ALBANY — Negotiators at the State Capitol have tentatively agreed to restore nearly

one-third of the $1.4 billion in cuts to public schools sought by Gov. David A. Paterson.

But officials are still divided over whether the additional funds steered to districts

should go entirely to property tax relief or for spending to restore program cuts or teachers

facing layoffs.

To pay for the added school spending, as well as other programs, Paterson said Thursday that

the upcoming state budget will include about $1 billion in tax hikes and other revenue-raising

ideas.

Among the plans being pushed are higher sales taxes on clothing purchases, deduction limits

on what the state's super-rich give to charities and deferring a couple dozen corporate tax

breaks.

While nearly 70 percent of the expected price tag of the budget has been adopted through

emergency spending bills passed since the April 1 beginning of the fiscal year, the sides have

still not publicly agreed on a final deal for state aid to public schools, various programs

for the state university system and tax hikes.

"These are tough choices. It's time to make them," Paterson said.

Officials say a tentative deal is in place to restore about $425 million in aid to public

schools. Since schools have a different fiscal year from the state, it would be worth about

$600 million.

Because most schools already have passed their budgets and at levels that took into account

Paterson's cuts, Democrats who control the Senate want to earmark the extra aid to property

tax relief. Assembly Democrats want to provide an exemption to current law — which says

the money could only go to reserve funds or property tax relief — to permit schools to

spend the money even though their budgets are already approved by taxpayers.

"We would prefer those restorations be left to the local decision-makers as to how that

money might best be used," said Timothy Kremer, executive director of the New York State

School Boards Association. He said some districts could afford to give tax breaks, while

others might want to use the money to hire back laid off teachers.

Paterson again warned that if the final budget is not in place by Monday, he will force

lawmakers to choose between a final emergency bill — which will have the cuts and tax

hikes he wants — or shutting down a portion of state government.

However, some lawmakers say the threat is holding up a final deal. "No," Assembly Speaker Sheldon Silver said when asked if he was certain Paterson wants a deal.

Some lawmakers believe Paterson wants to go through with his "showdown" vote threat on Monday as both a way to control the final elements of the budget and to look strong to New Yorkers in his last budget before leaving office at the end of the year.

However, some lawmakers say the threat is holding up a final deal. "No," Assembly Speaker

Sheldon Silver said when asked if he was certain Paterson wants a deal.

Some lawmakers believe Paterson wants to go through with his "showdown" vote threat on

Monday as both a way to control the final elements of the budget and to look strong to New

Yorkers in his last budget before leaving office at the end of the year.

As for taxes, Paterson is trying to keep alive a tax killed by lawmakers weeks ago: a new

levy on sugar-flavored beverages. The governor wants it as a way to reduce obesity levels, and

to raise nearly $500 million this year.

Also still alive is a plan to end the current 4 percent state sales tax exemption on

clothing and shoe purchases valued over $110. There is also a tentative deal to defer business

tax credits, though exactly how is still being negotiated. And those New Yorkers earning more

than $10 million a year would see their state deduction for charitable contributions cut in

half.

One of the last stumbling blocks to a final deal continued to be over a plan, promoted by

Paterson but opposed by Assembly Speaker Sheldon Silver, to let the State University of New

York impose annual tuition hikes instead of the "spikes" that occur every few years.

The plan, pushed heavily by the University at Buffalo, would also let SUNY keep the proceeds

of the new tuition hike instead of having Albany control the funds, and make it easier for

campuses to enter into partnerships with businesses.

The plan picked up both support and opposition Thursday.

Moody's Investors Services, a Wall Street credit rating agency, said the plan would be a

"credit positive" for SUNY as long as state funding for the system was not cut dramatically as

a quid pro quo for the tuition-granting powers.

Moody's views of SUNY's borrowings can affect interest rates for the bonds; it said the

SUNY plan would provide campuses with a more regular stream of funding and place SUNY on a

more level playing field with other public universities.

Moody's views of SUNY's borrowings can affect interest rates for the bonds; it said the SUNY plan would provide campuses with a more regular stream of funding and place SUNY on a more level playing field with other public universities.

But the politically powerful Civil Service Employees Association union, which represents

more than 12,000 SUNY workers, came out strongly against the SUNY plan. CSEA President Danny

Donohue blasted SUNY Chancellor Nancy Zimpher for pushing an impression that the SUNY plan has

broad labor support.

"Members of the State Legislature should be more concerned with the future of their

constituents and their children than further empowering a top-heavy SUNY bureaucracy and its

too-cozy relationship with self-serving private contractors and vendors," Donohue said.

Paterson warned lawmakers about adopting a budget with a potential extra $1 billion hole.

That's the amount Albany has been told it might not get from Washington in Medicaid funding.

But legislative leaders dismissed the warnings. Asked if he was certain the full Medicaid

money was coming, Silver said, "Am I certain? No."

Why not factor it into the deficit, which stands at $9.2 billion without including the

Medicaid money? "Because I think, very clearly, that there's a good chance we'll get the

money," he said. "If we don't get the money, we'll deal with it at that time."

But legislative leaders dismissed the warnings. Asked if he was certain the full Medicaid money was coming, Silver said, "Am I certain? No."