The demise of Lehman Brothers Holdings Inc. and anticipated job losses at Merrill Lynch & Co. could blow new holes in the city and state budgets, raising concerns about cuts in services and tax increases.

In separate press conferences Monday, neither Mayor Michael Bloomberg nor Gov. David Paterson estimated the impact of reduced Wall Street tax revenues on the city and state budgets, but political observers are already preparing for reductions.

“Their revenue forecasts had anticipated a diminished contribution by the securities industry,” said Kathryn Wylde, president of the Partnership for New York City, “but there’s no doubt that with the events of the weekend…revenue projections will have to be lowered yet again.”

It is certain that services will be cut; the question is which ones, and how severely. But the bigger concern for the business community is whether it can fight off tax increases pushed by progressive groups, Assembly Democrats and possibly the City Council.

“We’re headed for hard times, and that means shared sacrifice,” said Dan Cantor, executive director of the Working Families Party. “Some people are going to lose their jobs, some will lose their homes, and some will be asked to pay a bit more in taxes.”

E.J. McMahon, director of the Manhattan Institute’s Empire Center for Public Policy, expects the worst.

“The city and state are perfectly capable of making the situation worse for the local and regional economy by raising taxes, which they were already considering doing,” he said.

That last happened in 2003, when temporary increases in personal income tax were imposed by the city and state. Dire consequences predicted by some did not come to pass, but Mr. McMahon said the impact was offset by federal actions to lower interest rates and income taxes. “You’re not going to see a repeat of that,” he warned.

The city, with an annual budget of about $60 billion, two months ago projected a $2.3 billion budget deficit for fiscal 2010. “It’s much too early to tell, but it appears that estimate is the right order of magnitude,” Mr. Bloomberg said today at City Hall. “We’re going to have to take a look at other ways of raising revenues and perhaps look at other ways to reduce spending, [but] today is not the day to discuss it.”

The state Legislature cut more than $400 million in August from the $125 billion budget that was approved in April. But the state still forecasts $22.1 billion in deficits over the next three fiscal years.

Ms. Wylde said her group, which includes many major New York City companies, is working on a list of government spending reductions to pitch to elected officials. “We will have to defer some big projects,” she said, noting that the Metropolitan Transportation Authority capital budget deficit is also likely to grow.

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