How bad are times?

New York State is in bad financial shape.

Gov. David A. Paterson is imploring the Legislature to finally reckon with the state’s ugly financial reality. But first the governor must reckon with the likes of Senator Carl Kruger. Mr. Kruger, a Brooklyn Democrat who is the chairman of the Senate Finance Committee, has amassed a campaign war chest of $2.1 million, in part because of generous contributions from his labor union allies.

Special interest? Defender of the worker?

Despite a deficit of more than $3 billion, Mr. Kruger has threatened to block any significant cuts to health care and education, the biggest spending areas in the budget. He has presented his own budget plan, which has startled even Albany veterans for its reliance on one-time maneuvers and financial gimmickry.

If Albany veterans are surprised, it must be a doozy.

The governor and lawmakers have clashed over spending before. But recent events have created a new urgency and, in the view of Mr. Paterson and budget analysts, a desperate situation. The state has lost 270,000 jobs since the start of the recession. The tax bounty from Wall Street has shrunk.

That bounty is an important part of the city's and state's budgets.

And spending just keeps soaring. New York now spends more than any other state on Medicaid, twice the national average per capita. It also spends the most on school aid, per student, than any other state.

And nobody wants to accept cuts.

In New York over the last decade, the state operating budget has risen an average of 5.8 percent annually, far outpacing the average inflation rate of 2.8 percent. Budget analysts say lawmakers never prepared for the down times.

Chile did, but almost no one else saved the bounty from good times as insurance against lean times. But New York State spending pace was ridiculous, outpacing inflation, more than double that rate.

Senators have delayed budget negotiations for weeks as Mr. Kruger accused the governor of creating a “doomsday scenario” and vowed not to “succumb to his hysteria.”

No, things aren't bad; the Guv is crying wolf.

It is not clear whether Mr. Paterson has the stomach for a protracted battle over spending. With the help of Lt. Gov. Richard Ravitch, he has made progress persuading newspaper editorial boards and Assembly leaders that bold action is needed.

Still, on Thursday, Mr. Paterson seemed to be wavering on his commitment to cuts. That day, one of the state’s most powerful unions, 1199 S.E.I.U. United Healthcare Workers East, drew 2,000 people to Albany for a spirited rally, demanding that Mr. Paterson back off any budget cuts. The S.E.I.U. and its health care industry allies do not shrink from aggressively attacking governors. They unleashed a blistering set of television ads against Mr. Paterson last year, blaming him for hurting the most vulnerable people with his budget reductions.

All well and good, but where is the money to come from?