But now all that is forgotten. The Mayor and the Governor are reviving comparisons to the frosty relations between John Lindsay and Nelson Rockefeller, or Ed Koch and Mario Cuomo. Now their public appearances are brief and perfunctory, like the one earlier this month at the opening of the Millennium High School in lower Manhattan. The two stood together because they had to, then the Mayor left without taking questions while the Governor faced a scrum of reporters. Before he left, the Mayor tried to make light of their differences-he noted, in mock-serious tones, that he and Mr. Pataki were working out a "very serious and well-publicized state-city problem." Mr. Bloomberg had expressed his wish to march in a parade with Jennifer Lopez, but, he said, "the State Superintendent of Banks"-that would be Ms. Taylor-"thinks J. Lo should be marching with the Governor instead of me."

Yuks all around. The Mayor then mumbled a promise to "come to a resolution" on the problems bedeviling the two Republicans and their staffs.

The laughter died quickly-and right now, there seems to be no resolutions of any sort on the horizon. The Mayor's advisers note that Mr. Bloomberg has gone from denying the existence of any disagreements to carrying them on in public. "He has learned this is different from business," said one City Hall staff member. "It's not in his interest to keep everything private and behind closed doors. If you air these things in public, the public becomes your ally. You can bring them to the negotiating table."

The Mayor's supporters see it this way: The Governor is taking deliberate political shots at the Mayor-blowing a half-billion-dollar hole in the budget days after the Mayor said the city had turned a corner, and setting up a state commission to reform education without any input from the Mayor. The Bloomberg people think the Governor is trying to put the Mayor in his place.

But the Governor's people express a range of emotions, from confusion to fury. They say they have no idea why the Mayor reacted as he did to the Governor's position on refinancing city debt from the 1970's. "Why won't he just settle?" asked a senior Republican strategist. The dispute, which concerns the Governor's attempt to block the refinancing scheme, is now in court. As for the Governor's education panel, Mr. Pataki's aides say the Mayor jumped the gun, that the plan was to include him all along.

"We're going to be adding more people to [the education panel] from the city and across the state as we go forward," the Governor said at Millennium High School. "We're going to be reaching out to every interested group to get their ideas and input."

Some of the Governor's people believe that the Democrats in Mr. Bloomberg's administration are out to make the Republican Governor look bad. And they complain that the Mayor continues to do business with the Governor's public enemy No. 1: Assembly Speaker Sheldon Silver, a Democrat.

Rocky Spring

Relations between Albany and City Hall have been deteriorating since the spring, when the Governor refused to give the Mayor his coveted commuter tax. Then, in the summer, Mr. Pataki blew up the bond deal that would have given the city $500 million a year in budget relief for the next five years. Tensions continued through the blackout, when a state agency ordered Con Edison to turn on the juice upstate first-until the Mayor threatened to sue. And then, of course, there was the education panel.

The bond-sale dispute was a sure sign that the two men were at odds. It played out like a campaign, complete with late-afternoon, surprise e-mailed press releases, ambush-like court appearances and private spin sessions.

Yes, the Governor had long complained about the deal, under which the state would pay $170 million for 30 years to pay off $2.5 billion in debt left over from the 1970's fiscal crisis. But he also complained about lots of things in the budget-and then looked the other way as they went through. Not this time.

The Mayor's people were furious. To them, the bond-sale gambit was a direct attempt by the Pataki people to screw up the Mayor's political comeback. They point out that it came within days of a well-publicized Bloomberg speech in which the Mayor argued that the city had made it through its darkest hours. One Bloomberg ally-who once was a fan of Mr. Pataki-now foams at the mouth when the subject of the Governor comes up.

The Mayor's reaction to the education panel solidified the impression that city-state relations are not what they were a year ago. The panel includes no members of the Bloomberg administration or his Department of Education. Even so, the Campaign for Fiscal Equity, an advocacy group whose lawsuit prompted the need for statewide education reform, reacted mildly. Not so the Mayor.

"There is just no way the Governor could have not involved or informed the Mayor by mistake," said one member of Team Bloomberg. "He is way too smart for that. So that means he did it on purpose." To them, this is war-that is, a war over policy. They continue to insist there is nothing personal.

But the Governor's people seem genuinely perplexed. They say the panel isn't just about the city; it's about the whole state-schools structure. And they say perhaps the Mayor has forgotten this.

The clock is ticking now: The Republican National Convention is just 12 months away. National G.O.P. officials are absorbed with George W. Bush's problems right now and have little time for tensions between the host city's Mayor and the host state's Governor, both of them Republicans.

But they may have to consider an intervention.

And there is Fernando Mateo, on a private plane with the Mayor en route from the Dominican Republic, getting photographed on the tarmac, advising him on how to win back the Hispanic vote. And again at Governor George Pataki's elbow, as top officials of the Republican National Committee open an office on a broiling summer afternoon in Washington Heights. And again in a private midtown hotel suite with President George W. Bush, who greets him with all rolling "r's" and long "o's": " Ferrrrrnandoooo !"

Fernando Mateo, president of the New York State Federation of Taxi Drivers, is a Bush Pioneer, which means he has raised at least $100,000 for the President's re-election campaign. And he's well on his way to becoming a Ranger, an even more elite group-only 23 people so far-who have raised a minimum of $200,000. In all, there are only 68 Rangers and Pioneers.

Mr. Mateo doesn't exactly fit the profile. Mr. Bush's biggest fund-raisers tend to be the wealthiest of wealthy white men. During the 2000 Republican National Convention in Philadelphia, they were housed at the $400-per-night Westin Hotel. They spent their time in luxury skyboxes, attending catered breakfasts and private receptions and enjoying the perks of being a V.I.P.

Next year, when the Republicans come to Manhattan to re-nominate Mr. Bush, Mr. Mateo can expect to travel in such circles.

"I raised $400,000 for Governor Pataki in the last election," Mr. Mateo beams from behind a pair of designer sunglasses that he never seems to take off, not even indoors. "I have raised $103,000 for President George W. Bush-no, $108,000. I hope to reach at least a quarter of a million dollars before the end of the year."

Because of the way fund-raising records are kept, these numbers are impossible to confirm. If true-and no one from either camp is disputing them-they represent an extraordinary output for a man who made virtually no political contributions before the mid-1990's. Even then, on those rare occasions when Mr. Mateo wrote checks, they went to people like U.S. Representatives Charles Rangel, Nydia Velazquez and Nita Lowey-Democrats all. One recent analysis, by the Center for Responsive Politics, found that 81 percent of Mr. Mateo's federal contributions were to Democrats.

But now, Mr. Mateo has emerged as an influential and effective fund-raiser for Republicans, at least those named George-Mr. Pataki and Mr. Bush.

Fernando Mateo was born in the Dominican Republic and raised in a family of 10 children in the projects on the Lower East Side. As a young man, he started a small carpet business with his father and passed out his business cards in those very projects. Eventually, he moved uptown to a showroom across from the Citicorp building, selling high-end carpets to residents of the Upper East Side. His other businesses have included construction companies and a money-transferring operation, Mateo Express, a sort of Western Union to the Dominican Republic, which he has since sold.

Mr. Mateo adamantly refuses to identify all of his businesses, which are privately held. But there's no doubt they are successful. He now lives in the affluent Westchester suburb of Irvington, where homes routinely sell for $2 million.

The G.O.P. couldn't have ordered up a better example of the self-made entrepreneur than Fernando Mateo. In the eyes of Republican leaders, he is proof positive that they are a big-tent party, hostile neither to minorities nor the poor.

"Fernando Mateo is a leader in the Dominican and Hispanic communities because he has a keen understanding of the issues that are of importance to the Hispanic community at large," said Mr. Pataki's spokeswoman, Mollie Fullington. "The Governor considers Fernando a friend."

Indeed he does. The two met in the late 1990's, when a rash of murders of livery-cab drivers left the Dominican community gripped with fear and rage. Seeing an opening, the Governor called Mr. Mateo, and the two worked together on legislation to protect the drivers. After the bill's signing, Mr. Pataki and his communications director, Michael McKeon, lunched with Mr. Mateo- "Freddy," Mr. McKeon calls him-at the Mirage Restaurant on Dyckman Street. "That was really when it all began, there at that lunch," recalled Mr. McKeon, now a consultant who does pro bono public relations for Mr. Mateo's nonprofit causes, including the taxi federation and Hispanics Across America.

In 2001, Mr. Pataki swore in Mr. Mateo as president of the taxi drivers' group. The following year, Mr. Mateo organized a "Fiesta Pataki" to raise money for the Governor's re-election campaign.

Mr. Pataki wasn't a hard sell in the Dominican community. He often visitsWashington Heights, and his health-care program for children is popular in Hispanic neighborhoods.

For Mr. Bush, it may not be so easy, which is where Mr. Mateo comes into play. In poor communities-and the Dominicanimmigrant community is among New York's poorest-Mr. Bush is widely seen as a friend to the rich. Many see the Justice Department's post-9/11 security crackdown as anti-immigrant. When the Republicans opened their headquarters in Washington Heights, a spirited group of Democratic protesters from the neighborhood nearly drowned out parts of their press conference-a very unusual occurrence at a carefully scripted G.O.P. event.

Selling Bush

But Mr. Mateo has found his opening. He is raising money from the Dominican entrepreneurial community, the owners of supermarkets, travel agencies and chains of bodegas. "If you are a politician, he's a great guy to have on your side," said public-relations executive Andy Morris, who worked with Mr. Mateo in the early 1990's on the innovative "Toys for Guns" program. "He's very good at aggregating a lot of people who can write checks within the campaign-finance limits."

"You have a lot of small mom-and-pop businesses. That's Republican belief, and that is why our community is responding," Mr. Mateo said. Perhaps-or perhaps it's because of Mr. Mateo's relentless energy. For him, ideology is less important than who will pay attention to him, and to the Dominican community. "They're responding more to seeing the Governor, talking to him, holding him," he said, when asked why some Dominicans were supporting the G.O.P.

For Mr. Mateo, political recognition has always been tied up in his causes. There was the Mateo Institute for Training-a "very different M.I.T.," as the Associated Press called it-a prison-based program that offered job training and a position in one of Mr. Mateo's construction firms. Mr. Mateo appeared on Oprah Winfrey's talk show twice to talk about the program, and it was designated one of President George H.W. Bush's "thousand points of light" in the early 1990's.

"He is a very savvy, smart, tough self-promoting businessman and public voice," said Mark Green, the former Mayoral candidate. "He is a Republican, but he's principled within his own principles. He loves success, and loves to leverage his charisma and his contacts to get things done."

Mr. Mateo became friends with Mr. Green when they worked together on the "Toys for Guns" program, which encouraged city residents to surrender their weapons, no questions asked, in exchange for toys. Mr. Mateo has also worked with Democrats on issues ranging from hurricane relief to compensation for the Dominican families that lost loved ones on American Airlines Flight 587, which crashed shortly after taking off from the John F. Kennedy International Airport in the fall of 2001. He was at all the press conferences and in all the photos.

It was Mr. Pataki-himself a Bush Ranger-who introduced Mr. Mateo to Mr. Bush at a February 2002 fund-raiser at Mayor Bloomberg's townhouse. "The Governor told the President I was one of his biggest supporters-never mind being Hispanic, just in general," Mr. Mateo said. "And the President said to me, 'Great job.' And I said to him I would love to see him come eat rice and beans and plantains in Washington Heights, so he can see what our community is about. And the President said in Spanish, ' Buena idea '-good idea."

And then the President invited Mr. Mateo to a White House Christmas party, where Mr. Mateo suggested that he start a Dominican Independence Day celebration at the White House. Mr. Bush did, on Feb. 27. Laura Bush hosted it.

Mr. Bush appointed Mr. Mateo to a position with the White House Scholars Commission. The commissioners get a special pin, which Mr. Mateo routinely sports on his lapel.

Mr. Mateo has been telling Karl Rove, the President's political adviser, that Mr. Bush needs to come to Washington Heights so the Dominicans can "put their arms around him."

At the moment, however, Mr. Bush has yet to eat his rice and beans and plantains. Of course, he'll be in town in September of 2004. Who knows?

For Mr. Pataki, promoting someone like Mr. Daniels, who is African-American, goes to the core of his self-image as an inclusive Republican-he sees himself as someone who is expanding the party. Not coincidentally, the President sees himself fulfilling that very role, too.

Mr. Daniels simply described his date with the President as "a great honor." And it was also a huge favor, because Mr. Daniels wants to run for office in New York, so the exposure certainly helped.

"I'm basically exploring my options," Mr. Daniels said in a telephone interview from his Manhattan offices. "Those options are shaped by what the Governor does. If the Governor runs [for re-election in 2006], I will support him. If Rudy Giuliani runs, I will support him. If neither of them run, I would hope they support me."

It's pretty clear, if Mr. Daniels does run for Governor, he would get that support from Mr. Pataki. "We are very proud of Secretary Daniels, and he's done a great job as Secretary of State," said Mr. Pataki's spokeswoman, Lisa DeWald Stoll. "He has a key role in our administration, and we're confident he'll do well in any endeavor he chooses. But it's way too early to speculate, since the Governor hasn't ruled out running again."

Mr. Pataki's advisers are indeed working overtime these days to suggest he very well may run for a fourth term, but it's a scenario even some of his closest friends discount. Mr. Pataki has raised more than $2 million in campaign funds so far this year, but a fourth term is a bad bet in New York. Just ask Mario Cuomo, whose bid for a fourth term in 1994 was foiled by … George Pataki.

Still, if you were the incumbent Governor and you had three and a half more years in your term, and the State Legislature had just decided you were irrelevant and had passed its own budget, you'd probably start telling people that you were considering another term. Why become an instant lame duck?

As for Mr. Giuliani, the Post reported on July 18 that the former Mayor "had told friends" that he will run for Governor in 2006. It's certainly possible, but other friends expressed shock. "I know nothing about that" said one longtime adviser, speaking of the Post 's report. Others say there are only two jobs Mr. Giuliani wants in public life-President, of course, and maybe, just maybe, a return engagement as Mayor.

So why would he want to be Governor? He is already a national star, and if he ran for Governor, he could lose against Attorney General Eliot Spitzer or another Democrat and find himself relegated to the political recycling bin. And if he won, he would have to be the Governor-now there's a dubious prospect. He would have to deal with 212 unruly legislators, all with large egos. Finessing those kinds of relations is not, of course, Mr. Giuliani's favorite role in life.

Assuming Mr. Pataki and Mr. Giuliani do not run, many Republicans are chatting up Mr. Daniels, who has begun to build a treasury for a possible statewide campaign. He has raised $140,000 so far, with the help of Mr. Pataki's fund-raiser, Cathy Blaney.

Mr. Daniels, however, is not alone: John Sweeney, a member of Congress from Rensselaer County-home to State Senate Majority Leader Joseph Bruno and former party chairman Bill Powers-also gets lots of mention. He isn't on the fund-raising or campaign circuit, but there are plenty of people who think he should make a run for statewide office. Among them is Adam Goodman, the media man who worked on Mr. Sweeney's last two Congressional campaigns (and who also worked for Mr. Giuliani on his last two campaigns).

"John represents the next great generation of Republican officeholders in New York," Mr. Goodman told The Observer from his Florida offices. "His achievements in Washington certainly making him a top-shelf player."

Those achievements include siding against Governor Pataki and with Mayor Bloomberg in getting security aid for New York City, and otherwise throwing his influence around on the House Appropriations Committee-as well as spearheading an effort to bar scandal-scarred WorldCom from getting government contracts.

One thing's for certain: The Congressman doesn't need Mr. Pataki to get him on a chopper with the President. He has his own relationship with Mr. Bush, thanks in part to the role he played during the Florida re-count in 2000. His work earned him the moniker of "Congressman Kick-Ass" from Mr. Bush himself. And Mr. Sweeney's former chief of staff, lobbyist Brad Card, is the brother of White House chief of staff Andrew Card.

Mr. Sweeney didn't want to talk to The Observer for this article. "He hasn't looked past the 2004 re-election to the House of Representatives," his spokesman, Kevin Madden, insisted.

Mr. Sweeney's willingness to challenge Mr. Pataki probably would cost him the Governor's support if the Congressman and Mr. Daniels face each other in a primary for the 2006 gubernatorial nomination. "People like George Pataki are not sure what to do about Sweeney," said one Republican strategist. "They're used to red meat, and they expect Republicans to order steak. But when they sit at the table with the Congressman, they're worried that when the entrée is ordered, he's going to order fish."

One Pataki adviser conceded that "this is not an administration that tolerates freelancers." Dissenting from the party line is about the worst thing you can do in the Pataki administration-the loyalists will hate you forever and thwart you at every turn.

Mr. Daniels, on the other hand, is nothing if not loyal. And though there is palpable, genuine warmth when Mr. Pataki and Mr. Daniels get together-they like to talk over breakfast, they speak softly, they stand near each other-their relationship has been mutually beneficial.

For Mr. Daniels, working for Mr. Pataki has provided more than opportunity-it has provided redemption. In the 1990's, after a stint with former City Council President Andrew Stein, Mr. Daniels worked briefly for Mayor David Dinkins, but resigned amid accusations of sexual harassment. His accuser later recanted.

Mr. Daniels went back to private life as a public-relations executive, but not for long. Mr. Pataki hired him to be a top deputy in Charles Gargano's Empire State Development Corporation, where among his assignments was the redevelopment of 125th Street in Harlem. It was on that very street, on a gorgeous May day in 2001, that Mr. Pataki swore in Mr. Daniels as Secretary of State with complete honors, a choir, and a dais full of both Democrats and Republicans.

"I have long valued and trusted Randy's advice and counsel," the Governor said that afternoon as the sun slanted down through the plaza in front of the Adam Clayton Powell state office building. "His skills, vision and commitment will help us continue to ensure every New Yorker can pursue their version of the American Dream."

Mr. Daniels still is sounding that theme today. "I believe I can unite New Yorkers across the broadest possible spectrum," he has been telling the party faithful across the state. "The Republican Party must expand its base if it wants to remain viable against the Democratic Party. I have a vision and the ability to articulate it."

All of this is very good for Mr. Pataki. If he doesn't run for a fourth term, Mr. Daniels could be his legacy, and legacy is the kind of thing Mr. Pataki is very concerned about these days. He wants to have a hand in electing his successor, whenever that might happen. And he has made clear his deep interest in the rebuilding of downtown Manhattan. Long-term achievements, he hopes, will be remembered, and short-term defeats-like this year's budget-will be forgotten.

But then there's the question of Mr. Daniels' chances. No African-American, never mind an African-American Republican, has ever been elected Governor of New York. Former Comptroller H. Carl McCall was the first and thus far only African-American to win statewide office in New York. The fact that Mr. Daniels, a former Democrat, is even considering a gubernatorial campaign prompts some Republicans to gag, others to scoff. Skeptics point out that he has never run for office before (his current post is appointed, and it is also highly obscure). Roger Stone, who ran the third-party gubernatorial campaign of Thomas Golisano last year, accused Mr. Daniels of supporting a "David Dinkins–style economic agenda." Others point out that Mr. Daniels has no natural base in the party, a severe handicap in a statewide primary.

But Mr. Daniels is trying. He is talking to consultants like Arthur Finkelstein and Kieran Mahoney, who, it is believed, would also be interested in working for Mr. Sweeney. (Mr. Mahoney refused to discuss any contacts with the two men or their camps.) Mr. Daniels points out that Brad Race, the former Secretary to the Governor, attended his East Side fund-raiser this spring.

A lot can happen between now and 2006. Although it's unlikely, Mr. Pataki still could run, or Mr. Giuliani might. Two other Republicans, State Senator Michael Balboni of Nassau County and Erie County Executive Joel Giambra of Buffalo, might get into the race. Mr. Sweeney could run for Governor, or he could run for Senator against Hillary Clinton-or he could stay put in his powerful Congressional seat.

But in the meantime, Mr. Daniels is out there running, with the full faith and credit of Governor Pataki. Expect more airport greetings.

The last few weeks have been among the most difficult of the Governor's tenure. He engaged the State Legislature-or rather, the Legislature's all-powerful leaders-in a steel-cage match over the budget, and emerged bloody and defeated. He alienated allies, stuck to positions that seemed to belie his genial image, and baffled friends and foes alike with his uncompromising rhetoric.

And, even worse, the more he spoke to the public, the less they liked him-or his positions, anyway. Very suddenly, his smashing re-election victory in November seems a long, long time ago.

And the strain is showing, in ways both big and small. Many of his best and most loyal aides have moved on after two terms. Political insiders are preparing for the day when Mr. Pataki will leave office-which is to say that they're already trying to figure out which horse they'll support in 2006, assuming the Governor doesn't run for a fourth term.

Even minor glitches are being taken as signs that all is not right in Albany.

For example, a few weeks ago, after the State Senate unanimously overrode every one of his 119 budget vetoes-the first time such a thing had happened in 21 years-Mr. Pataki called a press conference in the Red Room, on the second floor of the State Capitol.

Mr. Pataki hoped to seize the headlines by announcing that he would issue one more veto-a $1.8 billion package of financial assistance for the city. But the event didn't quite go as planned. The normally perfectly disciplined gubernatorial staff couldn't get the sound system to work, which left the Governor standing uncomfortably at the podium, parrying questions about his tie ("Actually," he revealed, "this is an old tie") as a frustrated aide yanked wires in and out of a sound box.

The Governor didn't fare much better when the questioning began. When a reporter asked whether businesses should prepare to charge the new increased sales tax on June 1, the Governor answered: "In fact, the legislation provides for the regulations to be adopted by July 1 and implemented by July 15."

In fact, the new taxes go into effect June 1. An aide to Democratic Assembly Speaker Sheldon Silver quickly paged reporters to inform them of the Governor's error. A budget spokesman conceded the point, saying the Governor had "misspoke."

It has been that kind of spring for the usually sure-footed Mr. Pataki. He and his staff have been stunned by the ferocious criticism of his role in the now-concluded budget negotiations. The Governor himself nearly conceded that point during the press conference. "You know," he said, pausing to choose his words, "I knew that was going to be difficult, to have my vetoes of these tax increases … sustained."

Difficult? No, it became impossible.

It was a low public moment for the Governor: He'd been whipped by the generally tame State Legislature. He went on the hustings to make his case directly to the voters, but found his poll numbers steadily decreasing. As the battle with the Legislature reached its climax, he was getting a 37 percent favorable rating for his job performance, as low as any point during his eight-plus years as Governor.

Part of the problem for Mr. Pataki is that his staff is out of whack. Most of the people left in his inner circle are the true believers-those who are committed to carrying out his core anti-tax agenda. The barkers and the yellers are gone. People like his first communications director, Zenia Mucha, and his second, Michael McKeon, have moved on to more lucrative and presumably calmer jobs in the private sector. They kept an unruly press and an often hostile Legislature in line so the Governor could smile through it all. But they're gone, and so is the Governor's smile.

Mr. Pataki's political advisers, like the Governor himself, seem to have no clear goal in mind. When they speak, they lay out an array of options for Mr. Pataki-running for re-election in 2006, passing up a fourth term to run for the U.S. Senate against Hillary Clinton in '06, or running for President in 2008. All of these possibilities would require Mr. Pataki to act in different ways in the coming years. But which one will it be? Nobody seems to know.

Meanwhile, the dynamics within the state Republican Party are changing. Yes, the Governor is still at the top, but beneath him, people are already beginning to think about a post-Pataki party. Already, two Republicans, Secretary of State Randy Daniels and upstate Congressman John Sweeney, are making soft noises about running for Governor and are quietly raising funds. Mr. Daniels is the Governor's choice, but many party stalwarts-like Bill Powers, the former chairman of the state party, who is now a lobbyist-are siding with the Congressman. And Mr. Sweeney has tangled with Mr. Pataki in some battles.

The unbelievably coordinated machine that put Mr. Pataki in office and got him re-elected twice is drifting apart, and the Governor's conduct so far this year shows it.

First came his third inaugural speech in January. Anticipating a clash with the Legislature over possible tax hikes, Mr. Pataki began using the phrase that he would repeat over and over again, saying that he would oppose what he called "job-killing taxes." Then came Mr. Pataki's annual State of the State address, in which he vowed not only to oppose tax hikes, but actually to cut some taxes.

He unveiled his budget in late January, and Mr. Silver immediately condemned it as "an arrow aimed straight at New York City." Particularly galling for Mr. Silver were the Governor's proposed cuts in education spending, especially to pre-K programs that are a favorite of the Speaker's.

Still, a newly re-elected Governor with high poll ratings should have been able to fight and win that battle, at least in normal times. But it quickly became apparently that these aren't normal times. The Pataki people underestimated Mr. Silver's fury-or, more accurately, didn't anticipate that he would find an ally in Senate Majority Leader Joseph Bruno, an upstate Republican.

Mr. Bruno, whose members were hearing from angry constituents fearful of education cuts and property-tax hikes, did the unexpected: He joined forces with Mr. Silver to support an income-tax hike on the wealthy.

The Battle Is Joined

And so the two sides waged political war with each other. Mr. Pataki figured to emerge victorious; he'd won his third term easily in November and had managed, over the years, to alienate very few constituencies. Besides, he was preaching the gospel of no new taxes, which is a proven winner.

And yet, by April 14, it was pretty much over-and it was the Governor, not the legislators, who was in retreat. Mr. Bruno recently recalled that, on that day, he and Mr. Silver met with the Governor in the Red Room. He was surprised to discover that Mr. Pataki had invited the press to the meeting. "When we walked in, the Speaker and I said, 'What's the press doing in the Red Room?' And [the Governor] said, 'Well, I'm going to go and blow this up. It's not getting anywhere, and we're not going anywhere.'" In other words, Mr. Pataki decided (in Mr. Bruno's telling) that there would be no more discussions. "He was not going to participate further in the budget process," Mr. Bruno said. "He basically said, 'Legislature, go do a budget.' And we did."

A day later, the Legislature had its own agreement, although some negotiations were still underway. Mr. Silver says the Governor tried to get the two legislative leaders to accept a 1.25 percent hike in the sales tax, instead of the Legislature's plan to increase the sales tax by a 0.25 percent and raise income taxes on the wealthy. Mr. Pataki denied that such an offer took place; all Mr. Bruno will say is that "the idea was out there, and I didn't put it out there."

On May 2, the two houses began to pass their own budgets, much to Mr. Pataki's chagrin. The battle was over.

If you ask almost anyone around the Capitol why Governor Pataki clung so fiercely to his position, they'll tell you that he did so in order to curry favor with the Bush administration. Whether or not that's true, there's no doubt that the Pataki administration was surprisingly confrontational during the budget talks. The Governor built up enormous good will leading to last year's re-election bid by building coalitions and unlikely alliances. Why the change?

"It's simple," he said. "In good times, it's easy for everybody to avoid making tough decisions, but we haven't done that. We made the tough decisions in 1995, we made the tough decisions in 1996. We made the tough decisions over the past eight years."

The question for the Governor's future is whether or not he's made one tough decision too many.

Both men tried to grin through their differences over the need for tax hikes on the very day that the State Legislature was voting in favor of increases, which Mr. Bloomberg supported and Mr. Pataki bitterly opposed. The Mayor and the Governor said nothing to each other and, like drops of oil scuttling across a puddle, quickly separated after the two events. Afterwards, Pataki spokeswoman Mollie Fullington confirmed that the two hadn't talked budgets in a week.

This is not a happy time to be a New York Republican. The circular firing squad-a formation most commonly associated with Democrats here-has been appropriated by the G.O.P. Mr. Pataki is publicly attacking members of his own party. State Senate Majority Leader Joseph Bruno, a Republican formerly considered a Pataki ally, has all but called the Governor a liar.

And the "train wreck" that Mr. Pataki has so often invoked to describe the State Legislature's budget, with its record tax hikes, could also serve as a metaphor for this moment in the Governor's career. If the Republican-controlled State Senate overrides Mr. Pataki's budget veto, which is highly likely, the Governor will become politically hobbled-some think irreparably so-just months into his third term.

Meanwhile, taxes and fees will be going up just in time for the Republican National Convention here next year.

Washington is not pleased.

"The G.O.P. will rue the day it chose New York City," spat out one senior Washington strategist. Added another: "I always thought New York was a big gamble because of these political dynamics, including the personalities, and now it's coming home to roost. The tax environment in the city and state send exactly the opposite message that President Bush is trying to send."

Ouch.

In late April, a group of about a dozen Republican strategists met in Washington for the latest in a series of dinner meetings to discuss the upcoming convention. Not many in the group have thought much about the Republican tax wars in New York; the victory in the Iraq war tends to be uppermost in their minds at this point. But when one person raised the topic of tax hikes in New York-with a Republican Governor in Albany and a Republican Mayor in the city-"it was like a cloud came and hung over the meeting," according to one person who was there.

The White House would not go there. "The President's position is on matters pertaining to federal issues," said spokesman Ken Lisaius. "He's been abundantly clear …. At the federal level, we need to pass the largest economic-growth plan that we can, and right now we're at $550 billion [in tax cuts]."

There are some Republican strategists who think the country has a reservoir of understanding when it comes to New York. "A lot of national Republicans have always looked at New York as an exception to the accepted rules and norms of Republican orthodoxy," said Adam Goodman, an advisor to former Mayor Rudolph Giuliani who has also worked on several Florida campaigns. "Most of the triumphs in the city, up to and including 9/11, work very powerfully. Those are the stories you're going to see played and replayed" around the convention, Mr. Goodman added.

O.K., but isn't it possible that Mr. Pataki is a little, um, embarrassed that New York is likely to see huge tax increases under his watch, pushed through by fellow Republicans, the year before he hosts his party's quadrennial lovefest?

"We're a big tent," Mr. Pataki said as a scrum of reporters outside the Millenium hotel asked him over and over about the budget. "And I've always supported the big-tent theory of the Republican Party. I don't have a litmus test for anybody else, and I'm sure they don't have a litmus test for me." He asserted that in previous years, he "worked to make sure the state led the nation in cutting taxes." He stated yet again that he would not "sign what would be the largest tax increase in the history of the state."

Washington's disapproval notwithstanding, many political insiders can't explain why Mr. Pataki isn't exerting more leadership to work out a compromise between his budget, with billions in spending cuts, and the Legislature's, with restored spending and tax hikes. The most common theory, of course, has it that he's looking for a job in Washington. His advisers turn mighty sour when they hear that theory. An alternative explanation is that Mr. Pataki is off his game because he has no clear next step and instead has perched on a sagging ledge, lashing out at his fellow Republicans and promising that he'll not let them forget their apostasy.

Mr. Pataki's performance as an unyielding opponent of higher taxes hasn't exactly paid off in the polls. His approval ratings remain stuck below 50 percent-never a good sign. "The voters look at labor leaders and [Assembly Speaker] Sheldon Silver and even Joe Bruno as saving them from Governor Pataki," said Joseph Mercurio, a consultant who has worked for many Republican candidates. "He isn't giving the voters the government he promised them."

The anger is bubbling over. In Park Slope, Brooklyn, on May 6, City Council Speaker Gifford Miller stood in the drizzling rain outside P.S. 321, exhorting voters to call the Governor and urge him to let the city aid package-including the new taxes-stand. "I will call the Governor," agreed one bespectacled gray-haired father. "But I will call him something else."

To Pataki advisors, all this is terribly unfair. "The Governor is arguing, 'I'm trying to do what's in your best interest-bring your budget into line,'" said one confidante. "Giving someone the castor oil, saying it's good for you-that's a hard message to get across. He's saying, 'I'm trying to help,' but it looks, in a tabloid sense, like he's hurting."

Party Feuding

Hurt is exactly what state legislators see. Their constituents are screaming about local property-tax hikes, giving legislators the impetus to raise taxes on the wealthy. So far, voters are standing with their lawmakers. And Mr. Pataki and his allies are fighting back-against their fellow Republicans in the State Senate. Since late April, Republican county leaders have been circulating a letter to Republican Senators urging them to break with Mr. Bruno, who favors the tax hikes as a way to close the state's $11.5 billion budget gap. And some Senators say they've been inundated by what they believe is an organized telephone campaign against the budget.

All this intra-party warfare has some party elders grieving. "I don't like it at all," said Richard Rosenbaum, a Rochester Republican who has been a fund-raiser for Mr. Pataki and who calls Mr. Bruno a friend. But, he added, "maybe it's healthy they're not marching in lockstep any more."

Others aren't so sure. "What a mess!" lamented one major party donor. "And I don't think either one is going to back off."

According to allies of Mr. Bruno, the Majority Leader has been fielding calls from influential Republicans urging him to support the Governor. The sources said Mr. Bruno was told that an override of the Governor's veto would make Mr. Pataki an instant lame duck, with more than three years to go on his third term. For a while, it seemed as though Mr. Bruno might cave in. But then he ordered his members to pass the Legislature's budgets, something they did by large-and, if they hold, veto-proof-majorities.

All of this is terribly embarrassing for Mr. Pataki. Even his attempts to change the subject-such as his announcement of Pfizer's new jobs-haven't gone so well. If taxes kill jobs, Pfizer chief executive Hank McKinnell was asked at the news conference, then why was he moving more jobs here at a time when taxes were almost certain to rise?

"I am not opposed to paying taxes, perhaps somewhat surprisingly," he said. "It means you have income, which is a good thing …. " Mr. Pataki quickly interrupted him: "It's a great day, and we're delighted with Pfizer's decision-but that doesn't mean we just pat ourselves on the back. It means we get to work even harder." And then the Governor himself was cut off, by an aide yelling "Thank you, thank you!" and leading a round of pro forma applause.

From Washington to Albany, this is the only kind of applause Mr. Pataki is getting.

The first day of the new month-the day on which the budget is due, but never arrives-brought snow and tens of thousands of angry health-care workers to Albany. The Governor's erstwhile best friend in the labor movement, Dennis Rivera, denounced state cuts in health-care spending.

Two days later came unflattering front-page stories (followed by nasty editorials in the usually Pataki-friendly tabloids) about a public spat between Mr. Pataki and Mayor Michael Bloomberg over homeland-security funding. The fight caught the public's attention and embarrassed the Governor.

Making matters even worse, a legal judgment against the Phillip Morris Companies put in jeopardy $4 billion in tobacco bonding that the Governor has been counting on to bridge about a third of the state's massive $12 billion budget gap. Meanwhile, political insiders stood up and noticed when the Governor's onetime labor commissioner and faithful aide, U.S. Representative John Sweeney, publicly took sides against Mr. Pataki in the fight over federal security funds.

Even the weather refused to cooperate-and as John Lindsay once learned, cranky voters are happy to blame politicians for, say, the occasional snowstorm. In upstate Onondaga county, home of Syracuse University, snow and ice knocked out the power on April 5, which meant that fans of the university's basketball team couldn't see Syracuse beat Texas to advance to the national championship. And the Yankees' home opener-always a happy, good-news day-was snowed out.

No wonder the Governor is acting a bit strange these days. For eight years, he has managed to spin straw into gold. Now, with a sort of anti-Midas touch, everything he touches is turning back into straw. And unlike gold, straw can't educate kids or keep the hospitals fully functioning.

In the middle of all this bad news, Mr. Pataki took an uncharacteristic swipe at Mr. Bloomberg, whom he likes to call "a friend," by telling the Associated Press that he "didn't understand" why the Mayor was "disparaging" the state. This may seem like a mild criticism, but coming as it does from a man who never seems to dislike anyone, it caught the attention of Pataki watchers from Washington Street in Albany to K Street in Washington, D.C.

By April 7, the Governor and the Mayor were chatting on the phone; later that day, the two issued an unusual joint statement saying their rare public battle was over. But if both had good reasons for putting the dispute behind them-the Governor because he was going to lose, the Mayor because he needs other favors from the Governor-the tiff was a sign of just how isolated Mr. Pataki has become.

"He's flailing," said one Bloomberg supporter. "He's boxed himself in, and he's flailing and acting irrationally-and doing it in public." The fact that Mr. Pataki would take on the Mayor over what amounted to a few tens of millions shows just how tight the budget has become. Still, as another supporter of both the Mayor and the Governor points out, homeland security has become Mr. Pataki's mantra in the last few months. "He's assumed the mantle of the Tom Ridge of New York," said the source, who asked to remain anonymous. "That's the card he was going to play. If he doesn't get the money, there are no ribbons to cut; there go the photo-ops."

Indeed, Mr. Pataki has been most vocal in his criticism of the Democratic-controlled Assembly for failing to pass anti-terror measures. He has been at his most animated while holding press conferences on homeland-security issues. The day the war in Iraq started, for example, he basked in the reflected glow of 11 television cameras with the governors of Connecticut and New Jersey, talking about enhanced security measures. Mr. Bloomberg did not attend.

Though the two are publicly friends again, the private rifts run deep. Top Bloomberg aides absolutely and adamantly believe they are going to get a renewed commuter tax. Pataki supporters think the Bloomberg people are smoking crack. In public, the Governor has been thoroughly consistent in opposing the tax. The last thing he wants is a prolonged recession, like the early 1990's, and he thinks tax hikes will stall the state's economy even as other areas begin to recover.

Unfortunately for him, however, not many people agree, save for a few suburban legislators.

"He's besieged, and I kind of think he didn't expect it," said consultant Norman Adler, who works for both Republicans and Democrats. "I think he thought that a lot of people would be on his side who don't want to see taxes raised-people who kind of like him." But the anti-taxers are not jumping to the barricades to defend him; instead, they're writing op-eds in The New York Times attacking him. George Marlin, a prominent Conservative Party member and former Port Authority executive director, accused Mr. Pataki on March 30 of being "an incumbocrat."

Even "friends" like Congressman Sweeney are willing to say that Mr. Pataki was wrong on homeland security "on the merits." Mr. Sweeney has his own juice with Congress and the White House. But his willingness to take on Mr. Pataki may have to do with his own political ambitions: Mr. Sweeney is widely believed to be considering a run for statewide office-possibly Governor-while Mr. Pataki has been encouraging the ambitions of his Secretary of State, Randy Daniels.

Plunging Numbers

Meanwhile, Mr. Pataki's poll numbers are sinking again. A Marist poll released on April 7 shows his job approval at 49 percent, as low as it was during the rent-control battles of 1997.

Part of the problem is that nobody-including, perhaps, Mr. Pataki himself-seems to know exactly where the Governor wants to go from here. A fourth term? A Bush cabinet seat? A run for the Presidency in 2008? The private sector? The uncertainty has left Albany more confused than ever. In the corridors of the capitol, on the Amtrak trains through the Hudson Valley, legislators and staff speculate about whether-or when-Mr. Pataki will concede the need to raise taxes to solve the budget crisis. No one seems to know what his endgame is. Democratic and Republican legislators alike, who are up for re-election next year, believe the Governor eventually will go along with some form of tax hike. But the Governor is giving no sign of doing so, and with every public statement takes a firmer anti-tax position.

Granted, there are some bright spots for the Governor. Mr. Rivera lapses into tortured syntax to avoid blaming Mr. Pataki for the proposed budget cuts. "We believe the decision that has been advanced to cut health care is the wrong one," Mr. Rivera told health-care workers at the April 1 protest. Mr. Rivera's entire seven-minute speech avoided the words "George Pataki." His ad campaign urges people to "call Albany" about the proposed health-care cuts.

Mr. Rivera is trying hard not to repeat the personal attacks he made on Mr. Pataki a few years ago, when he accused the Governor of arrogance and said he was trying to "destroy our health-care system and the health and well-being of our families.

Even so, high-level officials in Local 1199, Mr. Rivera's union, have said they're stunned by the intensity of Mr. Pataki's opposition to income-tax hikes, which leads to an equally intense fervor for health-care cuts. Publicly, Mr. Rivera told The Observer , "We know for a fact, in our union, the best allies and the best friends that we have are our own membership, and we are prepared to defend the interests of our members and our patients regardless of who are friends and our allies are."

There's a huge debate raging in 1199-and in the labor movement generally-about whether endorsing Mr. Pataki last year was the right thing to do. The leadership is still disciplined in defending the move, and nobody in 1199's leadership wanted to go on the record expressing a contrary view-though plenty articulated that view privately. Bob Master, the political director of the Communications Workers of America, said what many people inside 1199 are feeling: "My big objection with this kind of short-term deal-making is that it helps elect candidates who make the very existence of the labor movement pretty precarious. One would have thought that was a long-run problem, but it turned out to be a very short-run problem."

Just how quickly everything has come unraveled has surprised almost everyone-even those few who were willing to say during the election that the Governor and the Legislature, by refusing to acknowledge budget problems last year, were making this year's problems even worse. The word "rent" has become the political byword du jour . "Governor Pataki 'rented' the unions for the election," one insider said. "Governor Pataki is only 'rentable' for the election season," said another.

Mr. Pataki's supporters certainly believe he will survive this crisis. He's been through unpleasant times before, they say, and he's taking a principled stand that will ultimately benefit the state.

Others aren't so sure. "The left cannot believe how quickly the Governor abandoned them," said one political consultant, who didn't want to be identified. "And the right has become disenchanted because he embraced the enemy too happily. He just doesn't have many friends left."

He won't propose them, as Mayor Michael Bloomberg has done. But then again, the Democrats in Albany aren't calling for income-tax increases, either. Instead, in an increasingly bitter and personal battle, each side is waiting for the other to surrender.

The other day, Mr. Pataki took time out from a visit to lower Manhattan to hammer away at Assembly Speaker Sheldon Silver, a Democrat and a persistent critic. "We haven't seen any response from the Assembly as to how they propose alternatives to the budget that I proposed," Mr. Pataki said. "And it's just disappointing, because I understand when people say 'You shouldn't do this' or 'You can't do that,' but they have to have an alternative-and sadly, so far they haven't proposed any alternatives."

Mr. Silver has indeed refused to talk about broad-based income tax hikes. (He has, however, supported Mayor Bloomberg's proposed commuter tax.) At Albany news conferences, reporters try in vain to get Mr. Silver to answer a single question: "If Governor Pataki is to avoid education and health-care cuts, what should he do instead?"

Mr. Silver doesn't want to answer this question, because there is widely believed in Albany to be just one answer: You have to raise income taxes. The Democrats hope that Mr. Pataki will have to cave in. Nevertheless, the Governor shows no signs of budging.

"George Pataki's opposition to income-tax hikes is one of the things that makes him him ," said Blair Horner, legislative director of the New York Public Interest Research Group. That said, the Governor's budget does contain tax hikes: Not just the subway-fare and the state university tuition hikes, which Democrats like to call "virtual tax hikes," but also industry-specific taxes, including insurance and hospital taxes, as well as the restoration of the sales taxes on clothing for all but four weeks a year.

Mr. Pataki's defense of his budget has been ferocious. In speeches across the state, he has raised the campaign against "job-killing taxes" to the level of a crusade. This has caught even some of his erstwhile allies by surprise. "There has to be revenue enhancement," said Ken Sunshine, a spokesman for Local 1199, the health-care workers' union that had so much to do with Mr. Pataki's landslide victory last year. "There are ways to do it that are modest and fair. Otherwise, there could be the destruction of the health-care system as we know it."

Even Randi Weingarten, the teachers' union chief who endorsed Mr. Pataki after he approved a circuitous financing mechanism for a new contract, has admitted to becoming more "cynical."

But privately, many people in these unions still cling to the belief that Mr. Pataki will not let them down, that in the end he will come around. Indeed, he sent word through emissaries early in the budget battle that the fight would be bruising, but there would be a compromise.

Mr. Pataki's campaign against income-tax hikes has spawned much bar-stool speculation about the Governor's political motives. The most common thinking is that he's auditioning for an unspecified job in the Bush administration. But Pataki advisers vehemently insist that the Governor isn't running or positioning himself for anything.

That said, his handling of the budget is clearly taking a toll. His poll numbers are sliding steeply. His job approval rating is at 49 percent, according to the Quinnipiac College poll. That's as low as it's been since June of 1996, when it was at 46 percent.

Still, amid all the bad news, Mr. Pataki is taking his usual nonchalant stance.

"I'm not worried about my support," he told The Observer . "I'm worried about the future of this city and the future of this state, and I'm very confident we will have a budget and an economic-growth program that makes this city and this state continue to be the place in this country where businesses and jobs and investors want to be."

Still, at the end of the day, no one sees how Mr. Pataki escapes an income-tax hike entirely. "He wants the Legislature to have to beg for it so he can say, 'What's it worth to you?'" said political consultant Norman Adler. "In negotiations, it doesn't matter what you say; it only matters what happens when the money flows."

Terry Golway will return to this space next week.

It may surprise youtoknow, however, that the moneyactually willbecoming notfromAlbany's treasury, but from Uncle Sam's. The $650 million has been allocated by the Federal Emergency Management Agency to the city as part of the promised $21.4 billion appropriated for rebuilding after Sept. 11.

At a news conference in late January, Governor George Pataki was asked how he could take credit for giving the city money that actually came from FEMA. "Because," he said, "the money comes through the state."

That bit of fiscal sleight of hand is just the latest example of how federal rebuilding money has become the funding source of last resort for cash-starved officials at the federal, state and local levels. Officials desperate for cash have allocated the money several times over to fund their special projects.

U.S. Representative Carolyn Maloney, a Democrat who represents the East Side and parts of Brooklyn and Queens, called the Governor's maneuver "fuzzy math." But it is firmly in the 18-month tradition of claiming the World Trade Center money for a litany of needs.

In the last year, members of Congress have tried to route money from the Lower Manhattan Development Corporation to the Bronx Zoo, the Downtown Athletic Club and a Chinese American cultural center. Congressional staffers say there was serious talk among state officials about taking some of the recovery aid for the development of Governors Island.

Other requests have a more direct relation to the attacks. Senator Hillary Clinton obtained $90 million for a health study of some 35,000 Ground Zero workers. And Mayor Michael Bloomberg has been agitating for $650 million to meet expenses he says the federal government never helped out with, like overtime for police and firefighters. But because the Mayor has already spent that money, the $650 million would go to close the city's budget gap. And for the Mayor to get it, Congress would have to vote to authorize it-and soon. (The proposed allocation inched closer to reality when the White House signaled on Feb. 6 that the President would support the expenditure.)

There's more. Federal transportation money already has been claimed by a new transit hub downtown ($750 million), a permanent PATH station ($1.5 billion), a refurbished South Ferry Station ($500 million), and Mayor Bloomberg's proposed rail tunnel from lower Manhattan to the city's airports ($3.7 billion). Burying West Street underground and building an underground parking garage and related projects near Ground Zero would cost another $1.65 billion. Even proponents of a Long Island Rail Road link to Grand Central Terminal tried to get a piece of the federal recovery money, government officials say.

The total tally? At least $7 billion, from a transportation-rebuilding budget of $4.5 billion ($2.75 billion from FEMA, $1.8 billion from the U.S. Department of Transportation). On Feb. 7, Governor Pataki released his own plan for spending the $4.5 billion. That plan had even more projects than those on the above list (and actually would cost more than $5 billion), including money for ferry terminals and covering the entrance to the Battery Park Tunnel with a park-two of Mayor Bloomberg's pet projects. But to make the numbers come out right, Governor Pataki simply didn't include a price tag on some of the projects, like the airport train and burying West Street, two big-ticket items.

There's a reason the tab keeps growing. "There's a lack of consensus among officials and business and civic groups," said Gene Russianoff of the Straphangers' Campaign, "and it's only intensified since Sept. 11."

To be sure, as Deputy Mayor Daniel Doctoroff has pointed out, some of the money for the airport tunnel could come from the Port Authority. "But it's not as if we just have the cash lying around," Port Authority vice chairman Charles Gargano told The Observer . "It's already been accounted for."

One of the problems is that there simply isn't enough money to meet New York's needs, officials said. "The initial $20 billion pledged for recovery was supposed to be a floor, not a ceiling," said Congresswoman Maloney. "While we are all grateful for the help, FEMA and the Governor's office seem to want to limit discussion on how to divvy what is in the FEMA account-and not talk about the remaining unmet needs of New York."

A Pot of Funds

The most recent source of contention has been Governor Pataki's proposed allocation of the $8.8 billion in FEMA money, the largest chunk of the $21.4 billion aid package. It has become the newest pot of funds for a Governor who spent his election year handing out goodies and making new friends, and who now finds the state cupboards are bare.

The ultimate authority on how the money will be spent comes from Congress through FEMA. But Brad Gair, FEMA's recovery officer for the World Trade Center disaster, said

FEMA would "entertain any joint proposal by the Mayor and the Governor" on how it should be spent. And the Governor, who controls the flow of FEMA money, does have a rather loud bully pulpit. Even so, the timing of his spending proposal had all the earmarks of a plan the Governor would just as soon see buried.

The press release came late in the day on a Thursday-a day after the Governor unveiled his budget, and on a news day so busy the Governor's press staffers said they were working until 3:30 a.m. The Mayor's office wouldn't offer any comment on anything having to do with the money, referring all questions to the Governor. The tight lips are part of a strategy, sources say, not to anger the Governor while the Mayor thinks he still has a shot at getting things like the commuter tax.

Even so, friction immediately arose around the Governor's allocation of just $23 million for the Ground Zero health study. His press release quoted Denis Hughes, the president of the state A.F.L.-C.I.O; conspicuously silent were the firefighters, who felt betrayed by the allocation, sources say, and refused to be part of the press release. For her part, Senator Clinton released a statement saying she was confident the full $90 million would eventually be allocated. She was right: Congress approved the funds on Feb. 11.

Then there's the $650 million Mayor Bloomberg asked for to cover unreimbursed outlays, mainly police and firefighter overtime. "I would go so far as to say 'Thank you, Governor Pataki' for putting in the request for the money," said Jonathan Bowles, research director for the Center for an Urban Future. "But he can't take credit for funds from the federal government the city is entitled to anyway."

Even that money may be less than meets the eye. According to an analysis by Ms. Maloney's office, while adding money for the unreimbursed expenses to its wish list, the state actually removed $222 million from the city's column. A Pataki administration official acknowledged the figures had been "readjusted" to reflect preliminary expenditures.

Even so, the Governor's tally actually adds up to $191 million more than the allocated $8.8 billion in FEMA. A footnote in his summary sheet says that this is because "it is anticipated that several programs will not fully spend out authorized obligations."

Translation: Money for help to individuals, like mortgage and rental assistance (M.R.A.) and individual and family grant money (I.F.G.), may not all be handed out. This is something

FEMA disputes. Because people who applied for M.R.A. help by Jan. 31, 2003, are eligible for aid for 18 months, Mr. Gair of FEMA expects all of that money will be spent.

The Governor's office has been loath to provide details of how, exactly, it wants to spend the FEMA money, releasing only a one-page list with broad categories. The less said, the more flexibility the state will have in spending that money in the future.

The Governor will place his hand on a Bible held by wife Libby, and daughter Emily will lead the Pledge of Allegiance. The Empire State King Interdenominational Mass Choir will lead the assembled entourage of officials, politicians and operatives in song, and then the Arturo O'Farrell Latin Jazz trio will perform.

The theme of the inaugural address is "Forward Together." As one aide described it: "You're going to hear the Governor say there are challenges to be faced, and the surest way to get things done is to not be divisive and to put the parochial themes aside." Journalists have been advised not to expect many specifics from the inaugural address; those will be saved for the State of the State address, to be delivered Jan. 8. Indeed, the inaugural address-except for the part about acknowledging there are challenges ahead-will sound very much like almost every speech Mr. Pataki delivered during his campaign. And that campaign was almost anachronistically buoyant.

After the inaugural address, the Governor and his guests will adjourn to the Crowne Plaza hotel for a post-inaugural brunch. There will be the back-slapping and congratulatory salutations and the smiles that there always are at these events. And then everyone will go home. They should savor the glow: It may be the last happy party in Albany for a while.

"Oh, please-why did he even want a third term?" mused Baruch College professor Douglas Muzzio. "In the third term, the elected official wears out his welcome. You've made enough enemies, so people are carping at you. This sounds like a lot of conflict and agita for the Governor."

Forget the enemies-even Mr. Pataki's friends are anticipating bad news. Dennis Rivera, the health-care workers' union leader whose early and enthusiastic endorsement had so much to do with Mr. Pataki's cascade of union and Latino support, has been told to expect very bad news in the upcoming budget, sources familiar with the union say. They've been warned that they'll have to fight for their share, and that there will be a compromise, the sources say. But it will be bruising.

Already, the Governor has made the first move, calling for "tobacco bonds": selling the right to collect $550 million in annual settlement payments from Big Tobacco for 25 years to Wall Street, in exchange for a one-time infusion of $3 billion to $4 billion. The tobacco securitization, as it's known, has the advantage of solving some current problems, but it jeopardizes the funding for Child Health Plus, a health-care program that won Mr. Pataki so much favor with the health-care workers and Latinos.

With deficits next year projected to reach a frightening $10 billion, lots of bad budget news is ahead. All this anxiety comes after an election-year budget that was "not only pain-free, it was euphoric," Mr. Muzzio said. "The public will be disappointed to learn that the [state] government didn't react to 9/11 on 9/11-it will be reacting this year," warned incoming State Senate Minority Leader David Paterson. And in that context, almost no one expects Mr. Pataki to keep the promises he made during the campaign. "He just cannot guarantee them all packages in the midst of a budget crisis," said Phillip Thompson, an associate professor of urban planning at the Massachusetts Institute of Technology who is also a close watcher of New York union politics.

"He's caught between the constituency that brought him to power"-that is, the anti-tax conservatives-"and the constituency that kept him in power": unions, moderate Democrats and Latinos, said Gerald Benjamin, the dean of the State University of New York at New Paltz. "How does he square the circle?" Mr. Benjamin, it should be noted, isn't questioning whether promises will be broken, only by how much.

"I would hope that his third term looks more like his first term," said Michael Long, chairman of the state Conservative Party. "I'm not asking him to punish the unions. I'm asking the leaders of state government to be realistic, to get state spending in control, to protect the working class and the taxpayers. Otherwise, there will be a time when people will jump in their cars and in planes and buses and turn the lights out on New York for good."

Good-Will Bank

Mr. Pataki does have the advantage of having created some good will in the union movement. "We are at a point where we know each other," said Denis Hughes, president of the state A.F.L.-C.I.O. "The Governor doesn't have an animus towards us. If he had all the resources and said, 'We know we made promises to you, but we're just not doing it,' that would be a problem."

Close watchers of the state budget say there just aren't many more places to turn for new sources of revenue. "Unlike the New York City Mayor, who has to balance his budget as a matter of law to within one-tenth of one percentage point, the Governor doesn't," Mr. Thompson said. "The state budget has historically been a mess, and [Mr. Pataki] has been able to coast because of the overall strength of the national economy. Well, the coasting's over."

All of this naysaying doesn't appear to have disturbed Mr. Pataki and his allies-outwardly, at least. "It's not going to be easy," allowed Pataki spokesman Michael McKeon. "There will be enormous challenges. But he knew what he was getting into when he ran for a third term-and he ran very hard for it."

True. Exactly why isn't known-but there are certain theories. Democrats who snickered at Mr. Pataki's political abilities now admire his canniness. "George Pataki is a very able and popular public official," Mr. Paterson said, expressing the view of many Democrats who, for a variety of reasons, chose not to say so publicly.

Mr. Paterson is a subscriber to the national-office theory. Under that theory, Mr. Pataki's aim this term is to get a high-level cabinet post or to run with President George W. Bush as his Vice President in 2004. "Mind you, I think he'd be a good candidate," Mr. Paterson said. "He does a lot of out-of-the-box thinking that I really respect. Most Republicans symbolically approach minorities. I wouldn't say the Governor's done a great job, but he's moved more than others have."

There are problems with this theory, of course. First of all, Mr. Bush already has declared that incumbent Dick Cheney will be his running mate in 2004. And the Bush administration has tended to nurture and nuzzle its conservatives-its Cheneys, its John Ashcrofts, its Paul Wolfowitzes, while poking its moderates-the Christine Todd Whitmans-in the eye.

But some sources can still see a scenario in which Mr. Pataki gets on the ticket in 2004. They see the possibility that a continued weak economy and a prolonged war will leave the nation disillusioned with Mr. Bush. To win a second term, the President will need to swivel to the center, where he'll find George Pataki-a moderate, tax-cutting governor of a large state with the ability to pull in huge amounts of cash.

Mr. Pataki has always been extremely loyal to Mr. Bush, almost never criticizing him, even though a few well-placed jabs could produce cheers in a state like New York. The Bushes, George W. chief among them, tend to value friendships and loyalty more than most political families.

"The Governor has this amazing ability to be in the right place at the right time, and he had faith that he might be again in 2004," said one Pataki watcher. History suggests that the Governor has a good sense of timing: He was an obscure State Senator from the Hudson Valley who carefully positioned himself as a fiscal conservative-so when Alfonse D'Amato came looking for a candidate to face Mario Cuomo in 1994, George Pataki was the obvious choice.

Of course, this prediction provokes derision among some national Republicans, who see a pro-choice, union-loving, big-spending Republican as the longest of long shots if Mr. Bush does look for a new Vice President. Those Republicans say that Mr. Pataki's allies are floating their Vice-Presidential theory so he doesn't become an instant lame duck as he begins his third term. One early clue may be whether the national party chooses New York City for its convention in 2004. A decision is expected soon.

Albany had its ninth-worst winter storm over the Christmas holiday, with 20 inches of snow falling on the state's capital. "We dug out! We dug out!" officials exclaimed afterward. But that very feat won't be so easy for George Elmer Pataki in what promises to be a long and bitter winter.

The bland proceedings belied the tensions in the room. The LMDC, created to rebuild the former World Trade Center, has become a dysfunctional family. And the relative who wasn't at the table-state economic-development czar Charles Gargano-may cause the most trouble in the coming months.

Mr. Gargano, as chairman of the LMDC's parent organization, the Empire State Development Corporation, ostensibly is the LMDC's boss. But now that the gubernatorial election is over and Mr. Gargano's boss, Governor George Pataki, has been re-elected, Mr. Gargano will be seeking a greater role for himself in the LMDC, according to city and state officials. And if Mr. Gargano had his druthers, other officials say, a newly constituted LMDC would not include John Whitehead, its current chair.

Mr. Gargano is already making a move. According to officials familiar with the LMDC, he has directed his staff to book him at LMDC meetings and events, which he has attended only sporadically so far. "Everything was in a holding pattern until Election Day," said one official close to the LMDC. "There was this silent feeling in the room that nobody rocks any boats."

Some are getting rocked now. The immediate aftermath of Election Day saw a spate of stories about Mr. Whitehead's tenuous hold on his job. Board members loyal to Mr. Whitehead reportedly blame Mr. Gargano or his staff for those stories.

"You guys [in the press] are just being used by someone else who wants Mr. Whitehead out so he can run the board himself," asserted one person close to the LMDC board, who spoke to The Observer on condition of anonymity.

Mr. Gargano's spokesman declined to comment.

All of this comes just weeks before the LMDC faces a huge hurdle: presenting a new set of design plans for the World Trade Center site, ordered up after the first set, introduced last July, was widely derided, then scrapped. And the disagreements are coming to the fore as Mayor Bloomberg, facing a yawning budget gap, is asking Albany for help in implementing unpopular tax increases.

Settling all of this will be a major challenge for Mr. Pataki. On election night, he received enthusiastic applause when he promised to rebuild lower Manhattan. Republican sources say the rebuilding effort will be a "massively important priority" for Mr. Pataki's third term.

From the beginning, Mr. Whitehead was a wild card. On the one hand, he is a loyal Republican (in recent years, he has contributed close to $400,000 to the party and its officials) and a reassuring choice for the city's bankers and business people. But the octogenarian's many years in the public and private sector, plus a proclivity for speaking his mind, made him a bit of a risk for an administration that prizes discipline and loyalty.

Early Tensions

Mr. Whitehead rankled Mr. Gargano from the beginning, when he pointed out to reporters-in a manner widely interpreted as paternalistic-that he had sworn in Mr. Gargano when he was named ambassador to Trinidad and Tobago during the Reagan administration.

But he really steamed Mr. Gargano on a frigidly rainy day last January, when a battery of federal, state and city officials gathered to announce business-development grants for lower Manhattan. These sorts of announcements-frequently upstate-were the bread and butter of Mr. Pataki's re-election campaign.

Just prior to the meeting, the Governor learned that Mr. Whitehead had met with President Bush at the White House. "I want to thank two people who came back from the private sector to do this job," Mr. Pataki said then. One was "John Whitehead, who I know just went down and met with the President just a few days ago in Washington. John, thank you."

It was Mr. Pataki's way of trying to seize control of Mr. Whitehead's surprising announcement, which completely eclipsed the announcement of the business grants in news reports, to Mr. Gargano's fury. Mr. Gargano-who was the event's master of ceremonies-didn't even know about the Bush meeting until it was mentioned in front of reporters.

Mr. Whitehead stepped on Mr. Gargano's headlines again last May, when Mr. Gargano was the guest speaker at the Association for a Better New York breakfast. After the event, Mr. Whitehead, surrounded by reporters, mentioned that ground had been broken at the 7 World Trade Center site. The remark not only startled reporters, but came before a planned ribbon-cutting, upstaging Mr. Gargano and the Governor.

The issue of who has the most direct line to President Bush has become the subtext of many of the tussles between the LMDC and the Pataki administration. Mr. Pataki, of course, has access and clout with the White House, but as a major donor and former Reagan administration official, so does Mr. Whitehead. And then there is Roland Betts, the Chelsea Piers developer who is a Yale classmate of the President's and was an investor in the Texas Rangers when Mr. Bush owned the team.

"They may think their connection to the President will protect them," muttered one state official about the LMDC, "but it won't." And so the struggle over Mr. Whitehead's future is consuming a certain faction of the Pataki administration. A couple of days after the election, The New York Times ran a story saying that "some people close to the governor are pushing for [his] replacement."

Mr. Whitehead denied it, but way down in the story, Mr. Pataki's spokesman, Michael McKeon, was quoted as saying: "It's always natural after a year of time to evaluate what has happened and how to improve on something." A nervous Mr. Whitehead called the Governor, who was on vacation, to check on his prospects for future employment. He received the assurances he wanted, and on Nov. 14, Mr. Whitehead declared: "There's no truth to the reports at all. I have no plans to leave and the Governor and the Mayor have no plans to fire me, so I'm in office to stay."

But some state officials aren't so sure, and even on Nov. 19, Mr. McKeon wasn't offering much comfort, saying: "The Governor is confident that the LMDC has done a good job, but that doesn't mean we shouldn't look at ways to make it even better." Sources close to the Governor say he simply hasn't turned his attention to the future of the LMDC.

Still, some people who have the Governor's ear are unhappy. "John Whitehead's 'independence'-which the New York Times editorial board likes so much-just means he's accountable to no one," one official in the anti-Whitehead camp griped. Several scenarios are being talked about. Under one, Mr. Whitehead quietly leaves after the design plans are introduced-sometime between Christmas and New Year's, say, when no one's looking. Or else he stays until spring, when talk of his resignation has long died down.

In this scenario, Mr. Gargano takes on a greater role in the LMDC, Mr. Whitehead eventually leaves, and Mr. Gargano becomes the "acting chair" of the LMDC indefinitely.

Meanwhile, there are other subplots. Some state Republicans-including some who are loyal to Mr. Gargano-see Deputy Mayor Daniel Doctoroff's dual stewardship of the 2012 Olympics bid and the city's role in lower Manhattan as an inherent conflict of interest. "How can you develop midtown office space and lower-Manhattan office space in a time of no resources?" said one. "How can you do the lower-Manhattan transit hub and the extension of the No. 7 subway line? There just isn't the money."

"We all have a lot of things to do," Mr. Doctoroff said in a telephone interview. "My job isn't just about the Olympics or lower Manhattan, its about all New York City. The effort to bring the Olympics is incredibly important as we contemplate the long process of rebuilding." Mr. Doctoroff denied that there were any tensions between him and Mr. Gargano. "I've never heard that from him directly or indirectly," he said.

Mr. Betts has also been putting out his own fires. As head of the site-planning process, he has repeatedly butted heads with Madelyn Wils, the Community Board 1 president who is close to Assembly Speaker Sheldon Silver. "Roland and I have discussed many issues," Ms. Wils said. "We may not agree on everything, but we agree on most things. That's just part of the dialogue. I've never been the kind of person not to say what's on my mind."

Mr. Betts also said the two have a working relationship.

Not so agreeable is Mr. Silver. At hearings he held last week, he expressed his "dismay" and "outrage" about what he called "unclear lines of authority," and repeatedly battered Alexander Garvin, the LMDC's architect, for "lack of public input" into the planning process. What was particularly peeving Mr. Silver, it came out, was that neither the Port Authority board nor the LMDC board had voted on the parameters of the new design plans. This was of paramount importance to him. "Without a vote, you have no accountability," he said after the hearings.

As the lid begins to boil off the pot, LMDC board members insist that any behind-the-scenes machinations are beside the point. "The design process is about to bear fruit; the architects plans are coming back in," Mr. Betts said. "I've seen enough of them to know now those will be spectacular-so the whole process is working."