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STATE SPENDING PROPOSAL LEAVES BUFFALO WITH $3.6 MILLION BUDGET GAP BUT MASIELLO, CITY HALL AIDES ARE STILL HOLDING OUT HOPE MORE ASSISTANCE MAY BE FORTHCOMING FROM ALBANY

Buffalo begins the second month of its new budget year Friday and, thanks to New York State, will wake up with a giant-sized headache -- a $3.6 million budget gap.

No one is ready to throw in the towel, however, and sources in Albany said late Wednesday that there is a chance the city could still get enough money to close the gap by the time the budget is finalized.

"Right now, I'm not panicking," Mayor Masiello said Wednesday. "I sense that this isn't a done deal. There still may be some wiggle room."

While in Buffalo to promote the budget agreement on Wednesday, Gov. Pataki did not dismiss the possibility of more state aid to help Buffalo balance its budget. Mayor Masiello was clearly disappointed on Wednesday that the budget pact provided only an additional $5.1 million -- not the $8.75 million requested.

"I know the mayor believes more is necessary," Pataki said. "I will listen to him and talk with him. We will certainly look and see if it is possible to do more."

But City Hall is preparing for the worst -- a sharp cut in anticipated state aid for the coming year. Budget officials already have a preliminary plan for dealing with the gap, from strict attrition control to a freeze in some budget lines.

No major service reductions are expected.

Masiello and city lobbyist Victor N. Farley spent much of Wednesday on the telephone lobbying for more money.

"He's in the thick if it," said Eva M. Hassett, commissioner of administration and finance, referring to Farley.

The city budget includes an extra $8.75 million in state aid.

State legislators insist that the city's funding is not finalized, despite the fact that Gov. Pataki and legislative leaders signed off on the budget deal Tuesday night.

"The rank and file still has its say, and I can't support a budget that doesn't give the necessary support to the City of Buffalo and its schools," said Assemblyman Sam Hoyt, D-Buffalo.

In splitting the overall dollars to cities, Hoyt said Assembly Democrats supported most of Buffalo's aid request.

"It just seems to me the governor and Senate are ignoring the needs of the second-largest city in the state," he said.

If the amount of state aid to Buffalo holds firm, the city will have to fill its $3.6 million gap through budget cuts. The first response may be a freeze in filling vacant jobs.

"Our first move will be strict attrition control," said Budget Director James B. Milroy.

Buffalo's lobbying effort Wednesday centered on its high concentration of poor people. The city put together a briefing paper for state lawmakers that suggests poverty, not population, should be the primary basis for allocating state aid to cities.

The research notes that, among the 100 largest cities in the country, Buffalo has the sixth-highest percentage of households on public assistance. The city also has the fourth-lowest median household income.

Ms. Hassett said the paper is being circulated in Albany by Deputy Assembly Speaker Arthur O. Eve, D-Buffalo.

"We think we made a case for more state aid based on poverty alone," she said. "We feel that's an indication of need."

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