It's a new year, with a new governor and a statewide election looming, but the California Legislature reconvened at the Capitol on Monday with the same gigantic headache: massive debt.
Many of the same money woes remain on the table, largely unresolved by last year's marathon of political infighting, accusations, finger-pointing and the first gubernatorial recall in state history.

Gov. Arnold Schwarzenegger, in his first State of the State speech tonight, will set the stage for what promises to be a fierce year of political warfare.

"It's going to be a weird ride," Senate President Pro Tem John Burton said of the eight-month legislative session that began Monday with handshakes, smiles and vows of bipartisanship.

Assemblyman Tony Strickland, R-Moorpark, cautioned against unrealistic expectations.

"(Former Governor) Gray Davis left this state in a mess, so it's going to take time time to fix it -- and we've got to do it without raising taxes," he said.

Dark clouds surround the Capitol, including a storm over how best to address a multibillion-dollar imbalance between state spending and revenues without gutting social service programs that many Democratic Party legislators see as invaluable.

"We will work a lot to preserve the gains that have been made over the years and stop wholesale assaults on the poor," said Burton, D-San Francisco.

After surviving last year's $38.2 billion state budget crisis, partly through the sale of bonds, lawmakers face another year of multibillion-dollar deficits that threaten to spark renewed program cuts or tax increases.

Legislators say that as they wrestle to keep state finances afloat, they will consider giving schools more spending flexibility and cutting costs in major state programs ranging from prisons to workers' compensation insurance.

Schwarzenegger's transition from movie star to governor has sent shock waves through the Capitol, renewing hopes for his Republican Party and altering the political landscape in a state where Democrats dominate the Senate and the Assembly.

"This is going to be the biggest reality check that most of these members have ever faced," said Dan Schnur, a political consultant for GOP causes.

"Most of these members have never served under a Republican governor," Schnur said. "That means the Democrats will have to learn to cooperate and the Republicans will have to learn to compromise."

But some Democrats are not so sure that the election of Schwarzenegger -- perhaps best known for his starring role in "Terminator" action films -- necessarily means that the public supports his political views.

"It's my opinion that when thousands of people show up at supermarkets or malls to welcome him, they're not welcoming the governor -- they're welcoming the star of a movie," said Assemblyman Mark Leno, D-San Francisco. "They want his autograph."

Not only does the state begin 2004 with a novice governor, it also will have two novice leaders in the Assembly -- both of whom entered the Legislature only one year ago.

A majority of the Assembly Democratic Caucus has expressed support for Fabian Nunez of Los Angeles to succeed Herb Wesson as speaker of the lower house. A formal vote is expected Thursday to anoint Nunez, an unabashed liberal and former Southern California union official.

The Assembly's GOP Caucus will be led by Kevin McCarthy of Bakersfield, a former aide to Rep. Bill Thomas, one of the most conservative members of Congress. McCarthy assumed his new duties Monday. He succeeds Dave Cox of Fair Oaks, who is running for the state Senate.

Among controversial bills expected to be considered by the Legislature are new versions, not yet drafted, of two key issues from last year: Whether to allow illegal immigrants to obtain driver's licenses and whether to give American Indian tribes more clout in preserving sacred tribal sites.

Other major bills call for creating a system of universal health care, available to all Californians, and for developing a statewide system of preschools to ensure that every child has access to basic learning before entering kindergarten.

Overshadowing everything else, however, is the looming budget fight.

Battle lines already were forming Monday, with Republicans vowing to loosen what they claim is an overregulation of businesses that has hurt the state's economy and forced employers to leave California.

GOP proposals are expected to include a reduction in the state's boards and commissions, and the appointment of a panel to recommend realigning or eliminating various departments or agencies. The recommendations could only be approved or rejected en masse.

While Republicans vowed to continue holding the line on new taxes, some Democrats say tax increases may be inevitable.

Behind the scenes, Democrats are polishing proposals that are likely to include stiffer taxes for tobacco products, a quarter-cent sales tax increase and an additional income tax bracket for wealthy California individuals and couples.

"I think most legislators on both sides of the aisle hope the governor has really good ideas on how to solve the budget problem, because that would help them all," said Gale Kaufman, a political consultant for Democratic candidates. "They're all waiting to see what he's got to say."