ALBANY — The other shoe is about to drop: state tax increases.

To pay for restoring at least $400 million in aid cuts for public schools and to beat back

other spending reductions proposed by Gov. David A. Paterson, legislative leaders are looking

at raising a variety of taxes — from those on the sales of a number of products and

services to more than $200 million from higher assessments on revenues of hospitals and

nursing homes.

Plans on the table include reinstituting the 4 percent state sales tax on clothing and

shoes costing less than $110, which could bring the state as much as $690 million.

Negotiators also are considering making the lottery's Quick Draw — derided as "Crack

Draw" by gambling treatment counselors — more accessible to bettors and permitting

electronic table games at racetrack casinos in Hamburg and other tracks across the state.

Paterson and lawmakers, meanwhile, are grappling with a proposal — pushed by the

governor but rejected so far by Democrats who run the Assembly — to allow the State

University of New York system to raise tuition each year and retain more of the additional

revenue for operating its campuses.

It also would give SUNY institutions more leeway to form partnerships with private

companies on a range of economic development efforts.

The SUNY plan has come down to a battle of wills between Paterson and Assembly Speaker

Sheldon Silver, D-

Manhattan.

A top Paterson administration official told The Buffalo News that if no overall budget deal

is reached, the governor will include key components of the SUNY plan in the next emergency

appropriation bill, which the Legislature would have to approve by Monday to avoid a shutdown

in state government.

About 70 percent of the overdue budget has been completed through the emergency spending

measures adopted weekly since the April 1 start of the state fiscal year to keep the state

operating. Paterson has warned that unless Legislature leaders reach a final deal by Monday,

he will include all remaining issues in a final emergency measure that lawmakers would have to

adopt — without changes — or parts of the state government would shut down.

"The governor knows the priorities of the chancellor of SUNY and the trustees, and absent

any agreement with the Legislature, those priorities will be reflected in the extender bill on

Monday," said the administration official, who spoke on condition of anonymity.

"The governor wants the SUNY system to be the best system in the nation, and to get there,

they need one or two aspects of his proposal," the official said, indicating Paterson is

willing to budge on some parts of the SUNY plan.

But the official said Paterson will insist in the emergency bill that SUNY have the

authority to raise tuition yearly, based on an index of inflation. Critics say that would hurt

low-income students, while backers say additional scholarship money would be available.

They also argue that the current system, under which the Legislature must approve tuition

increases, has resulted in big spikes in tuition levels, with increases during bad economic

times. Since 1990, when annual tuition was $1,350, SUNY tuition has gone up 280 percent

— an average of 14 percent per year — to $4,970.

As an alternative, sources said discussions have returned to permitting pilot projects for

a certain number of years at two of SUNY's biggest schools — the University at Buffalo

and Stony Brook University. UB originated the idea, but other campuses have embraced it. SUNY

now wants the authority extended statewide.

When asked about the possibility of a SUNY deal, Silver said, "I would hope so."

But Paterson officials say Silver has been willing to discuss only removing certain

procurement hurdles involving things like equipment purchases.

That, they say, is the least important of the plan's main components, which involve tuition

increases, allowing the campuses to keep tuition revenues and relaxing rules involving

public-private partnerships such as those between UB and health care concerns. UB has said the

plan would create thousands of jobs and allow it to proceed with a major downtown development.

Paterson said any SUNY deal would have to go beyond the procurement component. "We like

what would be a steady and easily predicted and estimated tuition increase over a period of

time so that when students enter college they would know how much they owe," Paterson

said after meeting with Silver in his office.

Democrats who control the Senate have supported the SUNY plan, though officials in that

chamber indicated Wednesday they were less enthusiastic than Paterson.

One Democrat insisted the plan is a priority. "I'm telling our leadership to stay firm

because it's very important to have UB in it," said Sen. William T. Stachowski, of Lake View.

"We have to have this as part of the budget," said Assemblywoman Crystal Peoples-Stokes, a

Buffalo Democrat, who added that proponents would lose their negotiating leverage if the issue

is pushed out of the budget talks.

Democrats in the two branches of state government remain sharply split. Silver also found

himself at odds Wednesday with State Attorney General Andrew M. Cuomo, the Democrats'

designated gubernatorial candidate, who supported the SUNY tuition plan during a visit to

Buffalo.

The ideas for new taxes came up Wednesday in a closed-door meeting between Democratic

legislators and the governor. Participants later refused to discuss the ideas publicly.

On an Albany radio show this morning, Paterson said tax hikes and other revenue-raising steps will likely make up as much as 12 percent of the effort to close a $9.2 billion deficit. That could be worth over $1.1 billion.

"Taxes are regrettable, Paterson said on WGY on the first stop of his weekly Thursday morning radio outreach effort. "But a combination of a few taxes and rather severe cuts to services is the best solution.

The governor said the budget talks are coming down to the final phase with either a deal with the Legislature or his threat to force through the budgets final components in an emergency bill on Monday.

Paterson said the issues remaining are the "hardest parts of the budget.

"These last decisions will be the most unpopular, Paterson said of looming cuts to schools and higher taxes.

In his proposed budget, Paterson included nearly $1 billion from various "revenue actions,"

including a new excise tax on sugar-flavored beverages — worth $465 million this year

and $1 billion next year — and authority for grocery stores to sell wine. Lawmakers

rejected both those ideas, but they favor several tax increases.

"We're reviewing them, and, frankly, they don't sound bad," Paterson said of ideas

presented by legislative leaders.

The tax increases offered an opening for Republicans, who say the emergency bills already

have raised taxes by about

$600 million, including this week's $1.60-per-pack increase in the cigarette excise tax.

Rick Lazio, a Republican running for governor, said Democrats are returning to their

"default" position of tax and fee levies instead of more spending cuts.

"The last thing this state needs right now are more taxes," Lazio said outside the

Capitol Wednesday.

The state has a $9.2 billion deficit, but Paterson again warned that could be $1 billion

higher because of lower-than-projected federal reimbursements for the Medicaid health

insurance program.