Gov. Paterson’s proposed school budget could actually hurt the state’s chance of winning federal Race to the Top funds, Secretary of Education Arne Duncan suggested today.

Duncan told reporters this afternoon that he was surprised to learn that Paterson’s proposed budget appropriated $750 million in Race to the Top funds even before the competitive fund’s application deadline today.

“This is going to be very, very competitive, so for anyone to assume they’re getting this — that’s a bit of a leap of faith, I would say,” Duncan said. “And obviously if this money is seen as simply something that is going to be plugging budget holes, that’s not something we’re going to be interested in.”

Duncan made the statement in a conference call where he explained President Obama’s intention to open the Race to the Top competition up to local school districts, instead of just states. That change would be a boon to New York City, which Duncan has cited as a model district but whose access to the grants is dependent on state-level policy decisions. If Obama gets his way, the district-level grant program will come online next year, along with a $1.35 billion expansion of the program.

Local officials said Paterson’s proposed budget showed a strong effort but could end up disproportionately hurting the city.

“The proposed reduction in school aid will affect funding for our city’s students at a time when we are still waiting to receive our just due as a result of the Campaign for Fiscal Equity lawsuit, adding insult to injury,” said City Comptroller John Liu.

Mayor Bloomberg said he would reserve final judgment on Paterson’s budget plan until after his visit to Albany on Monday.

Here’s Bloomberg’s full statement:

Not only is New York City willing to do its fair share to help Albany get out of its financial mess, but we’re eager to do so. An implosion of State government would have horrible consequences for the City. Some areas of the Governor’s budget proposal today appear, at first glance, to be proportional and fair in the way they affect New York City, and he deserves credit for those areas. Unfortunately, the proposal to eliminate two years of New York City’s revenue sharing payment — more than $650 million, which is 94 percent of the statewide cut and more than 15 times the cut for entire rest of the state together — appears neither proportional nor fair to New York City. I’m going to Albany to testify about the specifics of the Governor’s proposed budget on Monday, and will speak in detail then about the effect this and other parts of the budget will have on New York City.  

And here’s the full statement from Liu:

The Governor has worked hard to put forth an ambitious plan aimed at closing our State’s widening budget gap and putting New York back on track, and to do so with minimal use of one-shots. Some of the initiatives proposed today, however, impose a disproportionate burden upon New York City.

The proposed reduction in school aid will affect funding for our City’s students at a time when we are still waiting to receive our just due as a result of the Campaign for Fiscal Equity lawsuit, adding insult to injury. In addition, the elimination of more than $300 million from the Aid and Incentives for Municipalities funding will leave an immediate hole in our City’s budget. And with more than $1 billion set aside in the State’s Rainy Day Fund, it’s time to recognize that it is now pouring rain, and the use of these rainy day funds can and must be managed more tightly.