The state Legislature’s latest aid package didn’t really do New York City many favors.

Sure, Mayor Bloomberg got most of the state funding he was looking for–but some of that money is likely to vaporize next year, when the state will almost certainly be broke again. And, if not decisively vetoed by Gov. Pataki, the agreed-upon rises in city income and sales taxes will hardly do wonders for New York’s struggling economy.

But under one provision in this package, the Big Apple would be a huge winner–at the state’s expense. That’s because the Legislature has agreed to relieve the city of its remaining obligation to pay off Municipal Assistance Corporation (MAO) bonds, which date back to the fiscal crisis of the 1970s.

This will save the city an average of $500 million a year in debt service over the next five years. However, it will cost the state only $170 million a year.

If you don’t think these numbers add up, you’re overdue for a refresher course in public finance New York-style–the gist of which is that there is no problem so big it can’t be solved with a new long-term bond issue.

That is, the payoff of this debt is being stretched out from five years to 20 or more.

Here’s the condensed version of the deal: The state has agreed to pledge a share of its sales tax revenue to underwrite new bonds that will pay off the remaining $2.5 billion in MAC debt.

But the Byzantine details are really devilish:

1) The state Local Government Assistance Corporation (LGAC), which has first call on a portion of the statewide sales tax, will transfer $170 million a year to New York City. (LGAC is a paper entity that was set up a decade ago to pay the state’s accumulated deficit with long-term bonds of its own, which don’t figure in the city deal.)

2) The city will transfer the LGAC money to a new public-benefit corporation–as yet unnamed, but call it Baby MAC.

3) Baby MAC will use the $170 million to pay debt service on $2.5 billion in new long-term bonds.

4) Baby MAC’s bonds will be used to pay off the original MAC bonds, freeing the city to spend all of its own sales-tax revenue.

A few added wrinkles make the deal more dubious. Governments can’t issue tax exempt bonds for the sole purpose of paying down other tax exempt debt, so Baby Mac’s bonds will probably have to be taxable. That means the bonds will carry an interest rate of 7 percent to 8 percent–nearly twice the going rate on tax-exempt debt.

The only way to make this deal affordable for the state is to stretch out the remaining five years of MAC debt over 20 to 30 years … potentially at a much higher interest cost.

From City Hall’s self-interested point of view, there is absolutely nothing wrong with this deal.

But for those who don’t believe the ends justify the means, this represents a quantum leap in New York’s ongoing trend of defining fiscal deviancy downward. Coming on the heels of the $4.2 billion off-balance-sheet “tobacco bond” already included in the new state budget, the new MAC financing will make a mockery of the “debt reform” act that the state enacted with great fanfare just a few years ago.

Tapping into the previously untouched LGAC revenue stream also would set a dangerous precedent. It’s not difficult to imagine other fiscally troubled local New York governments–Yonkers, Nassau County, Buffalo and Troy clamoring for Baby MAC deals of their own in the near future.

Then there’s the issue of who foots the bill for this gambit.

Let’s not forget that the original MAC was created to bond out the long-term deficit created by the gross fiscal irresponsibility of New York City politicians.

Until now, MAC bonds were underwritten entirely by sales taxes generated within the city of New York. Under the Legislature’s bailout bill, this burden will be shifted to the statewide sales tax base–61 percent of which is outside the city.

In other words, long after Michael Bloomberg has retired, as-yet unborn farmers, factory workers and soccer moms from Montauk to Niagara Falls may still be helping to pay for the fiscal excesses of Mayor John Lindsay.

The best that can be said for this deal is that, for once, any hidden costs won’t be borne solely by the city’s taxpayers. This time, they will be spread all over the Empire State.

Gov. Pataki’s veto pen should get a lot of use in the days ahead.