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W YORK — A radical proposal to rein in pension costs triggered a political firestorm Thursday with lawmakers in Albany scrambling to limit the potential impact on local government and schools.

The Legislative Investigation Commission’s plan – to move workers whose jobs have been eliminated onto a state unemployment insurance fund – would have a major effect on local government, which is under great financial pressure and is one of the largest employers in New York State.

A number of local officials said they support the commission’s proposal, which is the linchpin of an economic-reform package by the Democrats, whose numbers in the state Senate had been down to a handful since the end of the legislative session.

Despite the heated rhetoric by lawmakers and others, state government generally is supportive of the commission’s plan. Some state labor leaders say the possible impact on their members could be minor, with workers who are not yet retired – and the number of those remaining at many townships is shrinking – receiving a benefit only if a worker dies.

Gov. George E. Pataki warned legislators that the commission proposal represents only one of several potentially harmful measures in the budget-balancing package.

“This is a proposal that deserves debate,” Mr. Pataki said in a speech to a gathering of elected officials. “But if it is not balanced with other measures, we will be left with a state government that is out of control and makes promises to the people of New York that it cannot keep.”

Mr. Pataki said that the commission’s proposal, if it were to become law, would undermine the principles of fiscal responsibility and trust in the government. The governor also said that the commission was forcing a “self-inflicted wound” by proposing a bill that would seem to “call into question” the state’s ability to pay its pension bills.

The legislative commission, whose chairs are Mr. Pataki, a Republican, and Mario M. Cuomo, a Democrat, is responding to what it described as massive pension over-funding. The problem, according to the commission, is that the state and the nation are far behind in addressing the cost of two pension funds now considered underfunded: the state’s retirement plan, the Public Employees Retirement System, and the New York City pension system.

The commission’s proposal is not to increase future pension payments, but to shift the burden of pension payments on workers who lose their jobs from local government and the state to the state unemployment insurance fund

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