SAN FRANCISCO — Lt. Gov. Eleni Kounalakis will drop out of the race for California governor, she announced Friday, exiting a crowded contest in which she was among the top Democratic contenders.
She will instead run for state treasurer next year — a pivot that POLITICO first reported Kounalakis began discussing with political allies as early as March, amid polling that showed her behind former Rep. Katie Porter and former Vice President Kamala Harris, who recently passed on the contest.
In a statement Friday, Kounalakis said she decided to switch races after “careful consideration and reflection” about what she could accomplish in the treasurer’s role, as the state’s primary banker and investment manager.
“This decision was not made lightly,” she said. “At this moment, I believe I can make the greatest impact by focusing on California’s financial future.”
Her exit from the governor’s race is the second major development in the last week — following Harris’ much-anticipated decision — that has shaken up the Democratic field to succeed Gov. Gavin Newsom. Kounalakis is close with Harris, and the two share close longtime advisers and a political network anchored in the San Francisco Bay Area.
The contest has drawn a host of well-known Democrats, including Porter, former Health and Human Services Secretary Xavier Becerra, former state Senate leader Toni Atkins, former Los Angeles Mayor Antonio Villaraigosa, billionaire Stephen Cloobeck, former Controller Betty Yee and Superintendent of Public Instruction Tony Thurmond.
Kounalakis’ move creates an opening for them to compete for the support of deep-pocketed San Francisco donors who had lined up behind the lieutenant governor. She had already raised roughly $9 million in her state campaign accounts — the majority of which her campaign said she can transfer to the treasurer’s race — and was among the top handful of Democratic contenders in polling, though she significantly lagged Porter.
Her exit — and the absence of her money in the race — could also make the race more appealing to deep-pocketed politicians with their own money to spend, such as Rick Caruso, the Los Angeles billionaire and former mayoral candidate.
And it opens the door for former House Speaker Nancy Pelosi, a longtime kingmaker in Democratic politics who had supported Kounalakis, to consider endorsing another gubernatorial hopeful.
Meanwhile, Kounalakis joins a still-evolving field of candidates vying for treasurer. Among those already running: state Sen. Anna Caballero, former Oakland Mayor Libby Schaaf and Board of Equalization member Antonio Vazquez. Several other Democrats have campaign committees and could still enter the race.
Kounalakis, a former housing developer, said she’s running to make sure the state efficiently leverages “every dollar at our disposal” to build affordable housing, as well as to oversee its investments in clean energy and infrastructure projects.
