In his rush to finish the state budget kinda-sorta-almost on time, Gov. Paterson is giving away the store.

Caving to pressure from special interests and their allies in the Legislature, the newbie governor is allowing spending to balloon at twice the rate of inflation – despite a looming recession that’s sure to decimate the state Treasury.

He’s going along with hundreds of millions in tax hikes – on cigarettes, health insurance, Internet sales and credit cards – adding to what’s already the biggest tax burden in the nation.

Worse still, he’s gutting or abandoning common-sense reforms that promised to save money while delivering better government service.

The result is a bloated $124 billion monstrosity built on wishful thinking and held together with chewing gum and sticky tape. It’s practically guaranteed to fall apart in the rapidly souring economy. But the lawmakers don’t much care – so long as they can keep the make-believe alive until November, when they’re safely reelected.

It’s true that most of this mess was created by Eliot Spitzer, who resigned in disgrace two weeks before the budget deadline. Spitzer’s meltdown thrust Paterson and the state into a crisis. But, as they say, a crisis is a terrible thing to waste.

What Paterson could and should have done is call a timeout – asking the Legislature to pass a placeholder spending plan to keep the state going for a month or so while he and his staff got up to speed on budget complexities.

Instead, he took the path of least resistance, which meant enabling the Legislature’s big-spending habits.

Although details are still being hashed out, the budget outline agreed to by Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno calls for boosting school aid by a whopping $1.8 billion – equaling last year’s record-setting increase. That’s $400 million more than Spitzer allocated, despite the worsening news from Wall Street.

They’re throwing cash not just at the hard-pressed school districts that really need it- such as New YorkCity – but also thewealthier suburban areas. Every school in the state is guaranteed 3% more from Albany, even if they use it to install electronic touch-timing equipment in Olympic-quality swimming pools.

Meanwhile, lawmakers are walking away from opportunities to make government smarter.

With crime falling and the inmate population shrinking, the Department of Correctional Services proposed to save a few bucks by shutting down five underused prison facilities. But upstate lawmakers and the correction officers’ union objected, so that plan is apparently dead.

Similarly, the Office of Children and Family Services wanted to shut six juvenile jails, since community programs are cheaper and more effective. Again, upstate pols and unions balked, and Paterson is back-pedaling.

The Health Department came up with a well-thought-out plan to modernize Medicaid’s system for reimbursing hospitals, replacing a wasteful one that dates back to 1981. The update would have saved a few hundred million dollars and shifted those funds to primary care – a baby step to a smarter Medicaid program. But the hospitals and the health care workers’ union lobbied hard to water down the change, and Paterson is folding.

One of the few places Paterson and the lawmakers are cutting state spending is welfare – but only by forcing local government to pick up an extra 1% of the tab. The cost shift for New York City alone will be $19 million.

“Their version of belt-tightening is they reach out and tighten Mike Bloomberg’s belt,” said E.J. McMahon of the Manhattan Institute.

So Paterson can take credit for bringing in the budget more or less on time. But when his rush job falls apart, he’ll also have to take the blame.

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.