Battle for the soul of the California GOP by Nina Easton @FortuneMagazine June 2, 2014, 11:05 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons The Republican Party’s entwined futures—bleak and hopeful—washes up on the shores of California tomorrow when primary polls close.The moderate, business-backed wing of the GOP has tried to push back against Tea Party candidates this primary season, with middling results. And it will face a pronounced setback if Bush Treasury official Neel Kashkari loses to Minuteman Project founder Tim Donnelly in the governor’s primary.Kashkari is a son of Indian immigrants and social liberal who preaches economic opportunity in a state with the nation’s fourth highest unemployment rate. State Assemblyman Donnelly has likened his desired campaign against illegal immigration to “warfare”—and appeals to the right with divisive proclamations like “I want my state back!”Polls are mixed on which candidate will face Governor Jerry Brown in the fall.Farther down the ballot, congressional GOP candidate Pablo Kleinman, facing socially conservative opponent Mark Reed in a Southern California district, stands a good chance of being tapped as the candidate to face Democratic incumbent Brad Sherman in the fall. (Predicting races in California is especially difficult because of an open primary system in which the top two vote-getters, regardless of party, face off in the general election. )If the Republican Party has a prayer of closing its gap with Democrats in places like California, it rests on the fate of candidates like Kleinman—fiscally conservative and socially liberal, a Spanish-speaking fixture on Univision radio and high-tech entrepreneur to boot.Kleinman, who immigrated to California from Argentina when he was 13, is a serial tech entrepreneur whose latest venture, Urbita, is a network of local search and travel-related online services. That’s a background with the potential for wide appeal in the start-up state. But his understanding of Hispanic voters—who make up a third of California adults though a smaller share of likely voters — is even more crucial.“The reason California is no longer a battle ground state is that we failed to get the Hispanic vote,” Kleinman says of the Republican Party. “If we can’t lure a third of Hispanics, then we can’t be competitive ever again.”While they tend to be Democrats, many Hispanics are politically conservative—and the breakout is just about even for those who describe themselves as “liberal,” “middle of the road,” and “conservative,” according to the Public Policy Institute of California.Kleinman appeals to the large block of Hispanic voters in his San Fernando Valley district by promoting public school choice—so families “don’t have to lie about their address to get into decent schools.” He supports a guest worker program and immigration reform so the nation’s 12 million undocumented residents “can come out of the shadows” (though he says he doesn’t support “amnesty”).Even if he wins tomorrow, Kleinman faces steep odds against an incumbent Democrat in a district where Republicans are mostly thought to exist alongside Mastadon tusks in the nearby La Brea tar pits.But what’s interesting is that, despite the party’s record-low standing and gnawing reputation for intolerance, he’s a compelling young candidate who opted to embrace the GOP underdog brand. (As a young man in New York, Kleinman fell under the spell of then-New York Mayor Rudy Giuliani, but his loyalty to the GOP was sealed, he says, after pursuing a business degree in France and experiencing European-style socialism.)Ronald Reagan’s home state long ago lost its Republican footing, with its entire political structure dominated by Democrats. The state hasn’t supported Republican presidential candidates since the 1980s.MORE Lew: Businesses need to stop looking backwardBut that’s exactly what makes it rich territory for a free-market message of economic opportunity. Decades of Democratic control have left a state that residents are fleeing in search of jobs and to escape local fiscal crises—3.4 million Californians have left since 1990.Businesses are fleeing as well. Texas Gov. Rick Perry likes to brag that he’s lured more than 60 California companies to his state–just since 2012. (According to Fortune 500 rankings released today New York and California are the home to the most Fortune 500 headquarters, with 54 each. Texas boasts 52.)Kashkari wants to waive income taxes for 10 years for businesses that move to California or build new manufacturing plants there.Kleinman hails from an industry famous for producing technological disruption. And right now, disruption is exactly what California’s encrusted political establishment could use.Related Video: California vs. Texas: Which state has the best business perks?