By Tom Precious

ALBANY — A dispute over how to control rising school taxes came out into the open Thursday, as Gov. David A. Paterson and legislative leaders squared off over whose idea is best to get a grip on a problem worsening the exodus of New Yorkers to states with lower taxes.

After nearly a half-hour of rhetoric, the sides were no closer, leaving it all but certain that property taxpayers will not be seeing a relief plan from Albany before lawmakers end their 2008 session on June 23.

With the Democratic governor standing at his side, Senate Majority Leader Joseph Bruno, R-Brunswick, said his house would not pass Paterson’s plan to cap annual school tax increases at 4 percent or 120 percent of the consumer price index, whichever is lower.

“When you cap at 4 percent you guarantee an increase of 4 percent. That’s higher than the [Consumer Price Index], and that’s what’s been going on, and we’re not going to do that,” Bruno said.

Instead, the Senate on Monday will pass a one-house bill — meaning it has no chance in the Assembly — to phase out school taxes over the next five years and replace the system with an increase in state aid.

With the state facing $21 billion in deficits over the next three years, Bruno did not explain how the plan would be funded, leading Assembly Speaker Sheldon Silver, D-Manhattan, to claim it would lead to higher income taxes.

Silver said he backs a “circuit breaker” program that would give income tax credits to low-to moderate-income residents if their property tax bill exceeds a certain portion of their income.

But Paterson, with Silver at his other side, rejected that as inadequate without a tax cap in place to push schools to take get better control of spending. Paterson said the starting point has to be a tax cap, “not a circuit breaker by itself, which, in my opinion, helps some, hurts others but only kicks into effect after the property taxes have accelerated. In other words, it’s a stopgap measure when the horse is out of the barn.”

Even if on the extraordinarily rare chance a genuine property tax cut deal is made in the next two weeks, it would not affect anyone’s tax levy until summer 2009. If no action is taken until the 2009 legislative session, property taxpayers could see no relief until 2010.

The latest idea tossed onto the table came Thursday from Senate Minority Leader Malcolm Smith, D-Queens. His plan calls for a 2 percent cap with no opportunity for school district residents to override the cap; Paterson has a provision for such an override if residents want to be taxed more.

For the governor, the property tax issue appears to be resonating. He said it is the most frequent complaint he gets as he travels the state. He cites it as a main reason people are leaving New York.

For his evidence, he points to Massachusetts, which enacted a 2.5 percent cap in 1980. At the time, the commonwealth was with New York in the top five of highest property tax states; today, it is 33rd while New York is first. Meanwhile, it has led the nation in standardized student test scores while New York is in the middle of the pack.

Still, the governor is willing to give lawmakers time to consider the issue despite his insistence that the property tax situation is an immediate crisis facing the state.

Wednesday, Paterson attacked the Legislature for not debating or negotiating his tax cap plan. Thursday, he softened that tone considerably, instead saying lawmakers are coming up with ideas while “advocates” opposed to the plan — seemingly a code word for the New York State United Teachers — are unwilling to compromise.

The legislative session ends June 23, and there appears no appetite by any of the sides to extend the session to deal with the property tax issue. Paterson has hinted that he could bring lawmakers back to a special session before election day to take up the matter, though they could simply come back to Albany without taking any action.

Silver said he supports a property tax cap, albeit it with a major asterisk. “I’m there, as well,” he said of a tax cap. “I just asked for a guarantee on resources, that’s all.” That means the state would have to guarantee making up any difference a tax cap could eat into a district’s resources. He said he also worries a tax cap would not take into account unexpected costs, such as steep increases in fuel costs that are leading to soaring transportation and energy expenses for schools.

The politics are tricky. Some lawmakers do not want to anger the potent teachers union. For Paterson, a tax cap law this session would bring him a major political win just three months into his administration with voters upstate and on Long Island where the property tax issue resonates.

“My desire is to put in a cap, but part of my desire was to get these leaders to start putting these issues out there so we could come to some kind of compromise,” the governor said. “I didn’t think we could do it by the end of session, but after hearing the passion of these gentlemen I’m beginning to think that maybe we can.”