ANNAPOLIS, JAN. 15 -- Four years ago Gov. William Donald Schaefer took office riding a huge wave of popularity, with a treasury flush with the windfall from federal tax law changes and the state in the midst of an economic boom.

But when he takes the oath of office for the second time Wednesday, Schaefer will inherit a world turned upside down. From the threat of war in the Middle East to a looming budget crunch and memories of a disappointing election at home, Schaefer's times have changed.

"As he holds up his hand, he's going to have to play the cards that are dealt to him," said Senate President Thomas V. Mike Miller Jr. (D-Prince George's). "Life and politics are not always as fair as one would hope."

"If you look in a rear-view mirror, it is pretty bleak," said Del. Peter Franchot (D-Montgomery), who met with Schaefer to discuss a package of gun control measures. "He has enormous constraints; he is in a budget straitjacket . . . . He is wrestling with what he wants his vision to be and at the same time fighting one forest fire after another. That is disconcerting."

Schaefer and Lt. Gov. Melvin A. Steinberg are scheduled to be inaugurated around noon. Plans for the day's events -- scaled back in accordance with the state's harsh economic climate -- could serve as a metaphor for what has been a frustrating prologue to their second terms. After canceling plans for a large tent to save money on Schaefer's outdoor inaugural address, aides were dismayed by forecasts of stormy weather.

Schaefer's aides say he recognizes the difficulty of the times, but remains determined to put his imprint on the state. These may be the 69-year-old Democratic governor's last four years in public office, and he is not about to take them lying down.

"We have a choice here," Schaefer spokesman Paul E. Schurick said. "When faced with circumstances -- a difficult budget, a recession, worldwide crisis -- you only have two alternatives: Do nothing or stampede ahead. As far as the governor is concerned, there is no choice."

When the governor kicked off his campaign for reelection last summer, he had reason to be optimistic. He could look back on a long list of accomplishments and had made a reasonable peace with the General Assembly. The economy was still good, and he looked forward to an election that would reaffirm his popularity and increase his clout with lawmakers.

In addition, high-level study commissions were dealing with problems such as tax revision, land use and transportation funding. Schaefer was hoping that strong recommendations from all three panels would set the stage for legislative action.

By the end of November, however, Schaefer's mood was grim. His margin of victory, though sizable, was far below expectations: He won with 60 percent of the vote, compared with a record-setting 82 percent in 1986. The governor said he had been misunderstood by a restless electorate and poorly marketed by his staff.

In addition, budget shortfalls dashed his hopes of new programs and projects, while the commissions he had appointed leading up to his second term either failed to offer definitive recommendations or were running into trouble with lawmakers.

Still, Schaefer legislative aide David Iannucci said the plans being laid for the governor's second term are no less ambitious than those of his first.

"I see the governor as having all the influence and all the ability to shape policy in this fifth year as he had in the first year," Iannucci said.

That first year saw approval of two sports stadiums in Baltimore, a gasoline tax increase, overhaul of the state's system of medical malpractice insurance and a major education funding initiative. This year's legislative package -- no less ambitious, in Iannucci's view -- is to include bills on land use, gun control, revision of the college scholarship system, probably a gasoline tax increase and possibly tax law changes.

"One trend that the governor attempts to resist greatly is the idea of letting the energy of the new administration wear out," Iannucci said. "We came down here four years ago wanting to make a dramatic stamp and shape events . . . . The governor is making an effort to keep the same is that vigor."

An unanswered question is how long Schaefer's influence will hold out. Prohibited by law from seeking a third term, the governor recognizes that he needs to push his major initiatives now because his authority may wane in future years, aides said.

"The governor is very mindful that time is short," Iannucci said. "The next four years are likely to fly by."