Nicole dissects Mayor Bloomberg’s preliminary 2011 budget in a Post op-ed today.   Her key point: while news coverage of what the Times headlined as a “grim budget” has concentrated heavily on the mayor’s proposed cuts, Bloomberg actually is relying much more heavily on a $2.9 billion revenue surplus created by the latest Wall Street bubble (call it the post-bubble bubble) to close a projected $4.1 billion budget gap.

But Wall Street’s run won’t last. Propping it up is massive government intervention — everything from zero interest rates to TARP. And the feds can’t keep this ongoing bailout going forever.

In light of that risk, Bloomberg remains too gentle with the workforce.

Bloomberg’s plan forecasts comparatively small out-year budget gaps ranging from $3.2 billion in fiscal 2012 to $3.8 billion in 2014.   However, he also outlined a contingency plan to lay off 8,500 teachers, more than 3,000 cops and many other employees in the event that Governor Paterson’s proposed cuts in aid to the city are enacted as part of Albany’s fiscal 2010-11 budget. (Bloomberg estimates Paterson’s budget would cost the city $1.3 billion, a figure the state budget director says is inflated).

For now, at least, the mayor’s preliminary plan assumes that total state categorical aid to the city will increase by $290 million (2.5 percent) this year, and by another $1.1 billion (12 percent) over the four years after that.

Memo to the mayor: even if state lawmakers somehow manage to restore some of the aid cuts Paterson has proposed for next year, one look at the state financial plan should make it obvious that the long-term state aid trend forecast in your city plan is utter fantasy.  Under the best-case scenario, the state is facing cumulative budget gaps of nearly $30 billion over the next three years.  Under the circumstances, the city will be lucky if it receives any aid increase at all next year.