(Adds license bill, last paragraph)
By Jim Christie
SAN FRANCISCO, Aug 27 (Reuters) - California legislators neared the end of their current session on Friday by handing some stinging setbacks to Gov. Arnold Schwarzenegger and leaving him with bills to sign that will test his political convictions.
The developments are a sign of an increasingly assertive legislature, and they leave the popular governor bruised as he prepares for his speech at next week's Republican National Convention in New York, political analysts said.
Lawmakers refused to ratify his deal with an Indian tribe for a Las Vegas-style casino near San Francisco and forced him to retreat from a call for Bay Area residents to pay $2.3 billion in cost overruns to retrofit the San Francisco Bay Bridge.
And the Senate passed and sent to the Assembly a bill to allow California's illegal immigrants to get state driver's licenses -- a proposal that Schwarzenegger had previously opposed.
The Republican governor will end his first legislative session by signing or vetoing several bills, and those decisions will shed light on his political convictions that have confounded supporters and opponents alike.
Among them are bills to encourage Californians to buy hybrid cars, allow drug imports from Canada, set the highest minimum wage in the United States, and bar state agencies from hiring service job contractors if their work is done overseas.
"It will be window into his thought process," said Bill Whalen, who served as an aide to former California Gov. Pete Wilson, a Republican. "For most governors, they get a thousand bills and every one is pretty much a done-deal. With this guy, a lot of stuff is up in the air."
Whalen added that the actor-turned-governor who swept into office in a special election late last year is the best known governor in state history, but "in some respects many of his positions are mysteries .. .he can't be put into a box."
Lawmakers, however, may have learned to box-in the unpredictable governor.
After months of watching Schwarzenegger tally political gains, lawmakers signaled they were tired of his maverick style by declining to ratify his casino deal with the Lytton Band of Pomo Indians.
That agreement, negotiated in secret, proved so radioactive that not a single lawmaker stepped forward to back it. Plans called for a casino with 2,500 slot machines only 18 miles from San Francisco.
Schwarzenegger wants to gain a share of the estimated $6 billion in Indian casino revenue to help balance the state's books, and he believes lawmakers will eventually back the deal to avoid a federal lawsuit by the tribe against the State, an aide said.
"The governor is confident that, given more time, the legislature will recognize the reality of the situation," said spokesman Vince Sollitto.
California's governor appears headed for a showdown with the state's Democrat-controlled legislature over the direction of the state's energy policy. He favors more competition in the state's power market, but a key bill calls for more regulation of utilities.
By contrast, Schwarzenegger is widely expected to support a bill that would allow single drivers of certain hybrid cars to drive in the state's freeway carpool lanes. Currently, the bill would favor Japanese automakers and has drawn complaints fromMotor Co. chief Bill Ford, Jr., who labeled it a "Buy Japanese Bill" in a letter to Schwarzenegger.
California's Assembly passed the bill, which Schwarzenegger co-sponsored, late on Thursday by a 41-28 vote after the State Senate passed the bill on Wednesday on a 29-7 vote. (Additional reporting by Leonard Anderson in San Francisco)