Lawmakers returned to the Capitol Monday for a new legislative session facing a roughly $1 billion budget shortfall for the upcoming two-year budget, not counting money they will need to spend to improve funding for education.

Their first meeting comes as a new coalition is expected to seize power in the Senate during the afternoon. Democrats have a small majority in the Senate, controlling 26 of 49 seats. But two Democrats, Sens. Rodney Tom and Tim Sheldon, have announced they'll work with the chamber's 23 Republicans in a new "majority coalition" caucus. That new caucus now holds a 25-24 advantage.

In November, Senate Democrats elected Sen. Ed Murray of Seattle as their majority leader. But on Monday, Tom is expected to be voted in as majority leader by the new coalition.

Under the proposed plan by the caucus, Republicans offered to chair six committees, including the panel that controls the state budget, while offering Democrats control of another six committees. The coalition offered split control of three other panels, though Sheldon is on two of those committees. But while Democrats didn't formally accept the offer, individual senators have said they've agreed to accept chairs or co-chairs: Sen. Brian Hatfield, D-Raymond, says he will be chairman of the Senate Agriculture, Water & Rural Economic Development Committee; Sen. Steve Hobbs, D-Lake Stevens, will be chairman of the Financial Institutions & Insurance Committee; and Sen. Tracey Eide, D-Federal Way, will co-chair the Transportation Committee with Republican Sen. Curtis King of Yakima.

Hobbs said that while some in the Democratic caucus were unhappy with the decision he said that it was an individual decision for each senator.

"We have to represent our districts," he said, but noted that aren't joining the new coalition.

Hatfield said the decision, was, in part, "taking what we've been dealt."

"We're in the minority," he said. "That's the realization."

One of the major issues facing lawmakers is how to comply with a state Supreme Court ruling that said the Legislature isn't adequately funding education. Many lawmakers and Gov.-elect Jay Inslee are looking to add at least $1 billion to education this year, though it's not clear where that money's coming from. Some legislators say new taxes are on the table as an option while Inslee says general tax increases are unnecessary. Adding to the complication is that the state budget is already out of balance by another $1 billion, so political leaders need to fund cuts or revenues to solve the general budget along with adding the new cash for education.

This week, outgoing Gov. Chris Gregoire is set to give her final speech on Tuesday, and Gov.-elect Jay Inslee will be sworn in on Wednesday before giving his inaugural speech.

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Online:

www.leg.wa.gov

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Follow Rachel La Corte at http://www.twitter.com/RachelAPOly or http://www.facebook.com/news.rachel. AP writers Mike Baker and Jonathan Kaminsky contributed to this report.