Democrats took hold of the state Legislature with relative ease Tuesday but now comes the hard part - repairing an at least $3 billion projected budget hole and a shaken state economy.

With the fall of the Republican Assembly in Tuesday's elections, Democrats now take control - and responsibility - for the steering of the course of a state where factories are closing, voters are fearful and government could be facing its largest budget shortfall in years.

Rep. Mike Sheridan, D-Janesville, a lawmaker in the running to be the next Assembly speaker, has seen a string of factory layoffs announced in his blue-collar district that are emblematic of the pain facing the entire state. He said the state's focus must be on jobs and the economy.

"We have difficult decisions ahead of us," Sheridan said. "Yes, we've taken back the majority but it's almost like getting caught holding the bag."

Like their federal counterparts, Wisconsin Democrats have made campaign promises to boost health care, manufacturing and renewable energy in the state while protecting education and middle-class taxpayers. But Democrats, who now control state government for the first time in two decades, must seek some of these long-deferred goals in the face of a bleak budget, slowing economy and at least some past internal differences on issues like health care.

"In the same way that the national Democrats are both blessed and cursed with united government, so the state Democrats are," said UW-Madison political science professor Charles Franklin, noting the "daunting looking problems" ahead.

With recounts in one or more races still possible, Democrats now control the Assembly by a 52-46 margin with one independent and the state Senate by an 18-15 margin.

Democratic Gov. Jim Doyle was upbeat Wednesday about the prospects for previously stalled parts of his agenda, saying the switch in the Assembly would likely bring support for proposals to mandate that insurers cover the costs of autism treatment for children and to establish a state rating system for child-care providers. Doyle said the election also improved the chances of a statewide workplace smoking ban including bars and restaurants.

"The Democrats are going to have to govern both in the state of Wisconsin and at the national level and I feel very confident that we are up to that challenge." Doyle told reporters at the Governor's Mansion on Wednesday.

But even as Republicans work to digest their own party's losses, some of them were already warning of possible Democratic tax increases and relishing the prospect of how Democrats would handle the fiscal challenges before them.

"The Democrats will eat their own in the first six months," Senate Minority Leader Scott Fitzgerald, R-Juneau, said. "I cannot wait to see the budget wrangling between them."

Doyle reiterated his opposition Wednesday to general tax increases but said he expected a tax on hospitals would now pass the Legislature since it would bring in more federal money to reimburse hospitals and help balance the budget. But Doyle rejected the idea of a state universal health-care plan pushed by Senate Democrats last year, saying that the next state budget would already be strained and that president-elect Barack Obama's administration had pledged to take action on health care.

Senate Majority Leader Russ Decker, D-Weston, said his caucus would seek to close what he calls a tax loophole that benefits corporations at the expense of middle-class taxpayers by allowing them shelter income in out-of-state subsidiaries. That could bring Senate Democrats into conflict with Doyle, who has not included the measure in his own past budgets.

Lawmakers from both parties scrambled Wednesday to seek leadership positions in the Assembly in the wake of the election shake-up. Assembly Speaker Mike Huebsch, R-West Salem, said he would not seek the position of minority leader in the next session in January and group of Republicans that included current Majority Leader Jeff Fitzgerald, R-Horicon, angled for it.

On the Democratic side, a group of lawmakers that included Sheridan and Assistant Minority Leader Jon Richards, D-Milwaukee, are seeking to become the next Assembly speaker. Rep. Mark Pocan, D-Madison, who headed up Assembly Democrats' campaign efforts, is seeking to become co-chairman of the Legislature's powerful joint budget committee.

Senate caucuses for both parties will meet for the first time after the election today and Assembly caucuses will meet next week.