A BINGE of borrowing and higher taxes are the shaky foundations of Gov. Gray Davis' latest budget package. It gets the job done for this year and next, but what happens beyond is anyone's guess.

The governor's financial fix is a marvel of canny trade-offs. With a two- year shortfall expected to hit $38 billion, he's come up with a plan that dulls the expected pain for education, medical care and social services that drew thousands of placard-waving protesters to Sacramento. These Californians, along with the rest of the state, will pay more in vehicle fees, cigarette taxes and college tuition.

The trick will be getting a smattering of Republicans -- two in the Senate and six in the Assembly -- to cross over and provide the two-thirds legislative margin needed to pass the Democratic budget.

To accomplish this, Davis borrowed and tweaked a GOP idea. He plans to borrow $10.7 billion in bonds and impose a half-cent sales tax to cover it. Republicans don't mind rolling over this mountain-sized bill, but they favor paying it back with current taxes, not the higher sales tax.

Either way, the bonds are a credit-card strategy that postpones the financial day of reckoning. But the state is at the brink, and the remaining options -- deeper cuts or higher taxes -- won't sell politically in the Legislature, Davis said.

What the governor and others in both parties are offering as a path forward is reforming the tax structure. Sacramento relies heavily on personal income taxes, a money-maker in boom times, but a poor performer now.

Also, if the bond package goes ahead, it introduces a new financial master in California: Wall Street bond houses. These bankers are the ones demanding the half-cent sales tax be reserved solely for their loans.

The income tax and bond fix are just two examples of why reform is needed. The governor, understandably, doesn't want to detail his suggestions for a new tax system in the midst of a budget fight. But there are plenty of options, with varying political pain levels, to be considered.

Some ideas taking shape include sharing sales tax windfalls among cities near big-box shopping centers, capping state spending, taxing business and residential properties differently, requiring rainy-day reserves and lowering the threshold for voter-approved local tax increases.

Several ideas go at the heart of Prop. 13, the local tax straitjacket dating back decades. But all are familiar to lawmakers, who, until this year, never felt the pressure to rewrite California's creaking tax code.

Once the state gets through this budget crisis, Davis pledges to take up these long-term solutions. On balance, his plan can restore financial stability to an ailing state.

But his grab-bag of measures is born of desperation. It may offer instant relief for this deficit -- and, realistically, some variation of the Davis plan may be the only way out of this mess -- but it is no substitute for a long-term restructuring of state finances.