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POLITICAL DIFFERENCES EASE, STATE MOVES TOWARD BUDGET APPROVAL

State budget negotiations were more peaceful Wednesday night as state leaders eased their political differences and moved toward meeting an April 1 budget-enactment deadline.

Gov. Pataki also suggested for the first time that he might drop his demand for a four-year cut in state income taxes, the same day he'd said in Orchard Park he would not. Instead, Pataki said, only a two-year cut may be possible this year, with action on the third and fourth years deferred to next year or beyond.

Wednesday's agreement to consider new revenue sources, which followed a 90-minute meeting among Pataki and legislative leaders, signaled a positive turning point in the negotiations. Greater revenues would allow the Legislature to spend more money on higher education, Medicaid and other areas where Pataki has proposed deep cuts.

All sides said it is now possible to meet the April 1 budget deadline. The leaders discussed, among other ideas, a tax-amnesty program, in which delinquent taxpayers could pay the state what they owe without suffering additional penalties. The state has tried that before, and while millions of dollars usually pour in, critics describe it as a one-shot revenue source that does not help change the state's fundamental fiscal problems.

Wednesday night's optimism was in marked contrast to earlier in the day when Pataki and Assembly Speaker Sheldon Silver, D-Manhattan, exchanged angry words about the stalled budget talks.

Pataki, during a visit to Buffalo, attacked Assembly Democrats, calling their failure to begin meaningful negotiations on a new budget a disgrace.

He said he was frustrated by the Assembly's lack of negotiating initiatives, adding that he expects the Assembly to "add a half billion here and a billion there" to his $62.6 billion proposal.

"They have criticized our cuts, but they haven't proposed one restoration," he said during a meeting with editors and reporters at The Buffalo News. "They've had my budget since Feb. 1. Here it is March 22, and they haven't done a thing. And it's a disgrace."

Pataki also reiterated his commitment to having a budget in place by April 1.

"I said in the State of the State, and I say it again, if it comes April 1 and there's no budget, I'm not going to get paid, the legislators aren't going to get paid, the legislative employees aren't going to get paid, and it is not going to be business as usual -- period," he said.

The governor cited a Standard and Poor's report indicating the state's credit rating may be upgraded if a budget similar to his proposal is adopted on time. He laid the blame for missing that possibility on Silver and his Democrats.

"What I've never liked or understood, particularly at this time of the year, is simple politics. The only thing I can conclude by the failure to have any proposal as of now is that the speaker would be delighted to see April 1 come and go so I wouldn't break the failed record of the previous administration."

Silver, in a stinging letter to the governor, accused Pataki of conducting a "deceptive, patently partisan and secretive" budget process.

"Your accusation of bad faith on our part is not only personally insulting, it is patently false," Silver wrote. "And in case you didn't know it, our Democratic priorities are crystal clear: We want to provide real tax relief to the middle class, instead of the duplicitous tax shift you propose."

But after Wednesday night's meeting, Silver changed his tune.

"We agreed that we should consult a little more before we exchange letters," he said. "I think the governor and I have indicated to each other that were on target for an April 1 budget."

Senate Majority Leader Joseph Bruno, R-Brunswick, said the closeness of the April 1 deadline helped spur discussions on tax-cut proposals and other budget differences.

The governor is not backing down from his tax-cutting plan, Bruno said. "But we're reviewing it to see how realistic it is because you're running into eight days to try to do a budget," he said. "So now is the time to face reality."

While traveling to Buffalo and Rochester Wednesday, Pataki stressed the need to enact a four-year, 25 percent cut in the income tax to stimulate jobs and business development. A four-year plan, he said, was necessary to give businesses the incentive to stay in New York.

But by Wednesday night, Pataki for the first time was conceding that Democrats might win on their proposal to limit the tax cut to two years. He stressed, however, that taxes would still be cut over the next four years.

"We certainly have no intention of giving up on it at all," Pataki said. "It's a fight to continue to get the tax-cut program, but what I'm saying is, if we don't get that (four-year cut enacted) in this year's budget, it's not going to be for lack of trying."

In addition to paring the tax cut down to two years, state legislative leaders are considering compromises in the tax-cutting plans offered by Democrats and Republicans. That could affect the amount of the tax cuts that would be enjoyed by taxpayers at various income levels.

State leaders said they are considering several ways to raise additional revenues beyond the extra $300 million projected last week following negotiations between Pataki and the Legislature. One idea -- wine sales in grocery stores to boost the state sales tax -- was rejected, Bruno said.

During his Buffalo visit Wednesday, Pataki said he is inherently opposed to wine sales in grocery stores, citing the effects on small liquor stores and his fear that revenue estimates are inflated. But he added that he has not made up his mind on the issue and is open to discussion.

Pataki, who earlier in the day addressed the Rochester Rotary and business leaders in Orchard Park, said he still feels a sense of "broad support" for his program to cut state spending despite the onslaught of anti-Pataki advertising and his low ratings in the polls. He reiterated that New York can't begin to generate jobs and wealth without state spending cuts.

From cuts in the State University system to changes in welfare and Medicaid spending, Pataki emphasized that he would not be faced with such deep budget cuts if the Cuomo administration had faced the situation.

"Every year you have a crisis or you sell Attica Prison or you raid the pension fund," he said. "Had these problems been faced up to last year when there was revenue -- or in the past -- we could have avoided some cuts."

His proposed SUNY cuts, he said, amount to a 4.5 percent reduction as opposed to the 7 percent cut he has imposed on state government as a whole.

Again referring to the lack of "political will" in the previous administration, the governor said he has no option but to impose SUNY cuts immediately rather than phase them in over several years, especially in light of a $5 billion deficit projected for the coming fiscal year.

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