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After announcing a new contract with the state's largest public-employee union Tuesday, Gov. Pataki dropped his threat to close state agencies and lay off tens of thousands of workers while state budget talks remain at an impasse.

Pataki had previously threatened to shut down all but the most vital state services unless a new budget was ready by the April 1 deadline.

But Tuesday, Pataki conceded that even though the budget will be late, there were too many legal and practical complications to this unprecedented action.

Despite the claims of unions and some state officials, Pataki insisted it was still possible for him to close agencies and lay off more than 100,000 of the state's 211,000 workers. But, for the first time, Pataki said it would be wrong to punish state workers who have nothing to do with the budget process.

Pataki said, however, that he will suspend the salaries of state legislators and their aides, as well as his own executive staff until a new budget is in place. Pension credits and health-care benefits will continue for the workers, the governor said.

It could be several weeks or months from now before a budget is in place since negotiations have broken off. Both houses of the Legislature are planning to pass separate budgets by next week.

But without the threat of a massive government shutdown, legislative sources say Pataki has lost the leverage many had thought would bring an earlier end to the annual budget battle.

One reason for Pataki's announcement was the tentative agreement reached earlier in the day with the Civil Service Employees Association. CSEA's 93,000 members will be asked to vote on the four-year package, which both sides called fair and realistic, in May.

The plan has a $550 one-time bonus sometime after April 1, 1996; a $700 bonus sometime after April 1 1997; a 3.5 percent salary increase effective Oct. 1, 1997; and a 3.5 percent increase after Oct. 1, 1998.

"It's a good deal. It's a fair deal. It's a deal we can live with, and it has no give-backs," said CSEA President Danny Donohue. "And it recognizes the value of the CSEA work force in creating a smarter government."

Donohue was referring to new Civil Service rules included in the proposal that help state employees find new jobs, receive a severance of between $2,000 and $15,000 or receive money toward job training if their job is transferred to a private company.

While this is a concession by the union -- currently the state is barred from "privatizing" a state worker's job -- Donohue said the cost of paying severance or job training may make state officials realize that privatization may not be cheaper.

By closing the deal early -- it's the first CSEA contract since 1985 that was settled before the April 1 deadline -- Pataki may have 93,000 fewer opponents to his controversial budget cuts.

The CSEA does not plan any more advertisements attacking Pataki's budget.

While one reason is the contract agreement, another is the cost of the multimedia campaign, CSEA officials said. One said the cost is close to $1 million so far.

The new civil service rules negotiated by the CSEA will make it easier for CSEA workers to move to different jobs within the state government. But those provisions, as well as the salary bonuses, will make it harder for the state's white-collar union, as well as the corrections officers union, to reach agreements with the state.

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