To use a currently popular commercial expression, incoming Democratic Governor Rod Blagojevich must "think outside the bun." Otherwise, he will not be able to solve Illinois' dire fiscal situation.

That means he must govern with extreme fiscal restraint, and he must not raise the state's income or sales taxes. But is it plausible to expect that liberal Democrat Blagojevich, who in 2002 ended 26 years of Republican rule during which Republican governors spent money as liberally as any Democrat, will now transform himself into a tight-fisted fiscal conservative?

Watch the new governor's rhetoric in the next few weeks. If he repeatedly uses the phrase "revenue enhancements" -- the latest euphemism for tax hikes -- and mumbles about "shared sacrifice," then it will be obvious that he will break his no-tax-hike pledge and will govern as a conventional liberal, inside the bun, and honor his campaign pledge for $800 million of new spending. However, if his verbiage is laced with references to "reform," and if Blagojevich reiterates his campaign pledge to "cut waste" in state government, then his liberal base should recoil in horror, as he is thinking outside the bun and is planning to slash spending and cut the state bureaucracy.

The state's Fiscal Year 2003 budget of $52.5 billion is already in deficit. Revenues were $700 million less than anticipated through the end of 2002, and the projected shortfall to the end of the fiscal year on June 30 ranges from $750 million to $1.2 billion. And it gets worse: Revenue declines, coupled with rising costs for health care and pensions, have prompted state agencies to project shortfalls ranging from $2.6 billion to $3.6 billion in Fiscal Year 2004, which begins July 1.

Outgoing Governor George Ryan effected some cuts, which the Democratic legislature may restore, and last year's tax hikes on cigarettes and riverboat casino gaming have not produced the revenue expected. Blagojevich's transition team is looking at an across-the-board 2 percent cut in all state agency budgets, which would save about $500 million annually (but only half of that amount in Fiscal Year 2003, if done in January). The state's early retirement program has spurred an exodus of more than 11,000 state employees (out of more than 85,000), and it will save more than $800 million in salaries, but that won't occur until the next fiscal year (as sick days and benefits must still be paid through June), and the savings will dwindle to just $250 million if the l1,000 retirees are replaced. Also, new casino gambling and gaming taxes could generate up to $1 billion.

To typical Illinoisans, a revenue "shortfall" of $2 or $3 billion does not constitute a crisis. After all, California has a $34.8 billion deficit, and it still functions. But at some point in time, most likely near the end of 2003, there will be insufficient money in the state's general revenue fund (which constitutes $22.3 billion of the budget) to pay the state's bills and payroll. There will be layoffs and payless paydays. That will be a political crisis.

Blagojevich and the General Assembly could then (or now) cobble together a solution, which could include revenue enhancements such as "temporary" increases in the state sales or income tax, increased state borrowing, a new casino license and gaming taxes, pushing some bills into the next fiscal year, and reallocating previously earmarked funds into the general fund. But a strong economic recovery, even by 2004, won't affect the state's tax receipts until a year or two later, and Blagojevich has made no secret of his desire to run for president in 2008, which means that he must be resoundingly re-elected in 2006.

Much as President George Bush escaped much of the blame for the 2001-02 recession, Blagojevich will initially escape voters' blame for the state's quagmire. He can blame Ryan and the Republicans, and the "culture of corruption" which, he has said, created a "bloated and wasteful" government. And he can blame national economic trends. But the clear message of the 2002 elections, as they relate to races for governor, is that voters hold governors accountable for their state's economy, and they will oust those who do not show sufficient imagination and innovation to solve the problem.

It was clear that "innovation" did not mean simply raising taxes; it meant first increasing every fee imaginable and slashing salaries and state jobs. If that didn't close the deficit, only then was a tax hike deemed acceptable by skeptical voters.

So, according to sources close to Blagojevich, the governor is considering two options, with his path to the White House clearly in mind:

Plan A is to govern conventionally and wishfully and to keep his base of liberals, teachers and unions happy. That means doling out plenty of state jobs to loyal Democrats, plenty of state contracts to loyal contributors, and plenty of state spending on pet liberal projects, which means raising taxes. And it means hoping that an economic recovery kicks in by 2005 so he can trim some taxes and win a second term in 2006. Otherwise, he will have to hope that voters have a short memory. Governing conventionally also means developing a "Blagojevich Machine" of workers and contributors that will be there for him when he goes national.

But the bottom line is this: To be a credible 2008 presidential contender, Blagojevich has to win a second term with a plurality of more than 500,000 votes.

Plan B is much more controversial in the short term, but much more beneficial in the long term in terms of publicity and national notice. It involves "reform." Instead of "slashing spending" or "cutting jobs," as Republicans are accused by Democrats of doing, Blagojevich could embark on a crusade to "reform" state government, which he can claim is long overdue. He could spend the next 2 years making headline-grabbing gestures, such as leaving positions unfilled, consolidating departments and agencies, and cutting every budget across the board.

If he chooses his targets well, blames the Republicans for the alleged "waste," and periodically vetoes the spending bills passed by the Democratic legislature, Blagojevich could stake out valuable turf as a "New Generation Democrat" who battles government sloth and corruption wherever he finds it and who is unafraid to confront the entrenched establishment. His popularity undoubtedly would soar. Of course, Dan Walker similarly went against the grain and governed as an "outsider" from 1973 to 1976, and he got beat in the 1976 Democratic primary.

But Blagojevich, in reaching out to fiscally conservative moderates and Republicans, and to Downstaters and suburbanites, must be careful not to infuriate and estrange his fiscally liberal Democratic base.

Walker lost in 1976 because voters tired of his government-by-theatrics, and because he went out of his way to bait then-mayor Richard J. Daley. Daley engineered the primary victory of Michael Howlett, but voters, irritated by 4 years of state government turmoil, elected Republican Jim Thompson.

That is the danger facing Blagojevich: If he opts for Plan B and governs like a "reformer," he must avoid the perception of tumult and turmoil, and he must give the impression that he is running the state, has an agenda, and is not simply reacting to the proposals of others. That means quieting, if not appeasing, his two main intra-party rivals, Illinois House Speaker Mike Madigan and Chicago Mayor Rich Daley.

The Democrats have a 66-52 majority in the Illinois House (and a 32-27 majority in the Senate), and many of Madigan's minions are quite liberal and about a third are black. Their agenda is to expand government social service programs and to increase spending in their districts. But Madigan had no liberal agenda, and he is no fool. He won't let himself become a foil for the governor. Nor will Daley.

If Blagojevich picks Plan A, any tax-hike plan would have to originate in the Senate, and it would pass the House only after Blagojevich got out front and embraced it. Any anti-tax reaction in 2004 or 2006 could cost Madigan his majority, and it would be suburban and Downstate white Democrats who would lose.

If Blagojevich picks Plan B, Madigan would stay mum and let his liberal members grumble. Likewise, Daley would be annoyed, as he wants and needs state dollars for Chicago projects, but he surely wouldn't publicly criticize the governor; instead, he'd simply pressure the Chicago members to get the legislature to appropriate and earmark more non-general revenue fund dollars for the city.

As Blagojevich is well aware, image always trumps substance in a campaign. But imagery cannot replace substance in governing. Whether he opts for Plan A or Plan B, the new governor will have to show some leadership, some courage and some imagination. If he doesn't, he'll be a one-termer.