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ALBANY (CBS) ― The need to address a multibillion dollar deficit was the top priority for New York's Legislature in a September session that never happened. And it was an "urgent" issue that was never taken up in last Tuesday's extraordinary session. Now, lawmakers promise to finally address the crisis early next week.

If that happens, it will be because the whole Legislature finally accepted that New York is on a highway to fiscal ruin, and the need for difficult action has trumped pressure from powerful special interests.

If New York saves itself next week from a California-like catastrophe, it will be because that dark prospect -- which Gov. David Paterson and Comptroller Thomas DiNapoli have warned about since at least early 2008 -- finally got through to them.

But at a cost.

The price of not taking a harder stand against education and health care lobbies in the budget approved in April -- or since then -- includes this year's record high tax increases. If the Legislature agrees to a midyear cut in school aid next week, the toll on New Yorkers will likely be higher local property taxes from school districts this spring.

"It's about saving our house," Paterson told lawmakers in a sometimes contentious leaders meeting Thursday.

Assembly Speaker Sheldon Silver, the most powerful guy in Albany, may have best described the task ahead: "This is a practical discussion. Put the politics back in your conference."

It's a line Republicans find hilarious. They have long pegged Silver as responsible for forcing high spending even higher over the last decade or so. But these are different times. And voters, who appear to have found their voice in dumping incumbents statewide during this month's off-year election, may be tuned in for this show.

"That budget should never have been enacted," said Rick Lazio, a Republican candidate for governor in 2010. He said instead of making harder, long-term fixes, Albany is "lurching from special session to special session ... we are barreling toward fiscal collapse. We need adult supervision."

DiNapoli, Albany's auditor, first used the phrase "unsustainable revenue projections" back in the spring of 2007 for then-Gov. Eliot Spitzer's budget.

Today, a cure is "critical and it is an urgent need," DiNapoli said. "This is not a problem that will self-correct."

He traces the immediate problem to the 2009-10 budget adopted in April. Those are the numbers schools, hospitals and nonprofit groups use to build their budgets.

"It's not honest budgeting if you give them inflated money and then during the year, say we have to take money back," he said of proposed midyear cuts.

The Pew Center on the States last week rated each state by fiscal "warning signs" showing New York, while still in crisis, wasn't among the states in the most dire condition. New York's leaders proudly taped the C-plus grade to the refrigerator, like a school kid of whom little is expected.

The report backed up Paterson's view that the state, even as deficits mounted, has so far avoided the IOUs issued by California, the early release of prisoners and the building sales by some other states. But Paterson's argument is that if the current deficit isn't erased, New York will join those other states.

The leaders are correct in noting that California and many other states are far worse off. Some failed to adopt the mostly modest fiscal restraints Albany has, including more than $1 billion of real cuts in the executive branch by Paterson.

Yet the study also shows New York is in worse straits than states such as Connecticut, Ohio and Pennsylvania, and even in the rare position of being behind Arkansas, Missouri and Utah.

The states in the most dire condition, however, share scary factors long associated with New York: Over-dependence on revenue from a single industry like Wall Street, spending beyond revenues even in good times, and an inability to "muster the political resolve to make long-term fixes to their fiscal problems," the report stated. "Lawmakers punted."

Next week in Albany, it's fourth down.

A new coalition of upstate and suburban Democratic senators said they will refuse to vote for any midyear school aid cuts sought by Gov. David Paterson. If it holds, the coalition of seven Democrats would kill the chance of disruptive midyear school aid cuts in any deficit reduction package.

Paterson says the cuts are needed to address a $3.2 billion deficit.

Senate Republicans are uniformly opposed to Paterson's proposed 4.5 percent aid cut.

Democrats have a 32-30 majority.

Senate and Assembly Democratic leaders also oppose the cuts, but continue negotiating all possibilities.

On Thursday, Paterson said he doubted school aid could escape a cut because it is a major part state spending, and said leaders were about three-quarters of the way to addressing the deficit. The biggest single item is the $500 million Paterson has already trimmed from executive branch agencies. They wouldn't disclose the rest. 

New York lawmakers have come up with more ways to make you pay. And as CBS 2 HD found out taxpayers feel like they are being nickel and dimed.

New York drivers are suffering from an intense case of road rage over the state's latest attempt to deplete their pocketbooks, issuing new license plates at a cost of $25 a pop.

"Twenty five bucks? Just for license plates? Oh, that's not a good look, definitely not a good look," said Kai Yuen of Flatbush.

"I feel they're trying to get money out of us any way they can," added Freddy Rojas of Williamsburg.

And its not just new plates. New York drivers have really been taken for a ride this year, forced to pay a $50 surcharge to renew their car and truck registrations, $16 more for driver's licenses and a new 5-percent tax to rent a car.

"I think that's ridiculous with the amount of fees that we're already being charged," said John White of Williamsburg.

Governor David Paterson and members of the Legislature had no qualms about the new fees when they added them to the budget last spring. They even issued a picture of the new gold and blue plate on Tuesday, trying to justify the new fee by claiming the new plate's reflective surface is safer.

"If I can find a way to replace the $129 million hole it will place in our budget then I'll reconsider it," Paterson said.

But there's nothing the governor can do about the new 5-cent deposit on water bottles that went into effect Sunday as part of the "bigger better bottle bill." That has voters angry, too.

"I think it stinks. It's a lot of money for people to lay out. It's gonna force people to go into New Jersey to buy their product," said Bon Fonti of Suffern.

"My honest opinion … this state is, it's outta hand, too many Democrats," said James Fegan of Hell's Kitchen.

And while the state said the bigger bottle bill is an environmental initiative it's also a huge money maker. Unclaimed bottle deposits have already netted the state some $2 billion and counting.

Ten other states already require a deposit on bottled water and more states are considering it. It's not just to reduce litter but as another source of cash in these tough economic times.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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