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CNN Larry King Live

Interview With California Governor Gray Davis, Wife Sharon Davis

Aired October 05, 2003 - 21:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LARRY KING, CNN ANCHOR: Tonight, Gray Davis, the governor of California. How much longer, with the recall vote on Tuesday, it's going to happen. What's he thinking? What's he thinking about Schwarzenegger? What's he thinking about his future?
Governor Gray Davis is here for the hour. We'll take your calls. He's next on LARRY KING LIVE.

Later in the hour, we'll be joined by his lovely wife, Sharon Davis, the first lady of the state of California. Your phone calls will be included in this hour. The election is Tuesday. The question, of course, is recall.

It's not yet sunset here in California, so being of the Jewish faith we're still permitted to work, even though it's Yom Kippur tomorrow.

It's a very important election on Tuesday and I'm very happy to welcome you to this august (UNINTELLIGIBLE).

GRAY DAVIS, GOV. OF CALIFORNIA: Thank you, Larry. Good Yenta to you and all your listeners.

KING: Thank you very much, Governor.

The vote is Tuesday. Your assessment? The odds are you're going to be recalled.

G. DAVIS: I don't think so. I believe these are fair-minded people in California. I trust them and I think they'll decide this recall is not in their best interest or the interest of their children.

KING: So the polls are wrong?

G. DAVIS: The recent tracking polls, private polls by both candidates, show this race closing dramatically. It's almost a dead even race right now. And I believe all of the momentum is on our side.

KING: You say both candidates. Is it just you and Schwarzenegger? Is that all we are talking about?

G. DAVIS: Well, we have access to a couple of other candidates who are polling on a nightly basis, and all the polls show a dramatic closing over the last 72 hours. KING: And it's just either you will be recalled or not, and if you are recalled, it's going to be Schwarzenegger. Is that what we're saying?

G. DAVIS: Yes, that's what it is. We have a crystal clear choice. Either people will vote no on the recall and allow me to finish the term they elected me to just last November, or they will elect Arnold Schwarzenegger. That's what the choice is down to.

KING: Now speaking politically, since this is a Democrat state, why isn't Bustamante doing better in the polls, even if the recall goes through?

G. DAVIS: Well, I think he's running a close second in the second race on the ballot, and it's not impossible that he could win, because Mr. Schwarzenegger is in sort of a freefall, and it's not impossible that Cruz Bustamante could pass him.

KING: What do you think has caused the change?

G. DAVIS: I think two things. I think people -- just this week, people began to realize that Arnold Schwarzenegger was going to emerge in all probability as the winning candidate in the replacement race, so then they had a clear choice, either vote no on the recall and allow me to continue as governor, or Arnold Schwarzenegger was going to be governor.

So they had to kind of digest that for a while, and no public poll has really shown that until Sunday night, the CNN poll. And then of course we have the revelations of the last 72 hours, which have caused further doubt in people's minds who were inclined to vote for Schwarzenegger.

Those two forces, I think, are causing people to reexamine their position.

KING: The revelations, the accusations by women, why does that mean that someone who may or may not have done that can't be a good governor?

G. DAVIS: The allegations, if true, are very disturbing. We're talking about seriously mistreating 15 women in situations which in some cases it truly would be a crime.

So clearly, these disturb people. We've not heard a forthright response from him. There have been some evasions, occasionally an apology, occasionally a denial, and the question gets down to this: are all 15 of these women lying? Or is Arnold Schwarzenegger not telling us the truth?

KING: Was it dirty pool do you think for it to come so late, the revelation?

G. DAVIS: The revelations came from a pretty respected institution in California, "The Los Angeles Times," who made very clear that their sources were not any candidate for office. They called on their own, dug this out through investigative journalism. So the three stories they printed are the result of their journalistic competence, verifying two or three times the sources that they used.

KING: One former writer there, I think Ms. Stewart (ph), said that they were sitting on this story. Do you know anything?

G. DAVIS: I don't know that.

KING: Do you know her?

G. DAVIS: I know of her. I don't know her personally.

KING: OK. Because she said that they were sitting on the story. They denied that, right? They said they were working on it.

G. DAVIS: Yes. In the paper, there are two or three people who have denied that allegation.

KING: OK, you say that these are criminal? It's criminal to grope?

G. DAVIS: Well, you know, some of these incidents are pretty appalling, I mean, pressing people up against refrigerators and putting your private parts next to other private parts. I mean, this is pretty -- this is not good stuff, and it's a crime to intentionally touch another human being in certain places, and that has happened now.

That's assuming the allegations are true. The only ones who can tell that would be the professional prosecutors. They're the ones that are in the business of determining whether this is true, partially true or not true at all.

KING: To your knowledge, is anyone investigating it on that basis?

G. DAVIS: I do not know.

KING: Concerning the lateness and the dirty aspect of this, Arnold Schwarzenegger yesterday had something to say about you, and we're going to play that and then get you to comment. Watch.

(BEGIN VIDEO CLIP)

ARNOLD SCHWARZENEGGER, CANDIDATE FOR CALIFORNIA GOVERNOR: They already have started their campaign, because that's exactly what they know how to do. Davis always knows how to run a dirty campaign, but he doesn't know how to run the state. That's the problem that he has.

(END VIDEO CLIP)

KING: What about the accusation that you run dirty?

G. DAVIS: Well, the source of these revelations are "The Los Angeles Times" and they have acknowledged themselves that they were the sole source of these allegations. KING: So this is not you bringing it up.

G. DAVIS: No. I'm just commenting on things that were written in the paper three days in a row. 15 women coming forward and saying that one human being treated them badly and against their will is not a trifling matter, and ought to be looked at, reviewed, and some determination made.

KING: As you look at this yourself, Governor, it has to be a little humbling, right? I mean...

G. DAVIS: You're talking about the recall?

KING: Yes, how you feel.

G. DAVIS: Absolutely.

KING: I mean, what it must do to you.

G. DAVIS: This has been a very challenging year for Sharon and I. We thought we'd have four years just to focus on policy and continue some initiatives.

We've done some good things. A million children have health insurance and test scores have gone up five years in a row in our schools. But within 30 days of within I was inaugurated, there were petitions on the street to recall me. Those petitions were organized and developed by Republican consultants in the losing campaign of Bill Simon in November of last year.

KING: Do you think they were getting even for losing?

G. DAVIS: I think they were embarrassed that in California the Democrats did pretty well, where around the country we unfortunately experienced some losses.

But I'm quick to say they did tap into some genuine anger caused in part from the economic conditions that California and most other states are facing.

KING: Where did you go wrong? What if you had to do it over?

G. DAVIS: That's the thing I really feel badly about, and if the people gave me a chance to finish my term will definitely change -- I did not keep in touch with the voters.

Trust me. I worked hard. We don't go home until 9:00, 9:15, try and get to bed by 11:30. But all my time is spent in my office in Sacramento. I have to spend more time, and I have, attend town hall meetings. I have to spend more time with voters.

Voters are the wellspring of democracy. They're the source of a lot of good ideas, and if you want to understand their aspirations and frustrations, there's no better way than to talk to them face to face.

KING: So it wasn't any accident on your part, any...

(CROSSTALK)

G. DAVIS: Oh, no, I'm sure that was part of it, and part of it were the difficult economic times. I mean, the last three years, since President Bush came into office, 3 million jobs have been lost, and some of them are in this state.

Now we're still 900,000 jobs to the good, but we're not as good as we were a couple of years ago. So that's caused some heartache. People in some cases have lost healthcare coverage. There are real economic problems that lead to anger against all people, including the governor.

KING: Do you think the idea of recall is terrible, period?

G. DAVIS: I think recall should have more standards. I don't think it's a good idea for the electorate to just recall you if they don't like a bill you signed or if they didn't like a policy you initiated.

A recall is supposed to be for gross incompetence, criminality, moral turpitude. And let me give you an example. President Clinton made this remark when he was out here. He made a loan to Mexico at a time when 85 percent of the country thought it was a bad idea. If we had a recall at the federal level, he might have been recalled.

But the Mexican government paid it back three years early with interest. There was no additional drug trafficking or immigration problems because it was enough money to stabilize the Mexican economy.

So a couple of years later, the decision that 85 percent of America opposed looked a lot better to them. So you need to give an elected official time to complete their term. Two years or four years. And then pass judgment on whether they did a good job or not.

KING: We'll take a break. We'll be back with Governor Gray Davis. We'll be taking your calls in a little while. His wife will join us later on this special live edition of LARRY KING LIVE, this Sunday night, getting close to election day, Tuesday, in California.

Don't go away.

(BEGIN VIDEO CLIP)

G. DAVIS: No on recall! No on recall! No on recall!

If we come together and unite against this recall, we will beat back this power grab and we will send a message from California to Crawford, Texas, to the White House, we are not going to stand for a Republican power grab.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: In the next segment we'll go to phone calls for Governor Davis. His wife will join us later.

Before we move to some issues, Tom Brokaw interviewed Arnold Schwarzenegger on "Dateline" tonight on NBC, and about the charges against Arnold, Brokaw asked, "You're not going to be anymore specific about these charges in terms of your denials"?

And Arnold's answer was, "As soon as the campaign is over, I will. I can get into all of the specifics and find out what is really going on. Right now, I'm just occupied with the campaign."

Want to comment?

DAVIS: You know, voters know a lot about Arnold Schwarzenegger as an actor. But they don't know very much about him as a political candidate, and this controversy has erupted in the last 72 hours, 15 women have accused him of improper physical behavior, and I think not to deal with that controversy before the election is to deny voters pretty important information.

I think many of them are going to find it insulting.

KING: So you mean saying he'll deal with it after the campaign is insulting. He should respond now.

G. DAVIS: He should respond now. I mean, this is not a political candidate we've seen for 20 years and we have a sense of who he is. This is a 77-day campaign. We don't know too much about him. All of this stuff crops up at the end, and to say, "Well, I'll deal with it afterwards," I think many voters are going to find insulting.

KING: Some charges against you. Accusations that you hid the scope of the state's fiscal problems until after you were reelected, that you knew they were in bigger trouble than they were.

G. DAVIS: You know, that's just comical. All this information is on the Internet. It's all publicly available. Everyone in Sacramento, independent sources, independent agencies, can tell you where we are from minute to minute.

KING: And so you never said during the campaign things are better than they are?

G. DAVIS: No. My estimate for the deficit was within $1 billion of the legislative analysts.

KING: Vehicle license fee, tripled on October 1. Triple fees for driver's licenses.

G. DAVIS: This issue goes back to 1998. Governor Wilson wanted to lower a local fee. This fee goes to Los Angeles and San Francisco and San Jose and San Diego. It does not come to Sacramento. You pay a fee, it goes to your local city, and they use most of it to pay for firefighting and police work.

When the previous governor, Governor Wilson, wanted to lower that local fee in 1998, the mayor said, "Wait a minute, Governor, lower one of your own taxes. Don't lower our fee." He says, "Don't worry, I'll write you a check for the difference."

They said, "What if you don't? You'd better put in that law an automatic escalator that if you don't write us the check, the fee goes back up, so we can pay fire and police."

So that's how he wrote the law. For four years, I wrote $12 billion worth of checks to local cities so you could enjoy a vehicle license fee about 1/3 of what it was before I took office. But this year we ran out of money in June. The thing automatically went up to the level it was at when I took office, so that you don't have to layoff half the fire and police.

So Governor Wilson's law lowered the fee, and it raised the fee.

KING: I guess the most talked about, the decision to sign the Immigrant Driver's License. A lot of people around the country ask about that. You mean you don't have to be a citizen to get a driver's license? Explain.

G. DAVIS: Well, for 67 years in the 20th century, that was the law in California.

KING: You could get a driver's license?

G. DAVIS: Right. It's still the law -- it's currently the law in Utah and New Mexico and it will be the law in California again January 1.

Our economy depends more than any other economy in America on immigrant labor. We have food on our tables three times a day. Food doesn't come from the supermarket. It comes from the agricultural fields, and Americans will not do that work, so illegal immigrants do about 80 percent of the farm work in this state. They do a lot of work in restaurants and hotels.

I believe that if they're paying taxes and working in our society, they should have a right to drive to work. Otherwise, you're asking these people to get up at 2:00 in the morning, take public transit, work in the fields, come home. How are they going to raise their kids?

KING: Are the growers committing a crime by employing them?

G. DAVIS: Technically. Everyone looks the other way, because there's no way that Americans will do this work.

I'll tell you, 1980, an Orange County strawberry farmer was raided by the INS. That's 23 years ago. He got so mad, he said, "I'm just hiring Anglos." He hired 100 people at 7:00 in the morning. At noon he had 3 left. At 5:00, he had nobody left.

Americans will not do this work and immigrants, if they can find work in construction will leave the fields, because it's so hard.

KING: Were you initially opposed to that?

G. DAVIS: No. I was always opposed to finding a way to let hardworking, taxpaying, immigrants drive to work. But we tried the first two years to get a whole bunch of security features into the driver's license bill, and it became too complicated. There were flaws in the bill.

So this time, we said, look, we're just dealing with driving. Here are the security advantages of giving the driver's licenses.

KING: Because there is a security risk, is there not?

G. DAVIS: Here are the security advantages. First of all, a lot of these immigrants are driving anyway. Now they have to pass a driver's test, show us their competent, get insurance, know the rules of the road, and we have in our computer 1 million or 1.5 million names, addresses, pictures and fingerprints. Thee is a security value to that.

Now, will we have to down the road possibly do some additional security precautions for all drivers, legal and illegal? Probably. But I spend about 15 percent of every day on homeland security and no one takes this issue more seriously than me.

KING: Mr. Schwarzenegger wants to repeal Prop 13, which he says will increase property taxes on people. Do you favor the repeat of that? This is where I think they're going to tax on what it's worth, not what it's assessed.

G. DAVIS: I believe Prop 13 is the expressed will of the voters, and I'm not going to tinker with it.

KING: So you're not in favor of a repeal?

G. DAVIS: No. I'm not going to favor a repeal.

KING: Where do you stand on the Proposition 54?

G. DAVIS: 54 I have not taken a position on yet, so I've got one day to express.

KING: What's tormenting you?

G. DAVIS: Oh, sorry, I'm mixed up here. Prop 54, I'm 100 percent against. It's a ban on information. It's ridiculous that we can't collect information.

KING: Now I'm told that Schwarzenegger does not support the repeal of Prop 13. I was told he supports the repeal of Prop 13. All right, I'm corrected. Someone told me he...

G. DAVIS: I think his financial advisor, Mr. Buffet (ph), proposed the change in Prop 13.

KING: And he didn't listen to Mr. Buffet.

G. DAVIS: Correct.

KING: We should correct that. Mr. Buffet (ph) favored the repeat of Prop 13. He thought that the state was under-taxed, right? In regard to homeowners.

G. DAVIS: Right. And I'm saying Prop 13 should remain the way it is.

KING: And Prop 54 you're against?

G. DAVIS: I'm against it. You know why? The simplest reason is, we collect a lot of information on health characteristics of certain groups. There's Tay-Sach disease and there's sickle cell anemia. You want drugs that work for you. That information couldn't be collected anymore, and that's why all the pharmaceutical companies are against it.

All of us deal with chronic diseases. We have drugs now that help mitigate the problems. Without this information, we can't have these lifesaving drugs, or drugs that considerably improve the quality of life. So that's one of many reasons you should be against it.

KING: Governor, do you feel beleaguered? Really? I mean, no one has ever -- I guess the last time this happened to a governor was in North Dakota in 1920-something. What do you feel?

G. DAVIS: I don't like this. I don't think it's fair. But I know people are not interested in my problems. I asked for the privilege of solving their problems. And we've solved quite a few. We still have some to go.

But I, as you know, because we've talked before about this, I am a person of faith, and I believe God doesn't give you more than you can handle, and I carry a little prayer card with me, I can show you if you like. It says, "Nothing will happen to me today that the Lord and I cannot handle together."

And I believe that this is a test that I'm meant to go through, and that somehow it will all work out.

KING: Do you share any of the blame for the energy crisis?

G. DAVIS: Only that I did not communicate clearly what was happening and I took too long to act. But without building a watch for you, before I became governor, the state deregulated, which said in effect that Larry King Company can come in and buy -- we're in Los Angeles, so I'll say Southern California Edison's power plants. And then you can sell the power back to Edison for as much as you want.

And you sold the power back to Edison for 400 percent more than it was sold the year before. So Edison went bankrupt, essentially, and the state had to go in and buy power.

Now, under deregulation, the only one that can tell you not to charge Edison 400 percent is the federal government. They didn't want to do it, because they're buddy-buddy's with Ken Lay, at Enron, and all these other energy producers. So we are still fighting with Washington to get $9 billion back for the consumers of this state.

But what we have done and what we could still do under energy deregulation was build more plants -- we built 26. I used my emergency power to greatly accelerate that, sometimes reducing the permit process to 21 days. People conserve power, so when the lights went out on the East Coast, they didn't even flicker here.

KING: We'll take a break and come back and start to include some of your phone calls. The governor's wife, the First Lady Sharon Davis will join us later. The election is Tuesday.

By the way, on Tuesday night, we'll have our regular LARRY KING LIVE at 9:00 Eastern and at 11:00 Eastern, Wolf Blitzer and a whole panel of political pros will take three hours to go over the complete California election. That's Tuesday night on CNN at 11:00 Eastern.

We'll be right back.

(COMMERCIAL BREAK)

KING: We're back. We'll go to your calls in a moment.

In the interview tonight with Tom Brokaw, Schwarzenegger discussed the allegations against him. He said, "It makes you become aware of the fact that this is what campaigning, dirty campaigning, is all about, because all of the sudden, three days before the election, all these people are coming out, and they're very well organized."

"The Terminator" actor said he never grabbed anyone. "That I pulled up their shirt and grabbed their breasts and stuff like that, that is not true." He said, "There's a lot of this stuff going on that is not true."

So he is denying.

G. DAVIS: Yes, all I can say is that his quarrel is with "The L.A. Times," because they're the ones who have printed this, and they've indicated they've got two or three corroborating sources before they put that in the paper, so my concern is that this controversy is not going to be resolved before election day, and people have to ask themselves whether, given all these allegations, if they're true, it makes sense to change horses at this time.

They'll make that judgment. I'm confident they'll make a good judgment, and I'll abide by whatever judgment they make.

KING: Sacramento, California, for Governor Gray Davis, hello.

CALLER: Thank you, Larry, for taking my call.

KING: Sure.

CALLER: Governor Davis, I currently work for the state of California and I'm off on furlough, being told my job may be cut because of the budget. I may not be called back next season. If this happens, can you tell me what you plan on doing about helping state workers find other jobs?

G. DAVIS: First of all, I feel very badly that anyone has to lose their job. The legislature, in the budget they gave me, said I had to reduce several thousand positions in the state government. We obviously hope that can be done through attrition.

As you know, we have been able to gain some concessions from the public employee groups that saved a good deal of the money the legislature asked us to save, and we're working very closely with your bargaining representatives in the hopes that we can achieve the dollar savings the legislature asked me to achieve with as few layoffs as humanly possible.

Clearly, if you have to be laid off, we'll be happy to try to write a letter of recommendation, do everything we can, to have you find gainful employment.

My hope as governor is that everyone finds work, and everyone has the opportunity to achieve their highest potential.

So we find ourselves in a difficult economy. My hope is that you're not laid off, but if you are, we'll do everything we can to help you in the private sector.

KING: College Park, Maryland, hello.

CALLER: Hi. Thank you for taking my call.

KING: Sure.

CALLER: I have a question. How would you run the state differently if you know that the recall was coming? And good luck.

G. DAVIS: Thank you.

KING: Well, he said the big thing he would have done differently is been in touch more with the public. Is there any item, bill, thing, if you could take it back you'd take it back?

G. DAVIS: No, because I don't think there's one bill that is spurring the people on the other side.

KING: So there's nothing you have done to disagree with?

G. DAVIS: I think I was slow to act on energy, but the point I did not make before, which I'd like to make now, is everyone was telling me raise consumer rates 400 percent, because that's what Edison had to pay to the Enrons of the world, and that's what PG&E had to pay to the Enrons of the world.

And they said, we know the law says reduce people's rates by 5 percent, but you're going to have to raise them 400 percent. And I knew people would just revolt if that happened, because they never would have gone along with deregulation if they were told their rates were going up 400 percent.

KING: President Bush came and met with you, right?

G. DAVIS: He came and met with me and it was not helpful initially. Finally after about a year, they mitigated the problem going forward by saying you can only charge so much for electricity starting June 2001. I met with him before that.

KING: Lubbock, Texas, hello.

CALLER: Hi. Thank you for taking my call.

KING: Sure.

CALLER: Governor Davis, putting aside the accusations against Mr. Schwarzenegger and his status as an actor, what policies would you resolve to implement during the remainder of your term that would be better for the community of California than those being proposed by your opposition?

G. DAVIS: Well, what I want to work on, if people are good enough to let me continue the term they elected me to, is to try and stimulate the economy, create more jobs and balance the budget.

I want to work on bringing down healthcare costs, particularly prescription drugs. We were the first in the country to reduce them for seniors and to give them the benefit of our MediCal discounts, which are roughly 25 or 30 percent.

I'm also proud that we were the first one to have an HMO Bill of Rights, which is...

KING: You signed something the other day, didn't you?

G. DAVIS: Yes. Today I signed a bill allowing 1 million working Californians to get healthcare coverage which they do not now have.

And so we're doing our best to make sure that workers are covered, have healthcare coverage, because I think they'll be more productive and it will produce a stronger economy.

KING: Mr. Schwarzenegger says everywhere he goes he sees businesses complaining that this is not a business-happy state.

G. DAVIS: You know, a couple of years ago, "Forbes/Milken" study said 6 of the 10 best places to run a business were in California. The Harris Poll every year for the last few years has said to people, if you want to live somewhere, if you couldn't live I your own state where would it be and they've chosen California.

Just today -- just last week a survey came out saying where the best place is to raise a baby. It said California. So, we're doing a few things right here. I realize that not everyone is happy with everything and I have made some mistakes but there is some good news out here as well the people need to know about.

KING: We'll be back with more of Governor Davis, more of your phone calls. Then we'll meet Sharon Davis. Don't go away. (COMMERCIAL BREAK)

KING: We're back with Governor Gray Davis -- Fair Oaks, California, hello.

CALLER: Thank you for taking my call.

KING: Sure.

CALLER: Governor Davis...

G. DAVIS: Yes, ma'am.

CALLER: ...I have two questions.

G. DAVIS: Yes, ma'am.

CALLER: The first one have you considered asking the Democratic Party to pressure Bustamante into dropping out so that Bustamante's voters would be more likely to vote no on the recall instead of yes on the recall and for Bustamante?

G. DAVIS: The answer to that question is no. I don't think it's my place to ask another candidate, in this case the lieutenant governor who I consider a good and decent person, to drop out.

I appreciate his efforts in encouraging people to vote no in the recall even as they consider him as a candidate on the replacement ballot. And so, as long as he thinks he should stay in the race, I'm not going to ask him to drop out.

KING: You voting for him after you vote no on the recall?

G. DAVIS: You know we have a secret ballot in this country, Larry.

KING: Yes, but he's the only prominent Democrat running.

G. DAVIS: I will say this. He's the most credentialed and is the most capable person on the replacement ballot but I want to keep people focused on the recall which I think is a bad idea.

KING: If there's no recall you could continue to work well with him right?

G. DAVIS: Yes. I like him. He's a thoughtful man and I look forward to continuing to work with him.

KING: What's the second part of your question ma'am.

CALLER: My second part is how about universal healthcare for everyone, including all of the people over 18 and I mean everybody, not just most people?

G. DAVIS: I think that's -- I believe in that goal. We took a big step today when I signed legislation here in Los Angeles that will provide healthcare coverage for a million working Americans.

You know a lot of people don't realize that 80 percent of the people who are uninsured are either working or families of working members and when they have health coverage there's less absenteeism.

There is more productivity. There's greater piece of mind. So, it is an investment that pays dividends not just for the family, which is very important, but for our economy as well.

KING: Watsonville, California for Governor Davis, hello.

CALLER: Yes, sir. Given the statement you made on the improved conditions of education in California, I'm wondering why am I teaching in a district where we don't have enough books for all the students, where there aren't enough desks for all the students to sit in and where we educators had to give two percent of our income, our pay to the district or face large layoffs?

G. DAVIS: Which district are you in?

CALLER: I'm in the Santa Cruz County, the Pajaro Valley Unified School District.

G. DAVIS: I'm going to answer your question but I'm going to preface it by saying I'm going to look into that tonight or tomorrow morning to find out what decisions were made at the district level.

I can tell you this that we have put $13 billion more in education funding than the law requires and we spent a lot of it on teacher training, more technology. We've doubled the number of computers and we spent almost $2 billion on textbooks.

Now, we don't make local school boards spend the money for that purpose but we give them a lot of incentives to do so, so I don't know what decisions were made at your local school board level but I will look into it and find out.

KING: Virginia Beach, Virginia, hello.

CALLER: Good evening, how are you doing Governor Davis?

G. DAVIS: Just fine. Thank you for calling.

CALLER: Sir, if you're not recalled what are your plans on adding funds to the state budget so all the teachers and all the other people will not suffer as they have been?

G. DAVIS: I have great regard for teachers. I really ran for governor because of my passion for education and we have, as you just heard me say, made major investments in education.

Some of it has resulted in increased teacher pay. When I first became governor, we ranked 43rd in the country in per capita spending on education, now we're 27th. Test scores are up five years in a row.

I have great respect for teachers. No matter how much we've increased their pay, and we have, they're close to the top in the country now, they're not paid enough because our future is in your hands.

If I may, Larry, as a young man I was trying to make a baseball team at a high school out here in San Fernando Valley and I was sitting on the bench as an eighth grader and a history teacher came over to me, who was also our baseball coach, and said, Gray, if you just worked hard and had some direction good things would happen to you.

I was so impressed that some adult took an interest in me. I began working harder. I ended up being captain of the baseball team. I went to Vietnam. I went to Stanford and now I'm governor.

So, I understand the power teachers have not just to educate but to get young people to believe in themselves and I'm going to do everything I can within our economic resources to continue to invest in teachers and invest in education.

KING: That's your top priority?

G. DAVIS: Has always been.

KING: Were you in combat in Vietnam?

G. DAVIS: I was in the combat arms, the Signal Corps, but my primary job was to make sure the tactical radios, we called them SGRs, worked. You know that was -- I was there in '68 and '69. We didn't have cell phones. We didn't have e-mails and you had a line of sight communication.

KING: San Jose, California, hello.

CALLER: Hi, Larry.

KING: Hi.

CALLER: Governor Davis this is an honor for me.

G. DAVIS: Oh, thank you.

CALLER: I think you've served us well. My question is if this sick travesty goes through and you are recalled what are you plans for the aftermath? And we love Sharon.

KING: She'll be here soon. What are you going to do if it's recalled, had to think about it?

G. DAVIS: You know I really haven't.

KING: You haven't.

G. DAVIS: Because in this job you get so much flack and so much grief you can't lead, you can't get anything done unless you can focus on the positive and so all the things we've been able to do, get a million kids with health insurance and be a strong pro-choice state and have a great environmental record, all that stuff was just focusing on the positive. So, I believe if it's God's will that I remain as governor, I will and if it's not he'll have a plan for me to do something else.

KING: During the interim period would you sit down with the governor-elect whoever that might be should the recall go through?

G. DAVIS: Absolutely. I would extend any courtesy and assistance in the transition. Governor Wilson did that to me. You know that's an obligation of the governor to help the incoming governor. I hope I have a chance to do that three years and three months from now rather than a few days from now.

KING: Nipomo, California, hello.

CALLER: Hi. I have a question for Governor Davis.

G. DAVIS: Yes, ma'am.

CALLER: My question is on the stem cell research I haven't heard a lot about it but what I have heard is that you passed a new law regulating it.

G. DAVIS: No -- is that your question?

CALLER: You said that California is going to fund more stem cell research?

G. DAVIS: Yes. We've done -- I signed three bills and I believe strongly that this research can provide life saving benefits to people who have Parkinson's and Alzheimer's.

You're going to meet my wife in a moment. We lost her mother, Mary Reyer (ph), to both Alzheimer's and Parkinson's and if you know anyone that went through that it's very depressing at the end. Mary, my mother-in-law, didn't even recognize Sharon.

So, there are drugs that put off the effects of Alzheimer's, extend the quality of your life and they come through the kind of research that stem cell research can provide.

It also helps people dealing with diabetes and stem cell diseases -- I mean spinal cord diseases, so there are a variety of ailments that benefit from this research and we were the first state to have full scale stem cell research.

I've signed a couple of bills this year allowing for an anonymous embryo inventory so that researchers can use all the embryos that are available. So, we are very much a believer that this kind of research will provide life saving benefits and want to attract researchers to come here to do that.

KING: You said you're a devout Christian, is that correct?

G. DAVIS: Yes, Catholic.

KING: But Christian -- Catholic.

G. DAVIS: Yes.

KING: Do you have any question about stem cells and morality?

G. DAVIS: I know the church's preachings and I respect the church and I'm deeply religious but as John Kennedy said when he was president we have a separation of church and state here.

KING: You disagree with the church?

G. DAVIS: Well, I'm taking a course of action that they may disagree with. I believe these benefits are important and I think any human being that does not want to avail themselves of this research can do so and say I'm not going to take advantage of it.

And, to be honest with you Larry, I don't think my mother-in-law and Mary would have. She was a conservative Republican but she never would have kept you or your wife from taking advantage of it.

KING: Back with more of Governor Davis and we'll be joined by Sharon Davis, the first lady of the state of California. Don't go away.

(COMMERCIAL BREAK)

KING: Again, the election is Tuesday. Governor Gray Davis has been our guest and now joining us is Sharon Davis, Gray Davis' wife, the first lady of the state of California. What has this done to you?

SHARON DAVIS, GOVERNOR DAVIS' WIFE: Oh, it's been difficult for us, Larry, as you can imagine. Somebody is trying to take my husband's job right after he took office and so it's been stressful and very difficult not only for Gray and me but for our family as well. His mother is 80 and she's very upset about it to say the least.

KING: Were you surprised that it all happened?

S. DAVIS: Yes, I was. You know what surprised me, Larry, was that you could have a recall in this state, as you mentioned, without having committed any crime or (unintelligible).

KING: There's no -- you can have any reason, right?

S. DAVIS: No, for any reason they could recall him.

KING: Like you could recall the next governor?

S. DAVIS: Right, exactly. They could start that the day after the election and it's creates a lot of chaos. It's very expensive. It is not educating one child or doing anything to move our state forward and so...

KING: But shouldn't the people -- what if someone said shouldn't the people have a right to change whenever they feel like changing? S. DAVIS: But I think it's like a virus, Larry. Once it takes hold if it succeeds it will spread. It will spread throughout California and it will spread throughout the country because then there will be all this retaliation because then liberal groups will try and take out Republicans and Republicans taking out Democrats and so I think ultimately...

KING: Have you heard that if there's a defeat there will be a movement to recall the next?

S. DAVIS: Well, there's already been, yes. I've heard people say that they're going to -- they'll put together the $3 million to pay signature gatherers to take out a Republican if he gets elected and that's really counterproductive.

KING: California could be the recall state.

S. DAVIS: That's right. That's right.

KING: Gray said he hasn't thought about the possibility of the recall going through and what he would do after. Have you?

S. DAVIS: You know we've been so busy campaigning. It's full time because normally you have about a year and a half to campaign and this we've done in 77 days. I say it's like campaigning in dog years.

Every day is like a week and you have to do so much and I've been working in the campaign with Gray. We have a much smaller staff, a very small budget and so everybody's working their hearts out and so we haven't had time to sit around and really even talk about it.

KING: Does it make you feel funny that Mr. Schwarzenegger's wife is Maria Shriver, a big D Democrat.

S. DAVIS: Right.

KING: A Kennedy Democrat, you are a Democrat, how do you feel about her?

S. DAVIS: Well, I know Maria and she's a lovely person.

KING: You're friends?

S. DAVIS: Well, I know her. We have the same social group and so we have a lot of mutual friends and we adore her. I mean she's a lovely person and...

G. DAVIS: She's a very nice person.

S. DAVIS: Yes.

G. DAVIS: I've known her for years. She's a wonderful person.

KING: What do you make of the allegations against Arnold?

S. DAVIS: Well, I worked for the airlines. In fact, I worked for PSA when we wore short little uniforms.

KING: You were one of those mini skirts?

S. DAVIS: Yes, I was one of those girls in the mini skirts and because of the type of uniform we wore people felt like they could take liberties and it was humiliating and so I understand.

KING: Did they grab you?

S. DAVIS: Oh, well, yes, or they would say things that you would know they would never want said to their daughter or their wife or their girlfriend or their niece and it's so humiliating and you really -- I understand these women not coming forward because you're so humiliated. You really want to put it out of you mind. You want to just put it behind you but it's really always there.

In fact, the day I read about in the "L.A. Times" what had happened with the women that had said that Arnold had done these things, I was shaking because it was like it all comes back to you and I think that's how other women who came forward felt.

It's like when you read about it, it brings back all those memories and I think of some of the really terribly insulting things that were said to me, being touched inappropriately.

KING: How has this, Gray, affected your relationship if at all?

G. DAVIS: Sharon and mine?

KING: Yes.

G. DAVIS: We have a wonderful relationship. I thank God every day she brought me back to the church and we have -- we are strong and...

KING: She was the...

G. DAVIS: She was the reason. I was raised as a Catholic and I sort of stopped going to church for about 15 years and she really brought me back to the church and we have great faith and we know that whatever God's plan is will happen.

I'll either be governor or I won't be governor but I think it's a lot -- it's much more comforting to go through life like that because otherwise you can just tear your hair out listening to all the problems and criticisms and complaints.

KING: Bitter, Sharon?

S. DAVIS: No, not at all. You know this is -- it would be so easy to be bitter but that's not productive and it doesn't really help at all. We're just working hard, trying to make sure that we can get out part of the story out. So much of it has been obscured because of this campaign and it's been so negative on the other side.

My husband's record has been misrepresented. He's been maligned. He's been called names and so I think what it is is to say instead of looking at it from just purely negative it's an extraordinary opportunity.

The whole world is watching California to see how we deal with this and they're going to see whether they're going to stay with somebody who has really been -- is a very good guy who's been faced with some very big challenges or if they're going to go with a super star because he's got a lot of money.

KING: Taking on a movie star?

S. DAVIS: It is. It is. I mean (unintelligible).

G. DAVIS: No question celebrity in our society is a big deal. You know that. You start a campaign with people thinking they know you and as we see this campaign unfold some things have come out that make some of the voters question but you have a big head start as a celebrity. There's no question about that.

KING: We'll be back with some more moments with Governor Gray Davis and the First Lady Sharon Davis. We'll include some phone calls as well. Don't go away.

(COMMERCIAL BREAK)

KING: We're back with our remaining moments. Are you surprised the White House has not taken a stand in this?

G. DAVIS: I don't know whether they've taken a stand or not.

KING: They haven't publicly said anything. Has the president ever commented on this, I don't think so.

G. DAVIS: Not in any great detail but clearly there's a lot of people that are helping Arnold. This is a...

KING: You mean inside the White House helping Arnold?

G. DAVIS: No, from the Republican Party helping Arnold.

KING: Oh.

G. DAVIS: But this is a big issue nationwide and something my wife touched on I want to mention. You know they're thinking of recalling the Republican governor of Nevada because of budgetary action he did to balance his budget and there's been talk of recalling the brand new governor of Wisconsin.

This is not a good policy for America. One reason why we've attracted investment around the world to California and to America is we're a stable society. People serve their term.

We're not like Italy that has 17 prime ministers in three years and then at the end of the term, fine, you can remove people or keep them depending on how they did. So, attracting investment and creating jobs for our growing population is a big reason we should have stability in this political climate.

KING: Do we know if there is a recall go through when the new governor is governor?

G. DAVIS: I think once the secretary of state certifies that the election results are final.

KING: And they might take a while, right?

G. DAVIS: It generally takes a couple weeks, two or three weeks.

KING: (Unintelligible.)

G. DAVIS: I think they have to do it within 28 days under law.

KING: Ellijay, Georgia, hello.

CALLER: Thank you, Larry. Ms. Davis, which of the campaign issues do you think you could better help your husband with, which one of the campaign issues?

S. DAVIS: Well, I enjoy campaigning so I am out quite a bit and one of the things I talk about, which is called the soft issues, I've been working quite a bit with children, especially children at risk, recruiting mentors for children, raising money for school libraries, and so I've been involved mainly in the issues that affect children.

And, I think talking to people and letting them know that what we've done to help advance this state to make it a better state for children is evidenced by a report that just came out, as my husband mentioned, that California is one of the best states in the country to raise your children.

KING: Chico, California, hello.

G. DAVIS: Not one of the best, the best, number one.

KING: Chico, hello.

CALLER: Hello, yes. My question is for Governor Davis.

KING: Go ahead.

G. DAVIS: Yes, ma'am.

CALLER: The question that I have is with regard to the energy situation.

G. DAVIS: Sure.

CALLER: And we realize that we had to put into force all of our new power plants. Could the deficit have an issue with being that we got no federal aid from the federal government?

G. DAVIS: That's a very good question and the answer is this. There's no question that California was bilked of somewhere between $20 and $30 billion. In other words, an electron, which costs $1 one year all of a sudden costs $4 the next year. You can't add value to an electron. You certainly can't add 400 percent worth of value.

And so all that money flowed out of California to Texas and to the south and that had an impact on our economy. In terms of the budget, we were fully repaid but in terms of the net worth of Californians we were ripped off and the federal government agency in charge of this, their staff came out with a report about six months ago and said, you know, Governor Davis was right.

Forty companies took advantage of California. They should not have manipulated the markets the way they did and I appreciate their kind words but show me the money. I want to get you back at least $9 billion, which I'm told is all we can sue for but I will not rest until I get it -- I get it for you.

KING: We're running out of time. What do you think is going to happen Tuesday?

S. DAVIS: I believe my husband is going to defeat this recall because we believe...

KING: And the recall will be defeated?

S. DAVIS: It will be. It will be a no vote. People will reject this because we believe that the voters of this state are fair minded.

KING: Big turn out?

G. DAVIS: I think there will be a very big turnout for a special election. I still believe it will be smaller than the number of people who turned out last November.

KING: Thank you both very much.

S. DAVIS: It's a pleasure.

KING: Governor Gray Davis and the first lady of California Sharon Davis, we thank them both for joining us.

A reminder CNN's complete coverage of the election in California starts Tuesday night at 11:00 p.m. Eastern Time but it will be three hours anchored by Wolf Blitzer.

We'll be on with our regular show at 9:00 Eastern Time, covering the election and leading up to those results.

Stay tuned now for "CNN SUNDAY NIGHT" with Carol Lin.

I'm Larry King, goodnight.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

Davis>

Aired October 5, 2003 - 21:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LARRY KING, CNN ANCHOR: Tonight, Gray Davis, the governor of California. How much longer, with the recall vote on Tuesday, it's going to happen. What's he thinking? What's he thinking about Schwarzenegger? What's he thinking about his future?
Governor Gray Davis is here for the hour. We'll take your calls. He's next on LARRY KING LIVE.

Later in the hour, we'll be joined by his lovely wife, Sharon Davis, the first lady of the state of California. Your phone calls will be included in this hour. The election is Tuesday. The question, of course, is recall.

It's not yet sunset here in California, so being of the Jewish faith we're still permitted to work, even though it's Yom Kippur tomorrow.

It's a very important election on Tuesday and I'm very happy to welcome you to this august (UNINTELLIGIBLE).

GRAY DAVIS, GOV. OF CALIFORNIA: Thank you, Larry. Good Yenta to you and all your listeners.

KING: Thank you very much, Governor.

The vote is Tuesday. Your assessment? The odds are you're going to be recalled.

G. DAVIS: I don't think so. I believe these are fair-minded people in California. I trust them and I think they'll decide this recall is not in their best interest or the interest of their children.

KING: So the polls are wrong?

G. DAVIS: The recent tracking polls, private polls by both candidates, show this race closing dramatically. It's almost a dead even race right now. And I believe all of the momentum is on our side.

KING: You say both candidates. Is it just you and Schwarzenegger? Is that all we are talking about?

G. DAVIS: Well, we have access to a couple of other candidates who are polling on a nightly basis, and all the polls show a dramatic closing over the last 72 hours. KING: And it's just either you will be recalled or not, and if you are recalled, it's going to be Schwarzenegger. Is that what we're saying?

G. DAVIS: Yes, that's what it is. We have a crystal clear choice. Either people will vote no on the recall and allow me to finish the term they elected me to just last November, or they will elect Arnold Schwarzenegger. That's what the choice is down to.

KING: Now speaking politically, since this is a Democrat state, why isn't Bustamante doing better in the polls, even if the recall goes through?

G. DAVIS: Well, I think he's running a close second in the second race on the ballot, and it's not impossible that he could win, because Mr. Schwarzenegger is in sort of a freefall, and it's not impossible that Cruz Bustamante could pass him.

KING: What do you think has caused the change?

G. DAVIS: I think two things. I think people -- just this week, people began to realize that Arnold Schwarzenegger was going to emerge in all probability as the winning candidate in the replacement race, so then they had a clear choice, either vote no on the recall and allow me to continue as governor, or Arnold Schwarzenegger was going to be governor.

So they had to kind of digest that for a while, and no public poll has really shown that until Sunday night, the CNN poll. And then of course we have the revelations of the last 72 hours, which have caused further doubt in people's minds who were inclined to vote for Schwarzenegger.

Those two forces, I think, are causing people to reexamine their position.

KING: The revelations, the accusations by women, why does that mean that someone who may or may not have done that can't be a good governor?

G. DAVIS: The allegations, if true, are very disturbing. We're talking about seriously mistreating 15 women in situations which in some cases it truly would be a crime.

So clearly, these disturb people. We've not heard a forthright response from him. There have been some evasions, occasionally an apology, occasionally a denial, and the question gets down to this: are all 15 of these women lying? Or is Arnold Schwarzenegger not telling us the truth?

KING: Was it dirty pool do you think for it to come so late, the revelation?

G. DAVIS: The revelations came from a pretty respected institution in California, "The Los Angeles Times," who made very clear that their sources were not any candidate for office. They called on their own, dug this out through investigative journalism. So the three stories they printed are the result of their journalistic competence, verifying two or three times the sources that they used.

KING: One former writer there, I think Ms. Stewart (ph), said that they were sitting on this story. Do you know anything?

G. DAVIS: I don't know that.

KING: Do you know her?

G. DAVIS: I know of her. I don't know her personally.

KING: OK. Because she said that they were sitting on the story. They denied that, right? They said they were working on it.

G. DAVIS: Yes. In the paper, there are two or three people who have denied that allegation.

KING: OK, you say that these are criminal? It's criminal to grope?

G. DAVIS: Well, you know, some of these incidents are pretty appalling, I mean, pressing people up against refrigerators and putting your private parts next to other private parts. I mean, this is pretty -- this is not good stuff, and it's a crime to intentionally touch another human being in certain places, and that has happened now.

That's assuming the allegations are true. The only ones who can tell that would be the professional prosecutors. They're the ones that are in the business of determining whether this is true, partially true or not true at all.

KING: To your knowledge, is anyone investigating it on that basis?

G. DAVIS: I do not know.

KING: Concerning the lateness and the dirty aspect of this, Arnold Schwarzenegger yesterday had something to say about you, and we're going to play that and then get you to comment. Watch.

(BEGIN VIDEO CLIP)

ARNOLD SCHWARZENEGGER, CANDIDATE FOR CALIFORNIA GOVERNOR: They already have started their campaign, because that's exactly what they know how to do. Davis always knows how to run a dirty campaign, but he doesn't know how to run the state. That's the problem that he has.

(END VIDEO CLIP)

KING: What about the accusation that you run dirty?

G. DAVIS: Well, the source of these revelations are "The Los Angeles Times" and they have acknowledged themselves that they were the sole source of these allegations. KING: So this is not you bringing it up.

G. DAVIS: No. I'm just commenting on things that were written in the paper three days in a row. 15 women coming forward and saying that one human being treated them badly and against their will is not a trifling matter, and ought to be looked at, reviewed, and some determination made.

KING: As you look at this yourself, Governor, it has to be a little humbling, right? I mean...

G. DAVIS: You're talking about the recall?

KING: Yes, how you feel.

G. DAVIS: Absolutely.

KING: I mean, what it must do to you.

G. DAVIS: This has been a very challenging year for Sharon and I. We thought we'd have four years just to focus on policy and continue some initiatives.

We've done some good things. A million children have health insurance and test scores have gone up five years in a row in our schools. But within 30 days of within I was inaugurated, there were petitions on the street to recall me. Those petitions were organized and developed by Republican consultants in the losing campaign of Bill Simon in November of last year.

KING: Do you think they were getting even for losing?

G. DAVIS: I think they were embarrassed that in California the Democrats did pretty well, where around the country we unfortunately experienced some losses.

But I'm quick to say they did tap into some genuine anger caused in part from the economic conditions that California and most other states are facing.

KING: Where did you go wrong? What if you had to do it over?

G. DAVIS: That's the thing I really feel badly about, and if the people gave me a chance to finish my term will definitely change -- I did not keep in touch with the voters.

Trust me. I worked hard. We don't go home until 9:00, 9:15, try and get to bed by 11:30. But all my time is spent in my office in Sacramento. I have to spend more time, and I have, attend town hall meetings. I have to spend more time with voters.

Voters are the wellspring of democracy. They're the source of a lot of good ideas, and if you want to understand their aspirations and frustrations, there's no better way than to talk to them face to face.

KING: So it wasn't any accident on your part, any...

(CROSSTALK)

G. DAVIS: Oh, no, I'm sure that was part of it, and part of it were the difficult economic times. I mean, the last three years, since President Bush came into office, 3 million jobs have been lost, and some of them are in this state.

Now we're still 900,000 jobs to the good, but we're not as good as we were a couple of years ago. So that's caused some heartache. People in some cases have lost healthcare coverage. There are real economic problems that lead to anger against all people, including the governor.

KING: Do you think the idea of recall is terrible, period?

G. DAVIS: I think recall should have more standards. I don't think it's a good idea for the electorate to just recall you if they don't like a bill you signed or if they didn't like a policy you initiated.

A recall is supposed to be for gross incompetence, criminality, moral turpitude. And let me give you an example. President Clinton made this remark when he was out here. He made a loan to Mexico at a time when 85 percent of the country thought it was a bad idea. If we had a recall at the federal level, he might have been recalled.

But the Mexican government paid it back three years early with interest. There was no additional drug trafficking or immigration problems because it was enough money to stabilize the Mexican economy.

So a couple of years later, the decision that 85 percent of America opposed looked a lot better to them. So you need to give an elected official time to complete their term. Two years or four years. And then pass judgment on whether they did a good job or not.

KING: We'll take a break. We'll be back with Governor Gray Davis. We'll be taking your calls in a little while. His wife will join us later on this special live edition of LARRY KING LIVE, this Sunday night, getting close to election day, Tuesday, in California.

Don't go away.

(BEGIN VIDEO CLIP)

G. DAVIS: No on recall! No on recall! No on recall!

If we come together and unite against this recall, we will beat back this power grab and we will send a message from California to Crawford, Texas, to the White House, we are not going to stand for a Republican power grab.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: In the next segment we'll go to phone calls for Governor Davis. His wife will join us later.

Before we move to some issues, Tom Brokaw interviewed Arnold Schwarzenegger on "Dateline" tonight on NBC, and about the charges against Arnold, Brokaw asked, "You're not going to be anymore specific about these charges in terms of your denials"?

And Arnold's answer was, "As soon as the campaign is over, I will. I can get into all of the specifics and find out what is really going on. Right now, I'm just occupied with the campaign."

Want to comment?

DAVIS: You know, voters know a lot about Arnold Schwarzenegger as an actor. But they don't know very much about him as a political candidate, and this controversy has erupted in the last 72 hours, 15 women have accused him of improper physical behavior, and I think not to deal with that controversy before the election is to deny voters pretty important information.

I think many of them are going to find it insulting.

KING: So you mean saying he'll deal with it after the campaign is insulting. He should respond now.

G. DAVIS: He should respond now. I mean, this is not a political candidate we've seen for 20 years and we have a sense of who he is. This is a 77-day campaign. We don't know too much about him. All of this stuff crops up at the end, and to say, "Well, I'll deal with it afterwards," I think many voters are going to find insulting.

KING: Some charges against you. Accusations that you hid the scope of the state's fiscal problems until after you were reelected, that you knew they were in bigger trouble than they were.

G. DAVIS: You know, that's just comical. All this information is on the Internet. It's all publicly available. Everyone in Sacramento, independent sources, independent agencies, can tell you where we are from minute to minute.

KING: And so you never said during the campaign things are better than they are?

G. DAVIS: No. My estimate for the deficit was within $1 billion of the legislative analysts.

KING: Vehicle license fee, tripled on October 1. Triple fees for driver's licenses.

G. DAVIS: This issue goes back to 1998. Governor Wilson wanted to lower a local fee. This fee goes to Los Angeles and San Francisco and San Jose and San Diego. It does not come to Sacramento. You pay a fee, it goes to your local city, and they use most of it to pay for firefighting and police work.

When the previous governor, Governor Wilson, wanted to lower that local fee in 1998, the mayor said, "Wait a minute, Governor, lower one of your own taxes. Don't lower our fee." He says, "Don't worry, I'll write you a check for the difference."

They said, "What if you don't? You'd better put in that law an automatic escalator that if you don't write us the check, the fee goes back up, so we can pay fire and police."

So that's how he wrote the law. For four years, I wrote $12 billion worth of checks to local cities so you could enjoy a vehicle license fee about 1/3 of what it was before I took office. But this year we ran out of money in June. The thing automatically went up to the level it was at when I took office, so that you don't have to layoff half the fire and police.

So Governor Wilson's law lowered the fee, and it raised the fee.

KING: I guess the most talked about, the decision to sign the Immigrant Driver's License. A lot of people around the country ask about that. You mean you don't have to be a citizen to get a driver's license? Explain.

G. DAVIS: Well, for 67 years in the 20th century, that was the law in California.

KING: You could get a driver's license?

G. DAVIS: Right. It's still the law -- it's currently the law in Utah and New Mexico and it will be the law in California again January 1.

Our economy depends more than any other economy in America on immigrant labor. We have food on our tables three times a day. Food doesn't come from the supermarket. It comes from the agricultural fields, and Americans will not do that work, so illegal immigrants do about 80 percent of the farm work in this state. They do a lot of work in restaurants and hotels.

I believe that if they're paying taxes and working in our society, they should have a right to drive to work. Otherwise, you're asking these people to get up at 2:00 in the morning, take public transit, work in the fields, come home. How are they going to raise their kids?

KING: Are the growers committing a crime by employing them?

G. DAVIS: Technically. Everyone looks the other way, because there's no way that Americans will do this work.

I'll tell you, 1980, an Orange County strawberry farmer was raided by the INS. That's 23 years ago. He got so mad, he said, "I'm just hiring Anglos." He hired 100 people at 7:00 in the morning. At noon he had 3 left. At 5:00, he had nobody left.

Americans will not do this work and immigrants, if they can find work in construction will leave the fields, because it's so hard.

KING: Were you initially opposed to that?

G. DAVIS: No. I was always opposed to finding a way to let hardworking, taxpaying, immigrants drive to work. But we tried the first two years to get a whole bunch of security features into the driver's license bill, and it became too complicated. There were flaws in the bill.

So this time, we said, look, we're just dealing with driving. Here are the security advantages of giving the driver's licenses.

KING: Because there is a security risk, is there not?

G. DAVIS: Here are the security advantages. First of all, a lot of these immigrants are driving anyway. Now they have to pass a driver's test, show us their competent, get insurance, know the rules of the road, and we have in our computer 1 million or 1.5 million names, addresses, pictures and fingerprints. Thee is a security value to that.

Now, will we have to down the road possibly do some additional security precautions for all drivers, legal and illegal? Probably. But I spend about 15 percent of every day on homeland security and no one takes this issue more seriously than me.

KING: Mr. Schwarzenegger wants to repeal Prop 13, which he says will increase property taxes on people. Do you favor the repeat of that? This is where I think they're going to tax on what it's worth, not what it's assessed.

G. DAVIS: I believe Prop 13 is the expressed will of the voters, and I'm not going to tinker with it.

KING: So you're not in favor of a repeal?

G. DAVIS: No. I'm not going to favor a repeal.

KING: Where do you stand on the Proposition 54?

G. DAVIS: 54 I have not taken a position on yet, so I've got one day to express.

KING: What's tormenting you?

G. DAVIS: Oh, sorry, I'm mixed up here. Prop 54, I'm 100 percent against. It's a ban on information. It's ridiculous that we can't collect information.

KING: Now I'm told that Schwarzenegger does not support the repeal of Prop 13. I was told he supports the repeal of Prop 13. All right, I'm corrected. Someone told me he...

G. DAVIS: I think his financial advisor, Mr. Buffet (ph), proposed the change in Prop 13.

KING: And he didn't listen to Mr. Buffet.

G. DAVIS: Correct.

KING: We should correct that. Mr. Buffet (ph) favored the repeat of Prop 13. He thought that the state was under-taxed, right? In regard to homeowners.

G. DAVIS: Right. And I'm saying Prop 13 should remain the way it is.

KING: And Prop 54 you're against?

G. DAVIS: I'm against it. You know why? The simplest reason is, we collect a lot of information on health characteristics of certain groups. There's Tay-Sach disease and there's sickle cell anemia. You want drugs that work for you. That information couldn't be collected anymore, and that's why all the pharmaceutical companies are against it.

All of us deal with chronic diseases. We have drugs now that help mitigate the problems. Without this information, we can't have these lifesaving drugs, or drugs that considerably improve the quality of life. So that's one of many reasons you should be against it.

KING: Governor, do you feel beleaguered? Really? I mean, no one has ever -- I guess the last time this happened to a governor was in North Dakota in 1920-something. What do you feel?

G. DAVIS: I don't like this. I don't think it's fair. But I know people are not interested in my problems. I asked for the privilege of solving their problems. And we've solved quite a few. We still have some to go.

But I, as you know, because we've talked before about this, I am a person of faith, and I believe God doesn't give you more than you can handle, and I carry a little prayer card with me, I can show you if you like. It says, "Nothing will happen to me today that the Lord and I cannot handle together."

And I believe that this is a test that I'm meant to go through, and that somehow it will all work out.

KING: Do you share any of the blame for the energy crisis?

G. DAVIS: Only that I did not communicate clearly what was happening and I took too long to act. But without building a watch for you, before I became governor, the state deregulated, which said in effect that Larry King Company can come in and buy -- we're in Los Angeles, so I'll say Southern California Edison's power plants. And then you can sell the power back to Edison for as much as you want.

And you sold the power back to Edison for 400 percent more than it was sold the year before. So Edison went bankrupt, essentially, and the state had to go in and buy power.

Now, under deregulation, the only one that can tell you not to charge Edison 400 percent is the federal government. They didn't want to do it, because they're buddy-buddy's with Ken Lay, at Enron, and all these other energy producers. So we are still fighting with Washington to get $9 billion back for the consumers of this state.

But what we have done and what we could still do under energy deregulation was build more plants -- we built 26. I used my emergency power to greatly accelerate that, sometimes reducing the permit process to 21 days. People conserve power, so when the lights went out on the East Coast, they didn't even flicker here.

KING: We'll take a break and come back and start to include some of your phone calls. The governor's wife, the First Lady Sharon Davis will join us later. The election is Tuesday.

By the way, on Tuesday night, we'll have our regular LARRY KING LIVE at 9:00 Eastern and at 11:00 Eastern, Wolf Blitzer and a whole panel of political pros will take three hours to go over the complete California election. That's Tuesday night on CNN at 11:00 Eastern.

We'll be right back.

(COMMERCIAL BREAK)

KING: We're back. We'll go to your calls in a moment.

In the interview tonight with Tom Brokaw, Schwarzenegger discussed the allegations against him. He said, "It makes you become aware of the fact that this is what campaigning, dirty campaigning, is all about, because all of the sudden, three days before the election, all these people are coming out, and they're very well organized."

"The Terminator" actor said he never grabbed anyone. "That I pulled up their shirt and grabbed their breasts and stuff like that, that is not true." He said, "There's a lot of this stuff going on that is not true."

So he is denying.

G. DAVIS: Yes, all I can say is that his quarrel is with "The L.A. Times," because they're the ones who have printed this, and they've indicated they've got two or three corroborating sources before they put that in the paper, so my concern is that this controversy is not going to be resolved before election day, and people have to ask themselves whether, given all these allegations, if they're true, it makes sense to change horses at this time.

They'll make that judgment. I'm confident they'll make a good judgment, and I'll abide by whatever judgment they make.

KING: Sacramento, California, for Governor Gray Davis, hello.

CALLER: Thank you, Larry, for taking my call.

KING: Sure.

CALLER: Governor Davis, I currently work for the state of California and I'm off on furlough, being told my job may be cut because of the budget. I may not be called back next season. If this happens, can you tell me what you plan on doing about helping state workers find other jobs?

G. DAVIS: First of all, I feel very badly that anyone has to lose their job. The legislature, in the budget they gave me, said I had to reduce several thousand positions in the state government. We obviously hope that can be done through attrition.

As you know, we have been able to gain some concessions from the public employee groups that saved a good deal of the money the legislature asked us to save, and we're working very closely with your bargaining representatives in the hopes that we can achieve the dollar savings the legislature asked me to achieve with as few layoffs as humanly possible.

Clearly, if you have to be laid off, we'll be happy to try to write a letter of recommendation, do everything we can, to have you find gainful employment.

My hope as governor is that everyone finds work, and everyone has the opportunity to achieve their highest potential.

So we find ourselves in a difficult economy. My hope is that you're not laid off, but if you are, we'll do everything we can to help you in the private sector.

KING: College Park, Maryland, hello.

CALLER: Hi. Thank you for taking my call.

KING: Sure.

CALLER: I have a question. How would you run the state differently if you know that the recall was coming? And good luck.

G. DAVIS: Thank you.

KING: Well, he said the big thing he would have done differently is been in touch more with the public. Is there any item, bill, thing, if you could take it back you'd take it back?

G. DAVIS: No, because I don't think there's one bill that is spurring the people on the other side.

KING: So there's nothing you have done to disagree with?

G. DAVIS: I think I was slow to act on energy, but the point I did not make before, which I'd like to make now, is everyone was telling me raise consumer rates 400 percent, because that's what Edison had to pay to the Enrons of the world, and that's what PG&E had to pay to the Enrons of the world.

And they said, we know the law says reduce people's rates by 5 percent, but you're going to have to raise them 400 percent. And I knew people would just revolt if that happened, because they never would have gone along with deregulation if they were told their rates were going up 400 percent.

KING: President Bush came and met with you, right?

G. DAVIS: He came and met with me and it was not helpful initially. Finally after about a year, they mitigated the problem going forward by saying you can only charge so much for electricity starting June 2001. I met with him before that.

KING: Lubbock, Texas, hello.

CALLER: Hi. Thank you for taking my call.

KING: Sure.

CALLER: Governor Davis, putting aside the accusations against Mr. Schwarzenegger and his status as an actor, what policies would you resolve to implement during the remainder of your term that would be better for the community of California than those being proposed by your opposition?

G. DAVIS: Well, what I want to work on, if people are good enough to let me continue the term they elected me to, is to try and stimulate the economy, create more jobs and balance the budget.

I want to work on bringing down healthcare costs, particularly prescription drugs. We were the first in the country to reduce them for seniors and to give them the benefit of our MediCal discounts, which are roughly 25 or 30 percent.

I'm also proud that we were the first one to have an HMO Bill of Rights, which is...

KING: You signed something the other day, didn't you?

G. DAVIS: Yes. Today I signed a bill allowing 1 million working Californians to get healthcare coverage which they do not now have.

And so we're doing our best to make sure that workers are covered, have healthcare coverage, because I think they'll be more productive and it will produce a stronger economy.

KING: Mr. Schwarzenegger says everywhere he goes he sees businesses complaining that this is not a business-happy state.

G. DAVIS: You know, a couple of years ago, "Forbes/Milken" study said 6 of the 10 best places to run a business were in California. The Harris Poll every year for the last few years has said to people, if you want to live somewhere, if you couldn't live I your own state where would it be and they've chosen California.

Just today -- just last week a survey came out saying where the best place is to raise a baby. It said California. So, we're doing a few things right here. I realize that not everyone is happy with everything and I have made some mistakes but there is some good news out here as well the people need to know about.

KING: We'll be back with more of Governor Davis, more of your phone calls. Then we'll meet Sharon Davis. Don't go away. (COMMERCIAL BREAK)

KING: We're back with Governor Gray Davis -- Fair Oaks, California, hello.

CALLER: Thank you for taking my call.

KING: Sure.

CALLER: Governor Davis...

G. DAVIS: Yes, ma'am.

CALLER: ...I have two questions.

G. DAVIS: Yes, ma'am.

CALLER: The first one have you considered asking the Democratic Party to pressure Bustamante into dropping out so that Bustamante's voters would be more likely to vote no on the recall instead of yes on the recall and for Bustamante?

G. DAVIS: The answer to that question is no. I don't think it's my place to ask another candidate, in this case the lieutenant governor who I consider a good and decent person, to drop out.

I appreciate his efforts in encouraging people to vote no in the recall even as they consider him as a candidate on the replacement ballot. And so, as long as he thinks he should stay in the race, I'm not going to ask him to drop out.

KING: You voting for him after you vote no on the recall?

G. DAVIS: You know we have a secret ballot in this country, Larry.

KING: Yes, but he's the only prominent Democrat running.

G. DAVIS: I will say this. He's the most credentialed and is the most capable person on the replacement ballot but I want to keep people focused on the recall which I think is a bad idea.

KING: If there's no recall you could continue to work well with him right?

G. DAVIS: Yes. I like him. He's a thoughtful man and I look forward to continuing to work with him.

KING: What's the second part of your question ma'am.

CALLER: My second part is how about universal healthcare for everyone, including all of the people over 18 and I mean everybody, not just most people?

G. DAVIS: I think that's -- I believe in that goal. We took a big step today when I signed legislation here in Los Angeles that will provide healthcare coverage for a million working Americans.

You know a lot of people don't realize that 80 percent of the people who are uninsured are either working or families of working members and when they have health coverage there's less absenteeism.

There is more productivity. There's greater piece of mind. So, it is an investment that pays dividends not just for the family, which is very important, but for our economy as well.

KING: Watsonville, California for Governor Davis, hello.

CALLER: Yes, sir. Given the statement you made on the improved conditions of education in California, I'm wondering why am I teaching in a district where we don't have enough books for all the students, where there aren't enough desks for all the students to sit in and where we educators had to give two percent of our income, our pay to the district or face large layoffs?

G. DAVIS: Which district are you in?

CALLER: I'm in the Santa Cruz County, the Pajaro Valley Unified School District.

G. DAVIS: I'm going to answer your question but I'm going to preface it by saying I'm going to look into that tonight or tomorrow morning to find out what decisions were made at the district level.

I can tell you this that we have put $13 billion more in education funding than the law requires and we spent a lot of it on teacher training, more technology. We've doubled the number of computers and we spent almost $2 billion on textbooks.

Now, we don't make local school boards spend the money for that purpose but we give them a lot of incentives to do so, so I don't know what decisions were made at your local school board level but I will look into it and find out.

KING: Virginia Beach, Virginia, hello.

CALLER: Good evening, how are you doing Governor Davis?

G. DAVIS: Just fine. Thank you for calling.

CALLER: Sir, if you're not recalled what are your plans on adding funds to the state budget so all the teachers and all the other people will not suffer as they have been?

G. DAVIS: I have great regard for teachers. I really ran for governor because of my passion for education and we have, as you just heard me say, made major investments in education.

Some of it has resulted in increased teacher pay. When I first became governor, we ranked 43rd in the country in per capita spending on education, now we're 27th. Test scores are up five years in a row.

I have great respect for teachers. No matter how much we've increased their pay, and we have, they're close to the top in the country now, they're not paid enough because our future is in your hands.

If I may, Larry, as a young man I was trying to make a baseball team at a high school out here in San Fernando Valley and I was sitting on the bench as an eighth grader and a history teacher came over to me, who was also our baseball coach, and said, Gray, if you just worked hard and had some direction good things would happen to you.

I was so impressed that some adult took an interest in me. I began working harder. I ended up being captain of the baseball team. I went to Vietnam. I went to Stanford and now I'm governor.

So, I understand the power teachers have not just to educate but to get young people to believe in themselves and I'm going to do everything I can within our economic resources to continue to invest in teachers and invest in education.

KING: That's your top priority?

G. DAVIS: Has always been.

KING: Were you in combat in Vietnam?

G. DAVIS: I was in the combat arms, the Signal Corps, but my primary job was to make sure the tactical radios, we called them SGRs, worked. You know that was -- I was there in '68 and '69. We didn't have cell phones. We didn't have e-mails and you had a line of sight communication.

KING: San Jose, California, hello.

CALLER: Hi, Larry.

KING: Hi.

CALLER: Governor Davis this is an honor for me.

G. DAVIS: Oh, thank you.

CALLER: I think you've served us well. My question is if this sick travesty goes through and you are recalled what are you plans for the aftermath? And we love Sharon.

KING: She'll be here soon. What are you going to do if it's recalled, had to think about it?

G. DAVIS: You know I really haven't.

KING: You haven't.

G. DAVIS: Because in this job you get so much flack and so much grief you can't lead, you can't get anything done unless you can focus on the positive and so all the things we've been able to do, get a million kids with health insurance and be a strong pro-choice state and have a great environmental record, all that stuff was just focusing on the positive. So, I believe if it's God's will that I remain as governor, I will and if it's not he'll have a plan for me to do something else.

KING: During the interim period would you sit down with the governor-elect whoever that might be should the recall go through?

G. DAVIS: Absolutely. I would extend any courtesy and assistance in the transition. Governor Wilson did that to me. You know that's an obligation of the governor to help the incoming governor. I hope I have a chance to do that three years and three months from now rather than a few days from now.

KING: Nipomo, California, hello.

CALLER: Hi. I have a question for Governor Davis.

G. DAVIS: Yes, ma'am.

CALLER: My question is on the stem cell research I haven't heard a lot about it but what I have heard is that you passed a new law regulating it.

G. DAVIS: No -- is that your question?

CALLER: You said that California is going to fund more stem cell research?

G. DAVIS: Yes. We've done -- I signed three bills and I believe strongly that this research can provide life saving benefits to people who have Parkinson's and Alzheimer's.

You're going to meet my wife in a moment. We lost her mother, Mary Reyer (ph), to both Alzheimer's and Parkinson's and if you know anyone that went through that it's very depressing at the end. Mary, my mother-in-law, didn't even recognize Sharon.

So, there are drugs that put off the effects of Alzheimer's, extend the quality of your life and they come through the kind of research that stem cell research can provide.

It also helps people dealing with diabetes and stem cell diseases -- I mean spinal cord diseases, so there are a variety of ailments that benefit from this research and we were the first state to have full scale stem cell research.

I've signed a couple of bills this year allowing for an anonymous embryo inventory so that researchers can use all the embryos that are available. So, we are very much a believer that this kind of research will provide life saving benefits and want to attract researchers to come here to do that.

KING: You said you're a devout Christian, is that correct?

G. DAVIS: Yes, Catholic.

KING: But Christian -- Catholic.

G. DAVIS: Yes.

KING: Do you have any question about stem cells and morality?

G. DAVIS: I know the church's preachings and I respect the church and I'm deeply religious but as John Kennedy said when he was president we have a separation of church and state here.

KING: You disagree with the church?

G. DAVIS: Well, I'm taking a course of action that they may disagree with. I believe these benefits are important and I think any human being that does not want to avail themselves of this research can do so and say I'm not going to take advantage of it.

And, to be honest with you Larry, I don't think my mother-in-law and Mary would have. She was a conservative Republican but she never would have kept you or your wife from taking advantage of it.

KING: Back with more of Governor Davis and we'll be joined by Sharon Davis, the first lady of the state of California. Don't go away.

(COMMERCIAL BREAK)

KING: Again, the election is Tuesday. Governor Gray Davis has been our guest and now joining us is Sharon Davis, Gray Davis' wife, the first lady of the state of California. What has this done to you?

SHARON DAVIS, GOVERNOR DAVIS' WIFE: Oh, it's been difficult for us, Larry, as you can imagine. Somebody is trying to take my husband's job right after he took office and so it's been stressful and very difficult not only for Gray and me but for our family as well. His mother is 80 and she's very upset about it to say the least.

KING: Were you surprised that it all happened?

S. DAVIS: Yes, I was. You know what surprised me, Larry, was that you could have a recall in this state, as you mentioned, without having committed any crime or (unintelligible).

KING: There's no -- you can have any reason, right?

S. DAVIS: No, for any reason they could recall him.

KING: Like you could recall the next governor?

S. DAVIS: Right, exactly. They could start that the day after the election and it's creates a lot of chaos. It's very expensive. It is not educating one child or doing anything to move our state forward and so...

KING: But shouldn't the people -- what if someone said shouldn't the people have a right to change whenever they feel like changing? S. DAVIS: But I think it's like a virus, Larry. Once it takes hold if it succeeds it will spread. It will spread throughout California and it will spread throughout the country because then there will be all this retaliation because then liberal groups will try and take out Republicans and Republicans taking out Democrats and so I think ultimately...

KING: Have you heard that if there's a defeat there will be a movement to recall the next?

S. DAVIS: Well, there's already been, yes. I've heard people say that they're going to -- they'll put together the $3 million to pay signature gatherers to take out a Republican if he gets elected and that's really counterproductive.

KING: California could be the recall state.

S. DAVIS: That's right. That's right.

KING: Gray said he hasn't thought about the possibility of the recall going through and what he would do after. Have you?

S. DAVIS: You know we've been so busy campaigning. It's full time because normally you have about a year and a half to campaign and this we've done in 77 days. I say it's like campaigning in dog years.

Every day is like a week and you have to do so much and I've been working in the campaign with Gray. We have a much smaller staff, a very small budget and so everybody's working their hearts out and so we haven't had time to sit around and really even talk about it.

KING: Does it make you feel funny that Mr. Schwarzenegger's wife is Maria Shriver, a big D Democrat.

S. DAVIS: Right.

KING: A Kennedy Democrat, you are a Democrat, how do you feel about her?

S. DAVIS: Well, I know Maria and she's a lovely person.

KING: You're friends?

S. DAVIS: Well, I know her. We have the same social group and so we have a lot of mutual friends and we adore her. I mean she's a lovely person and...

G. DAVIS: She's a very nice person.

S. DAVIS: Yes.

G. DAVIS: I've known her for years. She's a wonderful person.

KING: What do you make of the allegations against Arnold?

S. DAVIS: Well, I worked for the airlines. In fact, I worked for PSA when we wore short little uniforms.

KING: You were one of those mini skirts?

S. DAVIS: Yes, I was one of those girls in the mini skirts and because of the type of uniform we wore people felt like they could take liberties and it was humiliating and so I understand.

KING: Did they grab you?

S. DAVIS: Oh, well, yes, or they would say things that you would know they would never want said to their daughter or their wife or their girlfriend or their niece and it's so humiliating and you really -- I understand these women not coming forward because you're so humiliated. You really want to put it out of you mind. You want to just put it behind you but it's really always there.

In fact, the day I read about in the "L.A. Times" what had happened with the women that had said that Arnold had done these things, I was shaking because it was like it all comes back to you and I think that's how other women who came forward felt.

It's like when you read about it, it brings back all those memories and I think of some of the really terribly insulting things that were said to me, being touched inappropriately.

KING: How has this, Gray, affected your relationship if at all?

G. DAVIS: Sharon and mine?

KING: Yes.

G. DAVIS: We have a wonderful relationship. I thank God every day she brought me back to the church and we have -- we are strong and...

KING: She was the...

G. DAVIS: She was the reason. I was raised as a Catholic and I sort of stopped going to church for about 15 years and she really brought me back to the church and we have great faith and we know that whatever God's plan is will happen.

I'll either be governor or I won't be governor but I think it's a lot -- it's much more comforting to go through life like that because otherwise you can just tear your hair out listening to all the problems and criticisms and complaints.

KING: Bitter, Sharon?

S. DAVIS: No, not at all. You know this is -- it would be so easy to be bitter but that's not productive and it doesn't really help at all. We're just working hard, trying to make sure that we can get out part of the story out. So much of it has been obscured because of this campaign and it's been so negative on the other side.

My husband's record has been misrepresented. He's been maligned. He's been called names and so I think what it is is to say instead of looking at it from just purely negative it's an extraordinary opportunity.

The whole world is watching California to see how we deal with this and they're going to see whether they're going to stay with somebody who has really been -- is a very good guy who's been faced with some very big challenges or if they're going to go with a super star because he's got a lot of money.

KING: Taking on a movie star?

S. DAVIS: It is. It is. I mean (unintelligible).

G. DAVIS: No question celebrity in our society is a big deal. You know that. You start a campaign with people thinking they know you and as we see this campaign unfold some things have come out that make some of the voters question but you have a big head start as a celebrity. There's no question about that.

KING: We'll be back with some more moments with Governor Gray Davis and the First Lady Sharon Davis. We'll include some phone calls as well. Don't go away.

(COMMERCIAL BREAK)

KING: We're back with our remaining moments. Are you surprised the White House has not taken a stand in this?

G. DAVIS: I don't know whether they've taken a stand or not.

KING: They haven't publicly said anything. Has the president ever commented on this, I don't think so.

G. DAVIS: Not in any great detail but clearly there's a lot of people that are helping Arnold. This is a...

KING: You mean inside the White House helping Arnold?

G. DAVIS: No, from the Republican Party helping Arnold.

KING: Oh.

G. DAVIS: But this is a big issue nationwide and something my wife touched on I want to mention. You know they're thinking of recalling the Republican governor of Nevada because of budgetary action he did to balance his budget and there's been talk of recalling the brand new governor of Wisconsin.

This is not a good policy for America. One reason why we've attracted investment around the world to California and to America is we're a stable society. People serve their term.

We're not like Italy that has 17 prime ministers in three years and then at the end of the term, fine, you can remove people or keep them depending on how they did. So, attracting investment and creating jobs for our growing population is a big reason we should have stability in this political climate.

KING: Do we know if there is a recall go through when the new governor is governor?

G. DAVIS: I think once the secretary of state certifies that the election results are final.

KING: And they might take a while, right?

G. DAVIS: It generally takes a couple weeks, two or three weeks.

KING: (Unintelligible.)

G. DAVIS: I think they have to do it within 28 days under law.

KING: Ellijay, Georgia, hello.

CALLER: Thank you, Larry. Ms. Davis, which of the campaign issues do you think you could better help your husband with, which one of the campaign issues?

S. DAVIS: Well, I enjoy campaigning so I am out quite a bit and one of the things I talk about, which is called the soft issues, I've been working quite a bit with children, especially children at risk, recruiting mentors for children, raising money for school libraries, and so I've been involved mainly in the issues that affect children.

And, I think talking to people and letting them know that what we've done to help advance this state to make it a better state for children is evidenced by a report that just came out, as my husband mentioned, that California is one of the best states in the country to raise your children.

KING: Chico, California, hello.

G. DAVIS: Not one of the best, the best, number one.

KING: Chico, hello.

CALLER: Hello, yes. My question is for Governor Davis.

KING: Go ahead.

G. DAVIS: Yes, ma'am.

CALLER: The question that I have is with regard to the energy situation.

G. DAVIS: Sure.

CALLER: And we realize that we had to put into force all of our new power plants. Could the deficit have an issue with being that we got no federal aid from the federal government?

G. DAVIS: That's a very good question and the answer is this. There's no question that California was bilked of somewhere between $20 and $30 billion. In other words, an electron, which costs $1 one year all of a sudden costs $4 the next year. You can't add value to an electron. You certainly can't add 400 percent worth of value.

And so all that money flowed out of California to Texas and to the south and that had an impact on our economy. In terms of the budget, we were fully repaid but in terms of the net worth of Californians we were ripped off and the federal government agency in charge of this, their staff came out with a report about six months ago and said, you know, Governor Davis was right.

Forty companies took advantage of California. They should not have manipulated the markets the way they did and I appreciate their kind words but show me the money. I want to get you back at least $9 billion, which I'm told is all we can sue for but I will not rest until I get it -- I get it for you.

KING: We're running out of time. What do you think is going to happen Tuesday?

S. DAVIS: I believe my husband is going to defeat this recall because we believe...

KING: And the recall will be defeated?

S. DAVIS: It will be. It will be a no vote. People will reject this because we believe that the voters of this state are fair minded.

KING: Big turn out?

G. DAVIS: I think there will be a very big turnout for a special election. I still believe it will be smaller than the number of people who turned out last November.

KING: Thank you both very much.

S. DAVIS: It's a pleasure.

KING: Governor Gray Davis and the first lady of California Sharon Davis, we thank them both for joining us.

A reminder CNN's complete coverage of the election in California starts Tuesday night at 11:00 p.m. Eastern Time but it will be three hours anchored by Wolf Blitzer.

We'll be on with our regular show at 9:00 Eastern Time, covering the election and leading up to those results.

Stay tuned now for "CNN SUNDAY NIGHT" with Carol Lin.

I'm Larry King, goodnight.

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