California's Big Race to Succeed Schwarzenegger

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L. to R.: Max Whittaker / Reuters; Chip Somodevilla / Getty

California Attorney General Jerry Brown, left, and former eBay CEO Meg Whitman

Ever since gold miners first scraped their fortunes out of the hills of Northern California, America's most populous state has been a land of titanic dreams. These days, though, it's a place with big problems. Its $42-billion budget deficit would make an out-of-control Hollywood director blush — and bankrupt a small nation. Its schools are failing, air quality is worsening, and unemployment neared 10% as of December. The only thing larger than its litany of woes is the roster of political celebrities who are testing the waters for a run for governor in 2010, when term limits show Arnold Schwarzenegger the door. (See the top 10 scared stock traders.)

"This is an era of limits," Jerry Brown recently told TIME, reprising a theme he sounded more than 30 years ago, when the state first put him in the governor's mansion in the aftermath of Watergate and during the last throes of the Vietnam War. "There is not a lot of room for political maneuvering. The age of dividing up the easy surpluses is over. We've been on a borrowing binge, both in the private and public sector, and we're going to have to enter a time of belt-tightening." (See the top 10 financial-crisis buzzwords.)

Brown, 70, himself the son of an iconic governor (Pat Brown, who famously defeated Richard Nixon), is probably best known outside of California as a three-time Democratic presidential candidate and a former longtime boyfriend of Linda Ronstadt. Currently the state's attorney general, he has already added more than $3 million to his war chest, money that can be easily transferred to a gubernatorial campaign when the time is right. (See the top 10 financial collapses of 2008.)

Not everyone is waiting. Another longtime Golden State political pro, Lieutenant Governor John Garamendi, a two-time former insurance commissioner and Deputy Interior Secretary under President Clinton, told TIME, "I am in. Period." (Garamendi, 64, was once a political rival of Brown's sister Kathleen.) California, Garamendi said, needs a leader who will put progressive back into the state's political lexicon. Despite Schwarzenegger's recent swing to the middle, Garamendi said the governor has lost his ability to lead the state out of its troubles. Schwarzenegger's two terms, Garamendi said, "have been a failure of leadership." (See 25 people to blame for the financial crisis.)

Meanwhile, San Francisco Mayor Gavin Newsom, 41, another Democrat who has yet to officially enter the race, has been barnstorming across California holding town-hall-style meetings. "We've done six and we have more scheduled," he said recently, taking a late-night break on the side of a road to talk politics with TIME for 45 minutes. "And I just can't believe how engaged, and how passionate, the voters are at each and every place we go. They are hungry for change." (See pictures of the recession of 1958.)

Like Brown, Newsom says California is in bad shape. But he adds that he will offer a more hopeful message than one anchored by austerity. "There are two ways to respond to our current crisis," Newsom said. "One, we can cut our way out. But then we enter a downward spiral of disinvestment. The other is, we can grow our way out of our problems. That's where I am. This state has such amazing capacity for change, for economic development. We need a strategy to grow." (Watch a video about gay marriage in California.)

The state that once drew people from all over the world to create Silicon Valley, Hollywood and Berkeley's free-speech movement now sees too many of its best residents leave. To stop that, Newsom hopes to borrow a page from Barack Obama's presidential campaign. On the floor of the Democratic National Convention last summer, Newsom told TIME that he hoped to run in 2010 — but first he wanted to see if voters would embrace Obama's campaign focus on youth and generational change. "I think we've had an answer to that, back in November," Newsom said. "Youthfulness and hope — it's also who I am naturally. I was 35 when I ran for mayor of San Francisco [in 2003]. Youthfulness is not a chronological date; it's about a state of mind — it's the quality of your imagination."

Another big-city mayor, Antonio Villaraigosa of Los Angeles, could shake up the already crowded Democratic field as early as this spring. Villaraigosa, 56, is expected to easily win a second term on March 3. After that, an aide told TIME, he can turn his attention to whether he will run for governor. "He has said on the record that he doesn't know yet, but when he decides, he'll do what's best for the people of California," the aide said. (See the 25 most influential Hispanics in America.)

Senator Dianne Feinstein, the state's most popular politician, has been coy about her intentions regarding the race. She would make a powerful candidate, but others doubt that she would give up her influence in the Senate.

Whichever of the Democrats wins the primary, he or she will likely face tough competition from Schwarzenegger's Republican Party, within which two billionaires and a former Silicon Valley Congressman are already sizing one another up. Former Representative Tom Campbell and state insurance commissioner — and tech billionaire — Steve Poizner have each formed an exploratory committee and are expected to enter the race.

Then on Feb. 9, another potential candidate emerged. Former eBay CEO Meg Whitman jolted the potential GOP primary lineup by forming her own gubernatorial exploratory committee. Already equipped with a powerful roster of statewide co-chairs and political endorsements — and a history of big-time fundraising — Whitman and her team looked anything but exploratory. Whitman, 52, was a national co-chair and money magnet for the McCain/Palin ticket in 2008. In a statement, she said, "California faces challenges unlike any other time in its history — a weak and faltering economy, massive job losses and an exploding state budget deficit. California is better than this, and I refuse to stand by and watch it fail. Now is the time for people across the state to join a cause for change, excellence and a new California." (See the 25 most influential global executives.)

Brown, who expects the Republican billionaires to enter the race, said he's betting that voters aren't looking for a new California. Ideas, even if borrowed from an earlier time, will be fine, so long as they work. "[Voters] want a campaign based on hope but grounded in common sense," he said. "They don't need a grab bag of alluring ideas. They want realism."

Whatever it is Californians want, the only thing they can be sure they'll get is a long campaign to sell them a candidate who can try to deliver the goods.

See pictures of Schwarzenegger's wife Maria Shriver.

Read a TIME cover story on Schwarzenegger.