At last, California has a budget. The legislature of the largest state, home to more than 11 percent of this country's population, has approved a $143 billion plan that closes a projected $42 billion gap through 2010. Republican Gov. Arnold Schwarzenegger has signed it.

At last, California has a budget. The legislature of the largest state, home to more than 11 percent of this country's population, has approved a $143 billion plan that closes a projected $42 billion gap through 2010. Republican Gov. Arnold Schwarzenegger has signed it.

The package raises taxes and slashes spending — but it also relies heavily on new borrowing (including $5 billion secured by future state lottery revenue) and an expected influx of federal stimulus dollars. And it may not take effect completely if voters reject a referendum proposal this year.

With California's economy in a recession even deeper than that of the rest of the United States, this can only be considered a respite from, not a conclusion to, the state's chronic fiscal crisis.

The biggest disappointment in the California plan was the legislature's last-minute abandonment of a 12 cents-per-gallon increase in the state gasoline tax. It was dropped as the price of winning over a Republican legislator whose vote was necessary to meet the state's two-thirds majority requirement for passing a budget.

The gas tax increase would have raised $2.1 billion per year, according to the nonpartisan California Legislative Analyst's Office — which had previously urged the legislature not only to raise the tax but also to index it to inflation.

The California gas tax, currently 18 cents per gallon, was last increased in 1994, and therefore has been falling, in real terms, for a decade and a half. Because of that, and because of the recent decline in gas prices, gas in California would have been cheaper even with the 12-cent tax hike than it was a couple of years ago.

To be sure, California's sales tax applies to gasoline, and the budget plan raises that by a penny per dollar spent. But the larger fuel tax would have bought Californians not only more stable state finances but also cleaner air, less traffic and reduced sprawl. And this is a state that prides itself on being green.

That environmentalism is manifest in a host of complicated regulations and rules (such as mandatory, cleaner-burning "California blend" motor fuel) that cost state residents plenty. Yet by reducing fuel consumption even further than it has been cut in the past four years, a higher gas tax would have reduced car-related ozone and carbon dioxide pollution with a minimum of bureaucracy.

As the largest and most automobile-centric of the 50 states, California could have set a powerful example for other states that are considering difficult but necessary fixes to their budget problems. Higher fuel taxes could even have sped California's development into a laboratory for alternative automotive technology.

The state's budget crisis, in short, created a great opportunity to move American energy policy in a more rational direction. California, alas, missed it.