Governor Paterson, signaling that he wants to reduce sharply state grants to local programs, is setting the stage for a struggle over pork-barrel spending with the Legislature.

Mr. Paterson yesterday told his budget director and other senior administration officials to draw up a plan for reductions in next year’s budget.

Among the spending areas that he says should be targeted are “discretionary local grants that may be more appropriately financed at the local level or from private sources, or not at all,” according to a statement announcing a “working group” that will report back to the governor with budget-cutting recommendations before the end of June.

Mr. Paterson also directed the group to consider ways for scaling back “capital projects that are not needed to protect the health and safety of the public.”

Any attempt to shrink discretionary spending would likely provoke an outcry from lawmakers, who rely on the money for political outreach and influence.

Every year, they authorize about $200 million in cash grants, called “member items,” to various local groups handpicked by lawmakers and the governor. This year, they also added on $700 million in capital grants from bonded funds

In speeches and interviews, Mr. Paterson has said he intends to accomplish what past administrations have failed to do — or didn’t even bother attempting — and impose fiscal restraint.

Mr. Paterson, who took office last month, knows he’s not the first New York leader to take a vow of fiscal responsibility only to yield to legislative pressure and spread open the state purse.

Still, lawmakers, who just handed him a budget that increased spending by more than 4.5% — a figure that does not take into account hundreds of millions of dollars in new capital expenditures — and watched him sign it posthaste, aren’t quivering in their boots.

The working group, officials say, is in an effort to add credibility to his insistence on belt-tightening. “It’s time to get our fiscal house in order,” Mr. Paterson said in a statement.

For now, the administration seems primarily interested in going after the low-hanging fruit, such as member items, rather than education and Medicaid funding. Those two areas constitute half of the state budget and are fiercely protected by organized labor and other interest groups.

During past decades, state spending has advanced at two or three times the rate of inflation, with a major exception being Governor Pataki’s first years in office in the mid-1990s, when he temporarily halted growth.

The consistency has been matched by New York’s steady placement in national taxation surveys, where it has ranked in the top three highest-taxed states since the early 1970s.

“This is a very good start,” a fiscal analyst for the Manhattan Institute think tank, E.J. McMahon, said. “He’s asking the fundamental questions that should be asked by every new governor — that were asked by Pataki but were not asked by Spitzer.”

Mr. McMahon added: “At the end of the day, you have to address the issues of Medicaid and school aid.”

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