Schools and mass transit would bear the brunt of more than $350 million in cuts to New York City unveiled by Gov. Paterson yesterday as part of a $5 billion budget-slashing plan.

Paterson’s proposal calls for cutting state education aid by $480 million, which would represent the first midyear reduction in school aid in nearly two decades.

The plan also includes a $287 million cut to Medicaid, including payments to hospitals and nursing homes.

“We are placed in a position of having to see our governor show leadership at this time, and we will,” Paterson said. “This is a very painful plan, but we will share the burden.”

The plan — which cuts $3 billion this year and $2 billion next year — contains no tax hikes and includes no layoffs, but still faces stiff opposition in the Legislature, which holds sway over a vast majority of the spending cuts.

Paterson said he would order lawmakers back to Albany to act on the plan Oct. 27.

The governor warned the state could run out of cash as soon as December if lawmakers fail to act.

“There is no reason to be optimistic just because they’re doing better on Wall Street,” he said.

The school cuts would carry forward, adding up to $686 million by the end of the school year.

Locally, the city’s $8.5 billion school aid share would fall by $223 million.

Mayor Bloomberg praised Paterson for including a proposal for a more affordable pension tier for new government workers.

“One of the most serious threats to New York City’s future is the possibility that the state will not get its fiscal house in order quickly,” Bloomberg said.

The proposal would clip $113 million from the $3.9 billion the MTA expected from the state this year — a loss MTA sources said could endanger the agency’s credit rating.

Hospital and education groups immediately called on lawmakers to reject the “devastating” cuts.

Legislative leaders issued non-committal statements and promised hearings to review the governor’s plan.

Fiscal policy experts said Paterson’s proposal didn’t go far enough to cover any future drop in tax revenue.

“He’s a day late and a dollar short,” said E.J. McMahon, a fiscal policy expert for the Manhattan Institute. “It’s disappointing. The bottom line is he’s still behind the curve. ”

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