Albany, New York, May 2 (Bloomberg) -- Governor George Pataki and legislative leaders agreed to let New York City raise its cigarette tax to $1.50 a pack -- matching the state's highest-in- the-U.S. tax -- which would send prices in the city to near $7, l

The cigarette tax plan is part of a state budget ``framework'' agreement that would increase state aid to schools by $405 million or more, give 3 percent raises to health care workers left out of a previous pay-raise deal, begin paying for $1.2 billion in economic development projects and approve 10 new job-creating ``Empire Zones,'' legislators said. Pataki and the leaders are calling the tentative deal a ``framework'' for the budget that was due April 1 because it hasn't been put into writing. They haven't said how much money it would contain. Pataki in January proposed an $88.9 billion budget. New York City Mayor Michael Bloomberg, facing a $4.99 billion budget gap, said the city ``will get the help it needs'' from the state. ``We'd always like to have more, but we asked for roughly $400 million, either in aid or the ability to raise the revenue ourselves, or the ability to conduct our affairs ourselves like refinancing, and I believe this package will give us that,'' Bloomberg said during a news conference with Pataki in Brooklyn. Sharing Proceeds The mayor said he didn't know whether the state budget plan would make it possible for him to restore any of about $350 million in proposed city cuts in school funding. Bloomberg is founder and majority owner of Bloomberg LP, parent of Bloomberg News. A Pataki administration official who asked not to be named said the city and state each would keep half of the $250 million in projected proceeds from a higher city cigarette tax. The state cigarette tax rose to $1.50 per pack, the highest in the U.S., from $1.11 on April 1. The city's tax, now 8 cents, also would go to $1.50. Cigarettes typically retail for about $5 to $5.50 in the city. Brendan McCormick, a spokesman for cigarette-maker Philip Morris Inc., said the increase might drive down sales and reduce city and state tax collections. He called it ``punitive taxation'' of smokers. There isn't yet agreement on how the new school aid would be distributed. Typically, New York City schools receive about 37 percent of the state aid pie, said Assemblyman Steve Sanders, a Manhattan Democrat and education committee chairman. If that pattern holds, the city would get about $150 million of a $405 million increase. Settles Dispute Sanders said the tentative deal promises schools across the state an additional $515 million for operations, minus a $110 million reduction in construction aid. Pataki had proposed giving schools $14.2 billion. ``It's $400 million more than the governor had recommended in January, and that's good,'' Sanders said. ``It's not the amount of money that will save districts from having to go out and vote to raise taxes.'' The framework also proposes settling prior-year school aid disputes with New York's five biggest cities for $400 million to $450 million, up from the $200 million Pataki had proposed, Sanders said. New York City would get about 90 percent of that amount, he said. United Federation of Teachers President Randi Weingarten, whose 80,000 members are without a contract, said Pataki, Silver and Bruno have assured her ``the money is available'' in the budget deal to pay for it. An arbitrator has recommended the teachers receive 15 percent pay increases. Lawmakers Return Weingarten said it was ``a foregone conclusion'' that Bloomberg would gain mayoral control of the city's school system, though it wasn't part of the budget agreement. ``It is just a matter of details,'' she said. The governor, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno announced the agreement late yesterday. They haven't made details public. Bruno, a Republican of Brunswick, and Silver, Democrat from Manhattan, briefed members through e-mails, telephone calls and faxes. Several lawmakers, including Sanders and Assemblyman Alexander Grannis, Democrat of Manhattan, and legislative aides shared information with reporters. Rank-and-file lawmakers are scheduled to return to Albany Monday to learn more in closed-door conferences. The Pataki administration official said the negotiators agreed to refund 2001 and 2000 state income taxes of people killed in the World Trade Center attack to their estates. The official said 2,500 families each would get about $10,000. Health care workers left out of an earlier pay raise deal would get 3 percent salary increases, starting Dec. 1, at a cost of $82 million a year, lawmakers said. They include home care, mental health, substance abuse and AIDS adult care workers. The plan calls for spending $1.2 billion on a multiyear program to build high-tech and biotechnology facilities that would create jobs, lawmakers said. Some of the program's costs would be funded by state-issued bonds, and some would be funded with hundreds of millions of dollars in projected revenue from up to six Indian-run casinos in the Catskills region, Niagara Falls and Buffalo.

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