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NY1 has learned that federal stimulus money will go to the city school system, but it might not be enough to prevent layoffs.

On Thursday, Schools Chancellor Joel Klein testified before a New York City Council meeting that without significant funding from Albany, eliminating some school-based staff will be necessary.

"Federal money isn't enough to spare schools from all suffering," Klein said.

Sources say that education funding across the state is expected to stay flat.

Federal money will be used to off-set about $1 billion in cuts.

There is not enough to cover a court-ordered increase in aid, which was mandated following a lawsuit that challenged the formula used by the state to determine how much money school districts receive.

Another issue being discussed by lawmakers ahead of Wednesday's budget deadline is a cut to some of the anti-smoking funding the state uses. Additionally, there is a tentative agreement to tack on a deposit on water bottles.

Lawmakers are still debating how much wealthy New Yorkers will have to pay on income taxes.

Meanwhile, there is also word that state lawmakers are closing in on an agreement to repeal much of what remains of the state's 1970s-era Rockefeller drug laws.

According to a spokeswoman for the governor, the deal would repeal many of the mandatory minimum prison sentences for lower-level drug felons.

It also gives judges the discretion to send some first-time, nonviolent offenders to treatment rather than prison.

"Negotiations on the reform are intense and nearing a successful completion and reflect the governor's core principle to focus on treatment rather than punishment," said the governor's deputy director of communications, Marissa Shorenstein, in a statement this morning.

While all sides have agreed on a broad framework, sources say several details have not been resolved.

One official involved in negotiations says it has not been determined exactly who would be eligible under the new program.

The measure has been negotiated as part of the state budget. However, there has been no handshake on how much state money would be budgeted, and whether Paterson will guarantee those funds will continue month after month.

This year's budget proposal already has some opponents. Rochester businessman Tom Golisano is calling on state legislators to reject this year's proposal.

The former Independent gubernatorial candidate says the plan spends too much, adds on too many taxes, and is controlled by unions and special interests.

The billionaire said his group "Responsible New York" will bankroll any Democratic lawmaker who breaks ranks and holds up the spending plan.

"The legislatures that we think act responsibly, will act independently of their speakers and their special interests, Responsible New York is here to support," Golisano said. "Because, quite frankly, they don't have much support because of the strength of the special interests, and we are here to help them."

The Democrats only have a 32-30 majority in the Senate, so it would only take two dissident members to reject the bill.