it’s very difficult to parachute in to California.”

Stutzman has longstanding California ties and roots, but his firm, Navigators, has scaled back its California plans significantly since opening up an office here in 2004.

Still, Stutzman says his world is changing, and most of those changes have been brought on by technology.

“If there are changes in the landscape, it is from emerging firms trying to find ways to use emerging technologies to navigate the changing way in which people get their information,” he says.  “The biggest changes I see are the changes in what you can tactically do. You have the access and ability to active grassroots is more available to you know if you know how to use the technology. It moves us past the older, antiquated way of doing things.”

To help cultivate and harness these new technologies, new types of PR firms like ID Media and its founder Bryan Merica have emerged. Merica’s firm is primarily a software and technological strategy company that can do everything from build a client’s Web site, to manage email lists and help focus political messaging. Merica is among the few in Sacramento trying to turn those evolving technologies into a new business model.  

“Media is also changing,” says Stutzman. “It’s all wrapped up together. Even 7-8 years ago, people would value the relationships I had with reporters, but now, there’s a whole lot more you need to do to move a story.”

Merica says those changes inspired his business. He has, in essence, created a software company to help with the political consulting portion of his business.  “We started out five years ago not just as an online communications firm, but also building an web-based software platform that forms the foundation of the solutions we provide,” he said. “Our platform allows us to create Web sites in hours or days, collect supporter lists, blast out e-mail communications on demand, monitor the blogoshere and much more. In today’s world, owning actual pieces of Internet communications technology is like owning cable networks or printing presses in previous eras.”