New York Gov. George Pataki, in his final State of the State address on Wednesday, dangled a tasty bit of good news for New York's struggling business climate, especially upstate. But Pataki also talked like a governor with gobs of money - taxpayers' money - burning a hole in the state's pocket. And nothing could be farther from the truth.

Pataki's message to the Legislature to cut taxes to help the economy and boost manufacturing speaks to upstate New York where manufacturing jobs declined by 46 percent between 1990 and 2004. It is no secret that the high cost of doing business in New York through taxes, utility costs - which include taxes - and high worker's compensation rates are chief culprits.

So when the governor talks tax cuts and incentives to keep manufacturing operations open and attract new ones, he has the Twin Tiers' attention. But when he talks loosely and without specific amounts about how to spend a projected $2 billion surplus, the caution flags come out. In 1998, the last time the state enjoyed a surplus of that size, tax breaks and the stock market slide in 2001 plunged the state into the red for years. Pataki and the Legislature need to make sure they don't back New York into that corner again.

The governor in his budget and the Legislature in this session must work with State Comptroller Alan Hevesi to set aside enough of that surplus to cover unanticipated downfalls in revenue. Call it a rainy-day fund or an emergency savings account. The point is, the state, already carrying $48.2 billion in debt, must not add to that. Debt carries borrowing costs that add to the expense of state government that in turn requires those high taxes.

So as Pataki and lawmakers stare at an alluring $2 billion surplus, they must resist spending too much of it, even if this is an election year. The governor's idea of a rebate check for property owners sounds great in January 2006, but by March 2007 when the state's books may be short a couple of billion dollars, it will look like selfish, election-year folly. Pataki and the Legislature should proceed with extreme caution on short-term political giveaways.

While the governor's giddiness over the surplus raises concerns, Pataki cannot be accused of trying to coast through the last year of his third and final term in Albany. His agenda includes some ambitious proposals, including tougher laws for sex offenders, such as the civil confinement provision sought by Elmira-born attorney general candidate Jeanine Pirro.

His backing for improving middle school math and science scores and to offer free state tuition to math and science majors committed to teaching in New York can make the state's future work force more appealing to high-tech employers.

The governor also demonstrated a good eye for the future by calling for further spending on the state's Centers of Excellence and for expansion of the state's tax friendly Empire Zones to lure businesses.

But much of his plan can add up quickly and if taxes are to be kept in check to increase job opportunities and stem the state's population drain, especially among younger New Yorkers, then Pataki and lawmakers are going to have to curb spending, be conservative about new programs and protect a large portion of the surplus.

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