ALBANY - Putting a cap on property taxes or limiting them based on income are among the options the state should explore to bring down New York's sky-high property taxes, a new report says.

The report, prepared for a conference to be held by the Citizens' Budget Commission this week, also suggests cutting pension benefits for new government workers and consolidating some small school districts as possible steps to hold down spending by local governments.

The commission hopes the conference will help "direct more state resources where they're needed," the commission's Elizabeth Lynam said. "Our whole theme is better targeting."

She said the decisions made at the conference will be shaped into recommendations that will be presented to Gov. Eliot Spitzer and lawmakers this month.

New Yorkers pay about $111 billion a year in state and local taxes, with the state collecting 45 percent of the total and local governments the rest. That amounts to $150 per $1,000 of personal income, highest in the country except for Wyoming, which gets most of its tax revenue from minerals.

Outside New York City, which levies a local income tax, the biggest disparity between New York and the rest of the country is the property tax. New Yorkers pay an average of $54 per $1,000 of personal income in state and local taxes - $21 more than the national average, according to the report.

Among the problems identified in the report:

Excluding New York City, New York localities employ 459 workers for every 10,000 residents, compared to a national average of 395. New Jersey and Connecticut employ 392 and 329 local government employees per 10,000 residents, respectively.

As an example of inequities in school funding, the report points out that school districts' average spending in Erie County is about $13,000 per year per pupil, while the figure in Westchester County districts averages $21,000.

If the state had implemented a 3 percent annual growth cap on the school

Property-tax levy per pupil in 1998, districts in 2005 would have had to spend $2.5 billion less - a drop of $1,591 per pupil.

From 1995 to 2005, district expenditures went up $18 billion, or 72 percent. But average teacher salaries increased only 29 percent in this period, from $63,233 to $81,822. However, benefits - chiefly health insurance, pensions and Social Security - shot up 97 percent.

The report suggested the state consider updating its property-tax "circuit-breaker" program that caps property taxes when they exceed a predetermined share of income. The taxpayer gets any overpayments back through a state income-tax credit.

The expanded program could be paid for, the report suggests, by taking some of the money now sent to taxpayers in the STAR property-tax-rebate program.

"The circuit breaker is an attractive option because it is more targeted," Lynam said. "It would put the resources where they're needed most. The current STAR program does not do that."

Another option is capping property taxes, as several other states, including Massachusetts and California, have done. In Massachusetts, the cap, imposed in 1980, is credited with driving per-capita state and local taxes there from near the top of all states to the middle of the pack.

Among the options the report identifies to cut spending by local governments:

- Cutting "ineffective services" from Medicaid, including payments to hospitals and nursing homes.

- Establishing a new 'Tier 5" level of retirement benefits for new public workers that would give them a 401-K-style "defined-contribution" plan instead of the current arrangement that guarantees a level of monthly benefits. Benefits for current workers and retirees wouldn't be affected.

- Change the binding-arbitration system of deciding the contracts of police and firefighters, possibly setting up a "last, best offer" system that would encourage both sides to moderate their demands.

- Consolidate small school districts - a step that could save $435 million a year.

State Deputy Budget Director Laura Anglin is one of the people who will respond to the ideas in the report at Thursday's forum.

"The governor shares CBC's goal of lowering the property-tax burden," said state budget spokesman Jeffrey Gordon. He pointed out that commission Spitzer named this year to study how to streamline local governments, chaired by former Lt. Gov. Stan Lundine, is slated to issue a report early next year.