The collapse of Lehman Brothers, the sale of Merrill Lynch and yesterday’s 500- point drop in the Dow may yet prove to be the turning point in a long-overdue shakeout. If the optimists are right, a stronger and smarter securities industry will eventually emerge from the ruins of the last few months.

But the recovery won’t come soon enough for New York’s overstretched state and city budgets. The deepening crisis on Wall Street means the financial outlook for Albany and City Hall has just gone from bad to worse for the foreseeable future.

On the plus side, Mayor Bloomberg is justified in claiming that “the city is as well positioned as it has ever been” to handle turmoil on Wall Street. In fact, despite the latest developments, the state and city financial plans are both likely to remain balanced for the rest of their current fiscal years (Albany’s ends next March; City Hall’s, next June).

But, even if the economic climate doesn’t deteriorate further, real trouble for both levels of government starts in 2009.

The city budget is now essentially running on surplus fumes from the 2003-07 boom. The projected fiscal 2010 budget gap of $2.3 billion may be manageable – if it doesn’t grow bigger. But after that, the gap more than doubles.

As Bloomberg noted yesterday, “city expenses, once ratcheted up, are very, very difficult to bring down,” because most of the money is committed to city employees under long-term contracts.

The mayor made that observation in the course of complimenting himself and the City Council for refusing to spend more of the surplus funds in the last few budgets. Yet, even with that restraint, city spending is already ratcheted up.

Thanks to the recent round of labor settlements between the mayor and municipal unions, wages and salaries for city employees are set to rise by nearly 12 percent, or about $2.5 billion, over the next two years. Pension costs will grow 13 percent, or nearly $1 billion. (When Bloomberg took office, the city’s pension contribution was $1.1 billion; by 2012, it’s projected to hit $8.2 billion.)

And the state is in worse trouble. Albany relies on Wall Street for one-fifth of its tax revenues – and was slow to respond to the gathering storm.

Bloomberg, to his credit, insisted on adopting a pessimistic economic forecast in the wake of the August 2007 subprime meltdown – and stuck to his guns even when revenue trends remained surprisingly strong through the first quarter of this year.

Then-Gov. Eliot Spitzer, in contrast, took a glass-half-full approach. The economic projections in his last budget were much brighter – as it turned out, unjustifiably so. That left his successor to cope with a spreading blot of red ink in future years.

While the economic situation doesn’t live up to Gov. Paterson’s assessment of “the worst since the Great Depression,” it’s plenty bad enough.

Paterson has been surprisingly Strong in his early efforts to curb spending in anticipation of trouble ahead. He even dragged the Legislature back to Albany to join him in paring the budget. But the $400 million in savings they agreed to last month was a tiny down payment on the $5.5 billion gap for the coming year

And, after resisting all talk of higher taxes, the governor ominously suggested last week that a tax hike would be necessary to “finish off” the next budget. Bloomberg also has pointedly refused to rule out higher taxes.

Speaker Sheldon Silver is all too ready to oblige. The Assembly this year has already passed two versions of a “millionaire’s tax” – which now might just as well be called “the unemployed investment bankers’ tax.”

But maybe the optimists are wrong about the outlook for Wall Street. Maybe this isn’t the beginning of the end of the financial crisis and the associated loss of New York jobs. Maybe the last two days were just the end of the beginning – with worse upheavals still to come.

In that case, neither the city nor the state is prepared to deal with the economic and fiscal consequences.