ALBANY - The 2008-09 state budget, we're told, will contain hard choices. But the choices will be harder for some.

The reason for difficult decisions is clear: A national recession that's all but declared, layoffs and losses on Wall Street that provide 20 percent of state revenues, and declining revenue from income, sales and other taxes tied to the economy.

Yet the proposed state budget, due Tuesday and being detailed this weekend, calls for about a 4.5 percent increase in spending, perhaps even a bit higher. And one of the biggest pieces - state school aid - will still be a whopper: A record $1.8 billion increase for state school aid already at about $20 billion, which includes among the highest per-pupil funding in the nation.

So, as one reporter asked of budget aides to Gov. David Paterson, “Where's the pain?”

Here it is:

Smokers face up to a $1.50 per pack increase in the cigarette tax. The state tax is already $1.50 per pack and, in New York City because of an additional local tax, it's $4.50 a pack. That's quite a monkey on the back of a pack of cigarettes, which average $5.82 a pack. It could add up to $200 million to $500 million for the state.

And in New York City, there's talk of adding another 50-cent tax on each pack in coming months.

For some of New York's businesses, the cost of hard times in Albany could be measured in the millions. That's because “loophole closers” were still on the table Saturday. Supporters say it closes corporate loopholes that have allowed big businesses to avoid some taxes. Opponents, including the Republican-led Senate, say it's a tax, pure and simple.

But there's more pain on track.

Riders of New York City's subways and users of its tunnels and bridges could eventually see a fare increase because of Paterson's proposed trimming of the Metropolitan Transportation Authority's budget. Paterson's 2 percent cut of many agencies across the board would take $60 million in operating aid away from the MTA.

And cities, particularly those already crushed for years under a slumping upstate economy, will see 2 percent cuts in their municipal aid. For a city like Schenectady, a rust belt relic getting back on its feet a half-century after it was a global industrial address, the cut means $220,000.

Add to that other “revenue raisers” still on the table surrounded by lawmakers desperate for cash: Expanding the hours of the Quick Draw lottery game sometimes called “video crack”; redefining some malt beverages to light liquor and little cigars into cigarettes to snag higher tax rates; and countless other increases to user fees.

“All of this stuff is in the process,” said Jeffrey Gordon, spokesman for Paterson's budget office. “The Legislature is deliberating and determining the next steps for all of those issues.”

Which is included and which isn't probably won't be known for sure until at least Sunday, when lawmakers report back to their leaders on spending and revenues for different areas of the budget proposal.

“It's part of an overall decision to introduce a series of fees and service cuts that mostly affect middle-class people,” objected Assemblyman Richard Brodsky, a Westchester Democrat. “We're prepared to act responsibly in a difficult time, but a number of us are not satisfied to single out middle-class families.”

Spared an unkind cut, at this point, are New York's richest.

The Senate's Republican majority and the Democratic governor appear to have beaten back a proposal by the Assembly's Democratic majority to increase the tax temporarily on New Yorkers making over $1 million dollars. But Assembly Speaker Sheldon Silver, a Manhattan Democrat, and some colleagues hold out for trying again, if not this weekend then later in the year when revenue forecasts are expected to be even bleaker.

But the Republican Senate might also balk at the MTA funding cut.

“We do not want to do anything that will jeopardize raising any fares for riders of the system,” said Senate Transportation Committee Chairman Thomas Libous, a Broome County Republican.

No similar stand is being publicly made against the cigarette tax proposal, being fought behind the scenes by lobbyists for Philip Morris USA. In this, the company faces the Center for a Tobacco Free New York, a coalition of health groups that has spent $200,000 on radio advertisements and print ads to support doubling the $1.50 cigarette tax for a total $3 per-pack tax.

“We're in the mix,” said Russell Sciandra, of the Center for a Tobacco Free New York. Lawmakers are considering compromises of lower tax increases.

“The impact is going to be very bad,” said Dan Shanahan, chief fiscal officer of Wilson Farms Inc. with 200 convenience stores in the Buffalo, Rochester and Syracuse areas. “There will be stores that go out of business,” said the former smoker.

He argues that most smokers will still smoke, but they will evade state taxes altogether by turning to Internet purchases and untaxed sales by stores run by Indian tribes. He said cigarette sales dropped 10 percent when the state tax last increased in 2002.

“It's a technical balance of the budget that won't produce the revenue,” he said. “I think it's easy to get away with it in Albany and downstate, but we're taking it on the chin here in central and western New York.”

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Michael Gormley is the Albany, N.Y., Capitol editor for The Associated Press. He can be reached by e-mail at mgormley(at)ap.org.

AP-ES-03-29-08 1138EDT