CAPITOL NOTEBOOK: NOW ENTERING CENTER STAGE: GRAY DAVIS.

Byline: Terri Hardy and Dorothy Korber

WE didn't think it was possible for Gov. Gray Davis to top his embarrassing ``Little Engine That Could'' press conference - the one where legislators donned engineer caps and Davis slipped on a baseball cap with ``The Gov'' across the front before mugging for the camera and lauding themselves for the completion of the state budget.

But this is the ``Higher Expectations'' administration after all, and we'll admit it - we were wrong.

Last week, Davis and crew staged a no-holds-barred media event for the budget signing that surpassed their earlier debacle. It included all the elements of a bad high school pep rally, and none of the dignity one would expect from the state's highest office.

With a giant state flag as the backdrop, the event was held on the Capitol's unshaded east steps in the broiling sun. Small children were placed on the baking steps clutching miniature bear flags. Aging veterans stood uncomfortably beside them, squinting in the sun. Some hard hat-wearing laborers bellowed from the back.

One political wag took in the scene and commented: ``Oh look, all the extras are here.''

Davis' press officials have said they chose the inappropriate location because they believed it would draw more television coverage.

The event started with booming announcements over the public address system. Like the beginning of an NBA game, an excited announcer rattled off the names of lawmakers in attendance. But instead of sprinting through a row of team members to the applause of their adoring fans, the politicians were met only with stunned silence from the press corps.

Suddenly - unbelievably - there was a blast of trumpet fanfare from the sound system and there was ``The Gov'' in an immaculate black suit. As he strode to the podium, reporters' jaws dropped.

One longtime reporter said it best: ``I've never seen anything like it.''

Tall and short of it

As odd adversaries go, Assemblyman Tony Strickland, R-Camarillo, and state Sen. Betty Karnette, D-Long Beach, score pretty high on the odd-ometer.

He's a tall, 29-year-old former college basketball star and a staunch conservative. She's 67, plumply petite and a friend of labor. Strickland and Karnette may be the two nicest people in the Legislature, both of them as sweet as honey.

But the two are locked in a grim battle over license plates. Strickland is the author of a bill that would create a special Ronald Reagan plate, with proceeds from sales going to the Reagan Presidential Library and to Alzheimer's research.

Strickland, who was in fourth grade when Reagan was first inaugurated, reveres the former president as a hero and role model. ``I started in politics because of him,'' he says.

His bill, AB 1041, passed the Assembly on a 66-6 vote. Its next stop is the Senate Transportation Committee, which Karnette chairs.

And, as far as she's concerned, the bill stops there. Karnette plans to sink the measure without a hearing, citing a committee rule that aims to stop the proliferation of special-interest plates.

Karnette points to a California Highway Patrol report that says colorful plates hamper police identification of cars. Strickland doesn't buy it.

``I called the CHP and the DMV and neither one objects to this plate,'' he said. ``If the senator wants to vote against this bill, that's her prerogative. But at least it should get a hearing. That's the American way.''

For her part, the senator is a little exasperated with her young colleague.

``Heck, I like Ronald Reagan,'' Karnette said. ``Everybody likes Ronald Reagan. That's not the point. I won't support any special-interest license plates, no matter who is on it, whether it's Ronald Reagan or Jack Kennedy or FDR.''