For decades, California has been a national leader on a wide range of social and economic issues. But recently, education hasn't been one of them. Now, the necessary forces - politics, popular sentiment, and a fractious education establishment - seem to have lined up to give California a shot at classroom leadership once again. As Bruce Fuller, a public-policy and education professor at the University of California Berkeley, puts it: "We finally have all the horses moving in a common direction." California's newly installed Democratic Gov. Gray Davis has unveiled a controversial $440 million package of school reforms. The direction of the reforms appears to be, generally, toward greater centralization and standardization across California's education system. Proposals range from forcing students to pass a tough "exit" exam to graduate from high school to more rigorous performance reviews of teachers. Such standardization is already evident in some other large states, such as Texas, but it would be exceptionally influential if achieved in California, America's largest and most diverse state. Some of the proposals push the boundaries of what's been tried in other states. Others follow paths trod elsewhere, or they continue programs begun under Republican predecessor Pete Wilson. Mood is ripe for reform Yet the context is wholly new. In Governor Wilson's first term, early budget deficits forced him into a "bad cop" role which - when coupled with his antipathy toward California's powerful teachers' unions and an opposition-controlled legislature - frequently created an atmosphere of war rather than reform. Governor Davis's much friendlier record with labor, as well as his party's strengthened grip on the legislature, has created a dramatically altered environment that's expected to be more receptive to reform. First indications will come as soon as Jan. 19, when a special legislative session is expected to meet to debate the reform package. Davis has made himself "the education governor," wedding himself to a single issue to an unusual degree in a state with many divergent needs and issues. Education has been "the centerpiece of his campaign, of his inaugural [address], and of his state of the state speech," notes Steve Scott, political editor of the California Journal. The strategy carries risks, handing opponents a ready club to wield four years from now if the schools aren't performing better. But that political risk is also what makes many analysts believe the odds of change are higher than they've been for more than a decade. Finally, the context is framed by a public that ranks education as its top concern and has sky-high expectations, now that the candidate who promised the most on education has been installed as governor. Reversing the decline The problem with California's schools, says Sue Burr, the state's new undersecretary of education, is simple: lousy academic achievement. In national tests, California "ranks near the bottom in reading and math" compared with other states, Ms. Burr says. The remedy proposed by Davis is a combination of incentives and penalties meant to improve teacher quality and reading skills and demand more of students. Under the plan, for example, California will develop a new, statewide high school graduation exam that will be tougher and more standardized than the current basic proficiency tests. This fits a nationwide trend toward graduation exams, administered in 17 states and approved but not implemented yet in five others, according to FairTest, a Massachusetts group critical of the trend toward greater reliance on standardized tests. California's plan will also focus heavily on improving the quality of teachers. They will be given more incentives to enhance their skills, including $10,000 merit awards if they pass tough national certification standards. Teachers also will be subject to a peer review that will be more rigorous than the state's current mentorship program. The peer review has been tried in a few other jurisdictions, such as Toledo, Ohio, and Rochester, N.Y., but never on the scale being proposed for California. Also, the state's more prestigious University of California system will play a larger role in training teachers, a task now left largely to the California State University system. Davis's plan for higher education includes a controversial system that would guarantee admission into the UC system for the top 4 percent of graduates at each high school. The plan is widely seen as an attempt to blunt the impact of California's 1996 anti-affirmative-action ballot initiative. Actually, the UC system's master plan already calls for it to admit 12.5 percent of public high school seniors, but that mandate isn't being met because there simply isn't room. The UC Board of Regents is scheduled to vote on the 4 percent plan in March. Ward Connerly, father of the anti-affirmative-action ballot initiative and a UC regent, is opposed to the proposed admissions policy. Texas is the only other state to have initiated such an admissions plan based on class rank. Texas introduced the plan after its affirmative-action program was challenged in the courts. To ensure continued diversity in college admissions, Texas adopted a policy in 1997 to guarantee admission to the top 10 percent of high-school graduates. Davis's critics Like California's diverse school system - which at some point over the next decade will graduate more Latinos than Anglos - Davis's package of reforms is big and sprawling and contains contradictions, say some analysts. Mr. Fuller of UC Berkeley says while the graduation exams place heavy and centralized accountability on students, he sees nothing comparable in terms of more central control of teachers. Peer review, he says, will still be largely controlled by local school districts. Primary and secondary public education in California is a huge business, eating up $25 billion in state funds, by far the single largest component of the state's budget. Decades ago, California could boast achievement and expenditure per pupil that made its school system the envy of the nation. No longer. And while Burr says "our first priority is to take care of California," she acknowledges the program has elements to help the state "regain the preeminence we once had."