ALBANY -- Calling the state "functionally bankrupt," Gov. Andrew M. Cuomo proposed some of the steepest-ever spending cuts for public schools.

The spending plan for the 2011-12 fiscal year beginning April 1 also features reductions in state aid to localities across Western New York, the Medicaid program and state agencies, and the possible firing of as many as 9,800 state employees.

"We have to think in terms of restructuring because the state doesn't work on the numbers anymore," Cuomo told lawmakers Tuesday as he unveiled his first budget proposal.

But Cuomo left many unanswered questions about some key cuts, including specifics on the state's massive Medicaid health insurance program and what prisons might be on the chopping block because of his decision to subtract 3,500 beds from the system. He has left those questions to task forces that, in the case of prisons, don't report back until May.

"There's a lot more detail to be seen," said Senate Majority Leader Dean G. Skelos, a Long Island Republican.

The proposed $132.9 billion budget is a drop of 2.7 percent from the current fiscal year, which, in part, reflects the loss of $6 billion in federal stimulus funds. It is the first proposed cut in the all-funds budget in 15 years and would close a looming $10 billion deficit. The state's operating portion of the budget would rise by 1 percent.

State agencies face across-the-board cuts of 10 percent in operating budgets, while the aid to cities, towns and villages would drop by an average of about 2 percent. The Medicaid program would be cut by 2 percent, and state aid to education would drop by about 3 percent.

The governor also called for a 10 percent cut to the State University of New York's operating budget, and he declined to go along with an effort led by the University at Buffalo to raise tuition at regular, predictable levels and use the proceeds for on-campus programs such as the UB 2020 expansion plan for downtown.

Cuomo backed two elements of UB 2020, including making it easier for campuses to enter into joint ventures with private companies.

The cuts to SUNY, which also include a continuation of restrictions on the Tuition Assistance Program for students and $50 million in base aid for community colleges, come as Cuomo envisions tapping into the sprawling, 64-campus system to help partner with economic-development efforts with new, regionally based groups that will decide how the state's job-creation money is spent.

UB President John B. Simpson said the state has cut aid to UB by $63 million since 2008, or 30 percent. Another round of cutbacks, he said, "will leave UB no choice but to consider options that will impact our students, faculty and programs directly."

The state's public schools are in line for a $1.5 billion cut in year-to-year state aid, which will result in double-digit funding drops in many suburban schools and put more pressure on localities to raise property taxes to fill the gap. Poorer school districts -- including Buffalo, with a 4.6 percent reduction -- would see lower year-to-year cuts than wealthier districts.

The state's aid to schools would drop by 7.3 percent. But when when local property taxes are factored in, the actual cut to schools would be less than 4 percent -- which the Cuomo administration considers manageable.

Unions and education-advocacy groups said the cuts would be felt in the classrooms and after-school programs. With state officials also eyeing a cap on the growth of property taxes for school districts, the state's big teachers union -- New York State United Teachers -- called the education cuts "a potential recipe for a devastating impact in many districts."

Cuomo anticipated the criticism.

"There will be absolutely no need for any layoffs," said Cuomo, who noted that schools statewide have $1.2 billion in reserve accounts -- though many sharply lowered their rainy day funds last year -- and still have $600 million left from a federal aid allotment.

"So schools can make up the money," said the governor, who pushed them to extract wage and benefit concessions from management and teachers and to consolidate some of the state's 700 districts -- a third of them with fewer than 1,000 students.

Cuomo said that besides the prison-closing plan, 2 percent will have to be cut from the $54 billion Medicaid program. A task force to "redesign" Medicaid -- made up of various health care and union stakeholders -- won't have recommendations until March 1, only a month before the start of the new fiscal year.

If the Medicaid task force can't agree on a plan, the governor's budget asks that the health commissioner be allowed to unilaterally make decisions to lower the program's costs.

The governor also proposed two "incentive" grants that schools would compete for based on student performance and management efficiencies through steps such as consolidation of services. "You actually have to do something for the money," Cuomo said.

But the $500 million for the two funding sources is not currently backed up with any cash. Officials said they expect that schools would be eligible for the money in the 2011-12 school year, though the state is not counting on spending the money this year.

The public schools are in line for a $1.5 billion cut in year-to-year state aid, which will drive double-digit funding drops in many schools and put more pressure on localities to raise property taxes to fill the gap. Had previously enacted laws been kept in place, state aid to education was expected to grow by 13 percent, Cuomo said.

The proposed budget includes about $500 million in "revenue-raising" plans, including fee hikes and a growing reliance on gamblers to bring more money into the state's coffers through the state Lottery and racetrack-based casinos. He wants, for example, to make Quick Draw -- derided as "Crack Draw" by gambling treatment counselors -- more accessible statewide and lower the current age limit to 18, from 21.

The Aid and Incentives for Municipalities program, or AIM, which is the state's main revenue-sharing mechanism for local governments, will be cut from current levels by about 2 percent. Buffalo, for example, relies on AIM for nearly 48 percent of its revenues.

In a carrot-and-stick approach, the Cuomo plan does offer localities extra aid if they consolidate services or merge with nearby government entities. Cuomo also promises that a task force studying ways to reduce state mandates on localities will help make up for the cuts in aid.

For Buffalo, the AIM cut would mean a $3.3 million reduction in state aid, to $161 million. Niagara Falls would lose $363,000 from current levels, to $17.8 million.

State lawmakers, many of whom ran on fiscal-austerity themes last fall, rushed forward to say they supported the budget. "I thought he scored on all fronts," Sen. Michael H. Ranzenhofer, an Erie County Republican, said of the Democratic governor's plans.

Ranzenhofer said he has "concerns" about some of the funding hits that schools, for instance, would experience under the Cuomo plan. "They're going to have to make adjustments and live within a budget that's going to have less spending," Ranzenhofer said.

The budget plan, as Cuomo promised, includes no borrowing to close the deficit, but it would cost taxpayers $6 billion -- up 10 percent from this year-- just to pay the tab on previous borrowing by Albany.

The governor also wants to take out $125 million in benefits under the STAR property tax-reduction program. He said the program has grown because of benefits given to areas where property values declined dramatically. He wants to limit growth in exemption benefits to 2 percent annually.

Cuomo also would wipe out $85 million in pork-barrel spending for the Legislature and takes away a pot of money previously approved but not spent in past years on capital projects. He would steer some of the money to economic development; overall, he proposes cutting capital spending for economic development by nearly $300 million, to $757 million.

Critics were already pushing back, insisting that the Legislature reject some of Cuomo's cuts by extending a tax on wealthier New Yorkers that is set to expire at the end of the year. The tax is worth about $1 billion in the last three months of the fiscal year.

"There is nothing fair nor shared in the proposed state budget," said Civil Service Employees Association President Danny Donohue.

The Legislature begins hearings on the budget next week.

The reaction wasn't all glowing from legislative leaders. Skelos bristled at Cuomo's claims that the state budget process has been corrupt for years because officials build in annual spending increases into the law that drive up a structural deficit. Skelos noted that Cuomo knew well of the practice when he worked for his father, three-term Gov. Mario M. Cuomo, nearly 30 years ago.

Of Cuomo's anti-Legislature rhetoric, Skelos said, "I think that was a bit harsh."

Addressing the federal stimulus funds available to Albany for the last two years, Cuomo said, "We inhaled it, and we injected it into our body, and now it is gone."

tprecious@buffnews.comnull