Gov.-elect Arnold Schwarzenegger began the work Wednesday of becoming "the people's governor," creating a transition team and outlining the first steps in his new administration.

Schwarzenegger said he will place his personal business empire in a blind trust and put his movie career aside as he looks to dedicate his complete attention to a new era in California politics and grapple with the state's economic and budgetary problems.

President George W. Bush offered his congratulations and Schwarzenegger said he hopes to meet with him when he visits California next week.

"He promised me he would do everything possible to help California," Schwarzenegger said during an afternoon news conference covered by at least 60 television cameras and hundreds of journalists. "So I will be working with him and asking him for a lot, a lot of favors."

Schwarzenegger spoke with the state's two Democratic senators, Dianne Feinstein and Barbara Boxer, and symbolically added to his outreach to federal officials by naming Congressman David Dreier, R-Glendora, to head his transition team. Dreier was a co-chairman of his campaign.

The full transition team will be named today, but another prominent Republican expected to be involved is former Los Angeles Mayor Richard Riordan, who said he hopes to be part of an educational advisory group in Sacramento aimed at getting rid of bureaucratic layers.

"I'm excited, because we have an opportunity to make something real happen," Riordan said in an interview.

Riordan said he doesn't want a full-time post, but rather to be part of a group of educational experts working out the mechanics of Schwarzenegger's goals, specifically getting a higher percentage of each educational dollar into local schools.

A Schwarzenegger spokesman said the new administration might not be strictly Republican, but would seek out the best people for various positions, which could include Democrats.

Among those who have volunteered to help the transition team is former Democratic state Controller Kathleen Connell, who said she's told members of the transition team she'll be available to help out "behind the scenes," and on a voluntary basis. Currently a professor at the University of California at Berkeley's business school, she said she doesn't want to return to Sacramento in an official role. She has not at this point been officially named to the team.

Connell said Schwarzenegger's pledge for an independent audit of the state's crumbling finances is crucial, and that the state must become far more disciplined in its spending habits if it's to recover fiscally. "This is a spending problem, not a revenue problem," Connell said of the deficit, which she said could be billions of dollars higher than the $8 billion estimated when the budget was signed. She added there has been a "shell game up in Sacramento," "deficit figures have been couched in secrecy" and that the state could face an immediate liquidity crisis.

Schwarzenegger cannot take office until the vote is certified, a process which could take up to 39 days after the election. The latest he could be sworn in is Nov. 16. Aides said they weren't yet sure what type of inaugural celebration he would have.

He said he was not sure whether he will move full time to Sacramento, but will "spend a lot of time" there, while also traveling often throughout the state and maintaining his Pacific Palisades home.

The first action Schwarzenegger is expected to take as governor is to try to repeal the tripling of the car tax, as he promised in his campaign, an action some Democrats doubt is legally or financially feasible.

He was less specific, however, about how he would replace the $4 billion in revenue the measure was expected to generate, money that is primarily used to help local governments fund police and fire services.

He suggested some possible sources of new revenue are new compacts with Indian gaming casinos that he hopes to negotiate; reform of the workers' compensation system; and Medi-Cal reform -- none of which will be easily achieved.

But the biggest problem looming on the horizon might be next year's budget. State law requires the governor to submit a balanced budget proposal to the Legislature by Jan. 10.

When the current year's $38 billion budget deficit stalemate was resolved, it included rolling over at least $8 billion worth of debt to the following year. Also, the courts have been challenging the validity of the bonding proposals, meaning there could be even greater financial problems immediately this year to deal with.

Schwarzenegger said he learned Wednesday morning that some of the legal problems could add up to a $20 billion deficit.

He also has promised not to raise taxes, except in cases of natural disaster or terrorist attack, and will preserve spending on education, which makes up some 40 percent of the state budget, leaving him little room to maneuver.

Among others Schwarzenegger spoke to by telephone on election night and the morning after were former President George H.W. Bush, Nelson Mandela, Gov. Gray Davis, Feinstein, Boxer, U.S. Senate Majority Leader Bill Frist, state Senate President Pro Tem John Burton, Assembly Speaker Herb Wesson and Los Angeles Mayor James Hahn.

Although his movie career might be over for now, "Terminator 3" was not the last chance for fans to see the now-former action star. He has a cameo lasting all of a few seconds in the current "The Rundown" and an already-filmed role in the upcoming remake of "Around the World in 80 Days." , Staff Writers Beth Barrett and Rick Orlov contributed to this report.

Harrison Sheppard, (213) 978-0390 harrison.sheppard@dailynews.com