STATE 2004: ARNOLD'S FIRST YEAR 'A TERRIFIC RIDE'.

Byline: Harrison Sheppard Sacramento Bureau

SACRAMENTO - Gov. Arnold Schwarzenegger's first calendar year in office brought him mostly victories - some of them self-declared - that resulted from major arm-twisting, lengthy negotiations and big concessions to Democrats.

Schwarzenegger tightened up California's budget, launched a top-to- bottom review of state government and reformed the workers' compensation system. He also incurred billions of dollars in new debt, failed to pass a budget on time and raised millions of dollars from special interests for his political accounts at an unprecedented clip.

Schwarzenegger, who took office in November 2003 after the recall of Gov. Gray Davis, is also credited with changing the culture of capital politics. Even those who oppose his policies say he is far more fun to negotiate with than Davis.

``I say things to Arnold that Gray would think are an insult,'' said former Senate president pro tem John Burton. ``He'll laugh it off and throw one right back at me.

``They were different personalities. Gray was uptighter than Arnold. Arnold's loosey goosey.''

That often led to smoother negotiations, even when Burton's famous temper sometimes threatened to explode.

Schwarzenegger at once cajoled and threatened lawmakers in order to get his way - taking pictures with them and smoking cigars under his courtyard tent, even while threatening to unseat those who stood in his way or circumvent the Legislature completely through the ballot box.

Among his achievements were Propositions 57 and 58, passed by voters in March. They authorized $15 billion in new debt to help balance the budget, while placing future limits on spending and borrowing.

He also launched an overhaul of state government designed to ``blow up the boxes'' of bureaucracy. The California Performance Review recommended hundreds of changes designed to save billions of dollars over the long term.

He convinced the Legislature to overhaul the workers' compensation system, addressing a top concern of California businesses. He convinced the Legislature to pass the deal, which was slightly less than he had originally sought, by threatening to push a much harsher ballot measure.

Schwarzenegger was also criticized for raising campaign funds at a far faster pace than Davis ever did, and accepting millions of dollars from special interests, even though he criticized them during the recall campaign as corrupting politics in the capital.

He also failed to gain any seats for his party in the Legislature in November's elections. But always the optimist, Schwarzenegger said he was ``delighted'' with the results because his party didn't lose any seats either.

Schwarzenegger is also, of course, always self-confident.

Asked if he came across any surprises in his first year, he told talk-show host Larry King in November: ``Well, I don't think that anything really surprised me that much because I expected to be able to turn the state around and to do the kind of things that I did, and nothing really disappointed me as far as that goes.

``I think that the whole thing was just a terrific ride this whole last year.''

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com

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(color) Gov. Arnold Schwarzenegger kept a busy schedule in 2004, including a trip to Japan in November to promote California tourism and agriculture.

Koichi Kamoshida/Getty Images