California governor Arnold Schwarzenegger on Wednesday announced the first change to his administration since his resounding special election failure, appointing a longtime Democratic activist and lesbian as his chief of staff.

The move to replace Patricia Clarey had been widely anticipated since voters defeated all four of the governor's "year of reform" measures November 8. But the announcement of California Public Utilities commissioner Susan Kennedy as Clarey's replacement caught many Republicans and Democrats off-guard.

Kennedy, 45, was cabinet secretary to former California governor Gray Davis, who was ousted in the 2003 recall election that brought Schwarzenegger to power. She also is a former director of an abortion rights group and becomes one of the highest-profile gays in state politics, making her appointment a potentially risky one for the Republican governor.

"She's a woman that is known as being a hard-working woman, dedicated, and is willing to work whatever it takes to get the job done," Schwarzenegger said during an afternoon news conference at the capitol. "She's willing to set her Democratic philosophy aside and do the job and do my vision—to be able to work together with Democrats and Republicans."

Schwarzenegger has lost support over the past year from most Democrats and independent voters, relying increasingly on conservatives to carry his message. Kennedy's appointment could be a way to regain the bipartisan image he crafted during the recall election but also jeopardizes his standing among conservatives, his only reliable supporters.

"This makes Schwarzenegger a man without a country," said GOP strategist Dave Gilliard, who helped run the campaign to recall Davis. "The Democrats will never accept him or embrace him, and now he's breaking with his base. I don't understand it."

Even some leading Democrats appeared puzzled by the appointment. "Any move by the governor to embrace Democratic values is good news for the state," said Steve Maviglio, spokesman for Democratic assembly speaker Fabian Nunez. "However, it leaves many Democrats as well as Republicans wondering if he has any core values at all."

But the Democratic leader of the state senate praised the appointment, calling it a wise decision that underscores Schwarzenegger's desire to create a more collaborative tone around the capitol next year. "The senate wants the state to get back to basics and focus on the issues people care about," senate president pro tem Don Perata said in a statement. "Susan can be an effective part of that."

At Schwarzenegger's side Wednesday, Kennedy sought to bury the partisan labels, seeing her appointment as a historic opportunity to break the political gridlock in Sacramento. She said she believes in Schwarzenegger and his vision for California.

"If this governor is willing to risk his legacy to take a chance on me, I'm willing to risk my political career by doing what I think is right," she said.

The move comes three weeks after the governor suffered a sweeping loss in a special election showdown he orchestrated against Democrats and their union supporters. Voters rejected all eight of the initiatives on the ballot, including the four promoted by Schwarzenegger. They would have capped state spending, changed the way legislative districts are drawn, reformed teacher tenure rules, and restricted the ability of public employee unions to raise money for political purposes.

Responding to a reporter's question about Schwarzenegger's initiatives, Kennedy said she supported all four of the governor's initiatives. "I see a man whose philosophy is not that different from mine. I think a moderate Democrat and a moderate Republican—there is not a lot of light between us," she said. "This is not a time for California to hunker down behind partisan labels."

Former California governor Pete Wilson, a Republican, said in an interview that Republicans who are critical of Kennedy's appointment do not know her. "People who have actually experienced her performance on the PUC and the water board have uniform good things to say about her, and I am one of them," said Wilson, noting her support of less governmental regulation coupled with support for consumer protection.

He also discounted the notion that Schwarzenegger has appointed a Democrat in an effort to redeem himself in the eyes of the state's majority party. "If there are some expecting this signals some kind of change in course on his part, I don't think there's going to be any change," he said. "People who are expecting that she is going to be extremely liberal in her orientation just because she has a D after her name—they are going to be disappointed and have not been paying attention to her performance."

Clarey, a Republican and deputy chief of staff during the Wilson administration, announced in a letter sent Wednesday to Schwarzenegger that she would resign at the start of the New Year. "It's been quite a ride," she said in the letter, which was released by the governor's staff. "While much remains to be done, I am gratified at the success we have realized. California is on a much better path thanks to your leadership."

Schwarzenegger hinted that further staff changes may be coming. "There are a lot of people who are burned-out," he told reporters. "People after a certain amount of time in this job, working here at the capitol, they get burned-out and want to move on."

Kennedy, who does not have a college degree, will officially start the $131,412-a-year position January 1 but has already begun work in the governor's office. As chief of staff, she will be charged with running day-to-day staff operations while also helping implement Schwarzenegger's policy agenda.

She will join a Schwarzenegger inner circle that already is filled with Democrats in key positions. Among them are Daniel Zingale, another former Davis aide who now serves as chief of staff to first lady Maria Shriver; senior aide Bonnie Reiss; and Terry Tamminen, Schwarzenegger's cabinet secretary.

Kennedy was appointed to the Public Utilities Commission in 2003 and defended Davis during the recall campaign. Before joining the Davis administration, she was communications director for U.S. senator Dianne Feinstein. She has served as executive director of the California Democratic Party and executive director of the California Abortion Rights Action League.

She also has crafted a pro-business image that aligns well with Schwarzenegger's goals to strengthen the state's economy and reform its budget process. In a statement, the California Chamber of Commerce said it has "the highest respect" for Kennedy and noted her efforts to improve the state's economy.

Kennedy also played a role in the 2002 controversy surrounding a $95 million contract the state initially signed with Oracle Corp. just a few days before the company gave Davis a $25,000 campaign contribution. As Davis's deputy chief of staff and cabinet secretary, Kennedy signed a memo indicating that the governor's office had no problems with moving forward with the agreement.

The contract was supposed to save the state $16 million, but it was canceled after auditors said that it would end up costing the state $41 million. Kennedy was called to testify before a legislative committee, where she said she never discussed the computer deal with Davis before it was signed.

On the Public Utilities Commission, she also drew fire from consumer groups earlier this year for voting to suspend a sweeping set of protections for cell phone users. At issue were claims of false advertising and confusing billing practices. Kennedy said she voted to suspend the measures because they could have caused some carriers to raise their rates or leave California altogether. (AP)