Stating that the time for fiscal reckoning is upon us, Gov. David Paterson (D) put forth a proposed budget that would conceivably eliminate the state’s escalating debt by next year.

But how does the state’s awakening impact local taxpayers?

The embattled governor has proposed reducing state aid to districts by $1.1 billion, or 5 percent less than the previous year, structured progressively so that lower-wealth districts would experience smaller percentage cuts than higher-wealth districts. The plan also would look to extend the existing two-year statutory freeze on Foundation Aid by one year.

State Assemblyman George Latimer (D), a Rye resident, said under the governor’s plan local school districts, tagged as affluent outside of the county, would be faced with big cuts.

Rye City is facing a proposed $356,000 reduction in aid, for Mamaroneck the number is roughly $750,000, and New Rochelle would be faced with the burden of making up for a loss of $5 million in state aid.

According to Kathleen Ryan, a school business official, in Rye that loss is equivalent to a 0.5 increase in the tax levy. Superintendent of Schools Dr. Edward Shine is expected to present his recommended budget to the Rye community on Tuesday, Feb. 23.

The assemblyman said his state colleagues understood the ramifications of opposing mid-year cuts last year; school aid would be the target this go-round. “There will be a cut,” he admitted. “There’s no way around it given the economic situation.” The argument is the size and depth of the cut is too deep. Latimer has already reached out to key players within his district.

In his 22 years in public office at the city, county and state level, 2010 has been the toughest year of his career but that shouldn’t surprise anyone. “The storm is coming…people are angry and with people up for re-election it becomes a highly political environment,” he opined.

But aid to school districts isn’t the only concern. Some of the revenue streams Paterson has floated to uphold the budget Latimer doesn’t seem to be a fan of. The governor has proposed $1 billion in some controversial tax and fee increases. They include a $1 per pack increase in cigarette tax estimated to generate $218 million, and a new tax of roughly one penny per ounce on sugary beverages estimated to generate $465 million.

Latimer counters that the soda tax could very easily drive PepsiCo right out of Purchase where its corporation’s headquarters currently reside.

Paterson has also proposed allowing wine sales in grocery stores and budgeted an additional $92 million in revenue from doing so. Latimer is worried that such a move could put wine and liquor stores out of business.

There is also a plan to eliminate the School Tax Relief  (STAR) exemption for home valued above the $1.5 million threshold. That measure would have a direct impact on homeowners in a city where the median home value hovers just below it at roughly $1.12 million. according to 2008 numbers. And as of Feb. 1, 2010 there were 149 homes on the market with a median asking price of $1.19 million.

Aid and Incentives for Municipalities funding is also slated for reductions of 2-5 percent under his plan. However, Mayor Douglas French (R) thinks the state cuts on the city portion of its budget will be manageable. That is given the fact that the city didn’t budget for much of an increase.

The city used 2008 actual numbers when preparing its 2010 budget, according to City Manager Frank Culross. If the state does cut aid by 5 percent it would only impact the city to the tune of a $30,000 loss.

“It impacts us some but not dramatically,” the manager said. “We were being told that state aid could be cut by 5 percent – some said 10 percent was more realistic – so effectively we budgeted at a 2-3 percent reduction.”

The goal of the city’s 2010 budget was to present a realistic document. Culross said if municipalities are too conservative with their numbers it just raises property tax rates; the city tried very hard not to do just that. The budget adopted last December had a 1.56 percent tax rate increase – one of the lowest in the area.

Obviously, going forward financial stability of local governments is largely dependent on the economy. “We’re comfortable where we are but were cautious and we’ll be managing very carefully again in 2010 like we did in 2009,” Culross said.

The state enacts its 2010-11 budget in April after being tossed around the Senate and Assembly. “The month of February regarding the state budget is the calm before the storm…nothing is off the table,” Latimer forewarned.