Republicans had proposed authorizing $1.8 billion for the city to cover the cost of borrowing the c o n s t r u c t i o n funds for the first year of the fiveyear building plan...the mayor and Democratic A s s e m b l y Speaker Sheldon Silver had said this was not sufficient to meet the mayor's demands for a five-year program. With a Friday midnight deadline for agreement on the state budget coming steadily closer, Democrats and Republicans in Albany were reported to be close to a compromise on Mayor Michael Bloomberg's school construction funding plan, which would remove a key impediment toward achieving a final settlement on the state's spending plan.

The legislative leaders have already reached agreement on rejecting Governor George Pataki's proposal to boost CUNY and SUNY tuitions by $300 to $500 a year and also his plan to cut the popular Tuition Assistance Program (TAP) for students.

There was still no agreement on the rival plans to cut taxes and to provide rebates to parents of school children and seniors for their property and school tax payments.

Republicans in the senate were reportedly scaling back business tax cuts in their $6.3 billion tax cut package and, like the Assembly Democrats, were focusing more on property tax rebates. Democrats were still pushing to eliminate the sales tax on clothing items under $110.

Still facing the lawmakers are major disagreements over how to reduce Medicaid fraud and save the state about $325 million. The hangups here are whether Pataki, a lame duck, should have the power to appoint a new inspector general for a five-year term and whether whistleblower lawsuits should be allowed.

Democrats favor the whistleblower suits, saying they will help unearth more instances of fraud, but Republicans oppose them, saying trial lawyers would reap a bonanza.

As for the inspector general issue, Democrats argue that Pataki, who'll be out of office by year's end, should not be appointing an IG who will be in office throughout the next governor's first term, with the likelihood that a Democrat, Eliot Spitzer, will be occupying the governor's chair next January and for the next four years.

Under the reported tentative deal worked out on the mayor's school construction demands, the city would get $1.8 billion in the coming fiscal year to build schools and another $4.7 billion would be earmarked for the city over the following four years.

The funds would come by authorizing the state Dormitory Authority and the city Transitional Finance Authority to borrow the money.

Republicans had up to this point proposed authorizing $1.8 billion for the city to cover the cost of borrowing the construction funds for the first year of the five-year building plan.

But the mayor and Democratic Assembly Speaker Sheldon Silver had said this was not sufficient to meet the mayor's demands for a fiveyear program. The Assembly plan would authorize the Dormitory Authority to borrow the funds for the longer-term deal the mayor wanted.

However, the reported agreement calling for $1.8 billion initially and for $4.7 billion over the next four years does not appear to have the firm commitment the mayor wants in this year's budget.

The Gazette was attempting to get confirmation of the reported agreement and the long-term commitment as the paper went to press early yesterday evening.

Meanwhile, it was reported that legislative leaders had agreed to provide schools statewide with $1.1 billion for day-to-day operation. This would mean an additional $400 million for New York City schools in the fiscal year beginning April 1.

Sitting on budget surplus estimated to range from $2 billion to $4.3 billion, and with an election year ahead, the governor, Bruno and Silver have proposed multi-year, multi-billion tax-cutting packages. The Republican senate has put together a $6.3 billion plan, and the Assembly has kicked in with a more modest $2.4 billion annual cut.

All leaders favor the elimination of the socalled marriage penalty, which penalizes husbands and wives filing joint returns.

If the penalty is eliminated, a married couple with two children, annual income of $150,000 and using the standard deduction would save $821, according to the state Division of the Budget.

All principal players also favor granting tax credits to lowerand middle-income families with children and rebates on property and school taxes. With these agreements in place, it should take little more effort to work out a compromise on the rival plans.