Gov. Eliot Spitzer's reversal last week on his driver's license plan for illegal immigrants represented a major political defeat.

The Democratic governor, whose approval rating has plummeted in less than a year since he took office with historic statewide support, erred badly in trying to push this plan on New Yorkers.

In the end, he admitted what so many detractors of the plan had said from the start - that illegal immigration is a federal issue.

But now it's time for the state's leaders on all sides of the issue to move on and focus on the state's business.

In essence, it's time for a new “Day One,” the phrase Spitzer used prior to being sworn into office to synthesize his promise that he could bring true reform to Albany.

The new “Day One” can refer to last Wednesday, Nov. 14, the day Spitzer formally dropped his license plan.

We hope going forward that the governor can stay focused on issues of importance, that he can rise above petty politics and that he can realize he does need to work with legislators in order to get things done.

But we also hope it was a new “Day One” for Spitzer's adversaries in the state Legislature. They called on the governor to drop his license plan, and he did that. Now, they must also demonstrate a willingness to work with Spitzer on the state's business, rather than continue to waste taxpayer dollars on politically motivated investigations.

Ultimately both sides must embrace this new “Day One” because failure to do so could be disastrous.

With a projected state revenue shortfall, combined with the reality that 2008 is an election year, the state budget process has the potential to become extremely ugly. Slowing growth in wages, the declining housing markets, rising energy costs and the uncertainty in the stock market all represent major hurdles.

The governor and the Legislature cannot avoid some difficult spending decisions.

The longer they ignore this reality in favor of political games, the worse the outcome for New York taxpayers.