Lawrence C. Levy. Newsday. 1/21/2004.

Two weeks ago, as the governor took the podium to deliver his tenth State of the State speech, I wondered which George Pataki would show up.

Would it be last year's hard-edged conservative who (perhaps auditioning for the right-wing Republicans in control of all the good jobs in Washington) proposed slashing health and education funds and incited bi-partisan majorities of the Legislature to override his budget vetoes? Or would it be 2002's warmer, fuzzier candidate for re-election, whose campaign focused on all the health, social and education programs he'd supported?

The answer was more the latter, as Pataki didn't once refer to the historic overrides, the size of the 2004-05 deficits or the "fiscal train wreck" he'd accused lawmakers of hastening (but which never happened) with their tax hikes and spending restorations. Perhaps with an eye to calming the waters before the Republican national convention in New York City, in his State of the State Pataki was all smiles and back slaps with the men and women who'd embarrassed him.

But Pataki spent little time talking about the twin challenges facing the state - the spiraling local share of Medicaid and the looming court deadline to provide what could be billions more a year for poor students. And that's why, as the governor began his budget address yesterday, I thought of a different, over-arching question:

Can Albany walk and chew gum at the same time?

The answer that Pataki would like you to believe, based on the sunny tone of his presentation, is that, of course, Albany can tackle those two huge challenges at once. And, he trumpeted to lawmakers and their staffs, he has gone and proposed doing just that.

"Today we have an historic opportunity," Pataki said at the beginning and end of his one-hour address. "Let us seize this opportunity together, this year."

But reality is different. What he did this year was, in effect, to allow lawmakers to delay fully confronting the two most difficult tasks - finding funds to assume the local share of Medicaid and to enable poor schools to deliver court-ordered "sound basic education."

If the state would walk and chew at the same time under Pataki's proposal, it would do so with baby steps and very softly.

Pataki has proposed assuming the local share of long-term care, the fastest growing portion of Medicaid spending. But the state was supposed to do that 10 years ago, until Pataki stopped it, costing localities $500 million. And Pataki would now take another 10 years before he completely takes it over, with only a few million in the first year. If the economy doesn't turn around quickly, some counties could be broke before then.

Under the guise of making a "down payment" on an expected settlement of the suit brought by New York City parents and officials, Pataki has proposed expanding the number of video lottery terminals (known as VLTs) at race tracks and putting the money in a fund dedicated to increasing aid to poor students.

What's wrong with that? Plenty.

First off, lottery money already is supposed to go to education, even though everyone knows that it all goes to the general fund to be laundered before some of it ends up in the schools.

Second, it's not necessarily a reliable stream of revenue. The first VLTs don't go on-line until next week, at Saratoga race track, a full two years after the state approved their installation.

Third, there's a question about whether VLTs violate the state constitutional prohibition on slot machines. A suit seeking to overturn the ban is working its way through the courts. To hear Pataki say he's confident the state will win reminds me of the way he was sure that the school-funding decision would be overturned by the Court of Appeals.

Fourth, even if they are found to be legal, there's the queasy little question of whether they are moral. One lawmaker called VLTs "video crack" in how it feeds the need of compulsive gamblers for continuous "action." And the people who spend the biggest portion of their income on the "dollar and a dream" of lotteries are those who already have the least - the poor and working poor. Those are the same people who send their kids to the schools that need help the most.

So you can call the VLT revenue a poor tax. And you can call it a bitter irony - the poor providing the bulk of the extra money for schools that the state long has short-changed.

The better, fairer solution would be to keep in place the surcharges on high incomes, which were imposed last year to protect health and education programs. Unfortunately, the surcharges are being phased out and nobody in Albany has the guts to keep them in place.