SACRAMENTO - In his first two months in office, Arnold Schwarzenegger has pretty much followed the script he and his advisers laid out after his election.

But with a long-simmering crisis in the nation's largest prison system coming to a boil, the new governor and his administration are now suddenly forced to ad lib.

How governors deal with these unscripted events or natural disasters can often turn into defining moments for their administrations. Think Gray Davis and electricity.

At issue is how Schwarzenegger will handle charges that the state Department of Corrections, under the sway of the powerful prison guard union, is unable to police itself. A federal court report has accused top corrections officials of whitewashing an investigation and, in legislative hearings last week, tearful prison guards told of being intimidated after reporting on other officers.

Schwarzenegger -- with the threat of a federal takeover and renewed legislative scrutiny on his side -- could be emboldened to make changes sought by prison reformers for years. Unlike his three predecessors, he has not taken any contributions from the prison guard union, which has spent lavishly to support the state's politicians.

Lawmakers who want to reform the system are optimistic the governor is in their corner. State Sen. John Vasconcellos, D-San Jose, said he was buoyed after meeting with Schwarzenegger in early December. He said the governor told him, ``We've got to make the Department of Corrections a department of corrections.''

Persistent critics of the corrections system note, however, that Schwarzenegger installed a former prison guard in the top job and fired the acting inspector general for prisons just before he was about to testify about its failings at a legislative hearing.

Schwarzenegger inherited a corrections department that grew topsy-turvy in the 1980s as a focus on rehabilitation gave way to punishment. In the 1980s and 1990s, the state cracked down on gangs, enacted the ``three strikes'' law and imposed tougher drug sentences -- leading to more inmates.

As the number of inmates grew to 161,000 and corrections employees to 49,000, the guard union also grew. It now has more than 25,000 members and collects millions of dollars in dues that are funneled into political donations.

``They have a lot of money,'' which translates into political clout, said Bruce Bikle, an assistant professor of criminal justice at California State University-Sacramento.

Sacramento Superior Court Judge Steve White, the former inspector general for prisons, testified last week that the union also works behind the scenes to influence the appointments of wardens, who must be confirmed by the Senate Rules Committee. With a close relationship to former Gov. Gray Davis, the union also managed to negotiate a controversial labor agreement that critics say will cost more than $500 million annually when it takes full effect.

The system is plagued with problems -- from an inability to investigate and discipline its own officers to an inability to send an e-mail between prisons. Most troubling, critics say, is a pervasive code of silence in which prison guards say they are discouraged from exposing excesses.

Bikle said Schwarzenegger must recognize that this is an enormous problem. ``The code of silence is an indication of institutional malaise in the department and they've got to fix that,'' said Bikle, a former prison administrator in Oregon and other states.

Mike Jimenez, president of the California Correctional Peace Officers Association for the past 18 months, said the guard union ``has never stopped an investigation.'' In legislative testimony last week, he disputed the claim that a code of silence prevails, calling it instead ``a code of cowardice'' by ``individuals who lack the courage and the intestinal fortitude to stand up.''

Schwarzenegger himself has not talked about prisons, but his cabinet secretary for corrections, Roderick Hickman, has promised to make changes. Last week, for example, corrections officials temporarily reassigned the top managers at Folsom State Prison in the wake of an internal report that was critical of how the prison's leadership handled a 2002 riot.

``The key for leadership is understanding that the message has to be clear that you will be held accountable for the values that we expound,'' Hickman told a legislative hearing last week. Prodded by the federal court's oversight at Pelican Bay State Prison, Hickman said he is developing a plan to revamp the way the department investigates wrongdoing.

In the coming weeks, a flurry of legislation is expected to be introduced, possibly to restore $5 million that lawmakers cut from the budget for the inspector general, the state's prison watchdog; to expand the attorney general's role in scrutinizing prisons; and to allow expanded media access to prisoners for jailhouse interviews.

Schwarzenegger will be asked to take positions on these proposals.

Some close observers of the prisons are concerned about Schwarzenegger's first moves, citing the appointment of Hickman as the corrections secretary to oversee the state's 32 prisons, juvenile prisons and parole programs.

They note that Hickman started as a guard and has spent 25 years in the California prison system. At the dramatic legislative hearings last week, White, the former inspector general, questioned whether Hickman had the passion to lead the agency on a new path.

And just the week before, Schwarzenegger fired John Chen, White's successor as acting inspector general. Chen had been poised to testify that the department exhibited ``a persistent cultural environment resistant to reform.''

State Sen. Gloria Romero, D-Rosemead, who co-chaired the hearings, contends that the system is on the brink of being morally bankrupt. ``It is one judge's order away from being pulled into receivership and run by a federal court,'' she declared. ``It is a tarnished institution.''

Romero and others insist that there is a pervasive code of silence that must be broken. And witnesses, including hardened prison guards, broke down in tears last week as they described the hostility they suffered when they blew the whistle at prisons.

The code of silence was cited by a special court master in a highly critical report to U.S. District Judge Thelton Henderson detailing the failure of the Department of Corrections to investigate and discipline staff who abuse prisoners. The report found officers unwilling to report problems, especially if the union was involved, because of this informal code.

Acknowledging Schwarzenegger's recent election, the special master, John Hagar, suggested the state should be given additional time to comply with his recommendations for reform despite its ``miserable compliance record.''

Hagar wants the department to develop a plan to fully investigate allegations of the misuse of force, to establish appropriate penalties and to do this without interference from the union.

But White, the former inspector general, remains skeptical that Schwarzenegger and his new corrections chief can accomplish the sweeping reforms he thinks are needed.

``What will happen,'' White told lawmakers, ``is that heads will roll, butts will get kicked, and three months later, when you're not looking, it will all be back to where it was. I know this to a certainty.''