After Gov. Arnold Schwarzenegger won big at the ballot box March 2, gaining landslide majorities for the first two pieces of his fiscal recovery plan, the governor and his allies suggested that his electoral victories showed he had the power to appeal directly to the people to change policy in Sacramento.

Next on the agenda was workers' compensation, the public-private system for taking care of workers who are injured on the job. With California employers paying three times the national average for insurance coverage, Schwarzenegger said fixing the system was the top priority of his economic recovery plan. He immediately began efforts to qualify an initiative for the November ballot that would allow the voters to enact his proposal if the Legislature failed to cooperate.

A month later, however, the governor is mired in negotiations with Democratic leaders, who have twice ignored his threatened deadlines and made many demands of their own. Although the framework for a deal could be announced at any moment, if one does emerge it is likely to be a broad compromise. Schwarzenegger seems far from dictating its terms.

Why hasn't Schwarzenegger, then, made good on his threat, walked away from the table and headed for the campaign trail? He has certainly been nudged to do so, by big employers who want dramatic savings, and by Republican legislative leaders who wouldn't mind running campaigns this fall against Democrats who could be blamed for blocking Schwarzenegger's reforms.

But a ballot battle over workers' compensation carries great risks for Schwarzenegger, and he seems to appreciate those potential pitfalls more than some of his presumed allies.

Such a campaign would be nothing like the one he just completed. Propositions 57 and 58 were placed on the ballot with the help of Democrats, and supported by the Democratic Party leadership and the major interest groups with which they are aligned. Even Schwarzenegger's communications director, Rob Stutzman, said that there was no "legitimate, organized opposition" to the measures. So while Proposition 57, the $15 billion bond measure, started out behind in the polls, it was a relatively straightforward task for the governor to mount an aggressive campaign to explain the issue, define the stakes and ask the voters for their support in implementing his fiscal agenda.

Workers' compensation is another matter. If Schwarzenegger goes to the ballot, there will be legitimate, organized opposition, and it will be well financed. Organized labor, lawyers who represent injured workers, and some elements of the medical community will be opposed, and they will fight hard. You can expect television commercials featuring injured workers telling their horror stories, and portraying the governor and his business allies as heartless and cold.

The broader political environment, meanwhile, is very unpredictable. Unlike with Propositions 57 and 58, when Schwarzenegger knew pretty much what he was getting into, this fall's political climate is still distant, and unstable. At least a dozen measures, perhaps more, will be on the ballot, including three proposals to raise taxes, a proposal to limit lawsuits and a referendum on legislation requiring employers to provide health insurance to their workers. Add the presidential campaign to the mix and you have a situation in which it will be much harder for Schwarzenegger to raise money and communicate his message clearly to the voters.

An all-out partisan war over workers' compensation, meanwhile, would distract Schwarzenegger from his next priority: balancing the budget. He is little more than a month away from releasing his revised spending plan, which will reflect the latest economic projections and revenue and expenditure numbers. Negotiations on that issue will then begin in earnest. While some Republicans believe a tough stance by the governor on workers' compensation would show the Democrats that he means business on the budget as well, the conflict in the air would surely contaminate what are certain to be very sensitive talks over Schwarzenegger's plan to balance the budget without raising taxes.

Finally, Schwarzenegger knows that if he goes to the ballot on workers' compensation, he has to win. His entire political persona rests on his ability to appeal to the people, and he has played that card twice now in major negotiations with the Legislature. If they call his bluff and he loses, he will not be able to use that tactic again.

If, instead, he compromises with the Democrats, declares at least partial victory and moves on, Schwarzenegger will benefit politically. Unless the deal is a complete sham, it will get Republican as well as Democratic votes in the Legislature, and there will be no uproar from the business community. Voters will sense that the new governor is making steady progress, bringing together warring interest groups and brokering agreements on important problems. That's all they really ask of a chief executive.

Schwarzenegger sounds sincere when he threatens to go to the ballot, and the $1 million his political committee contributed to the cause makes the threat credible. But watching him, you get the sense that he wants to use confrontation not for its own sake, but to build consensus that would be difficult to achieve without it.