ALBANY – Rising county property taxes across New York State remain largely the result of a costly Medicaid system, even as a cap this year significantly curbed local contributions into the program, according to a report released yesterday by the state comptroller, Alan Hevesi.

County property taxes this year increased an average of 3.3% as a result of a local Medicaid cap enacted last year. Before the cap, county property taxes had been increasing by 7% for the past five years.

Medicaid spending by counties nevertheless grew by $66 million this year, accounting for roughly half the $131 million increase in county property taxes statewide. At $45 billion, New York’s Medicaid program is the largest in the nation, including California, which covers significantly more people.

“The property tax burden remains crushingly high and Medicaid remains the largest part of that problem,” a member of the Business Council of New York State, Incorporated, Matt Maguire, said.

Mr. Maguire pointed out that the 3.3% increase in county property taxes is still slightly higher than the rate of inflation.

“It’s telling that we recognize that to be an achievement, while the rest of the society measures themselves against the rate of inflation,” he said.

Without the cap, counties would have had to pay $190 million more this year in property taxes. The comptroller’s office previously estimated that county property taxes statewide would have to increase by an average of almost one-third by 2010 to keep pace with Medicaid growth rates.

“Our new Medicaid reforms have dramatically reined in what was one of the fastest growing fiscal responsibilities for counties and New York City by providing immediate and significant relief from Medicaid costs,” Governor Pataki said yesterday in a written statement.

In the statement, Mr. Pataki urged county leaders to put the savings toward property tax relief and for New York City to invest the savings into the city’s schools.

“It is a good first step, but it is only a first step.This doesn’t reduce property taxes, it reduces the increase,” Mr. Hevesi said.

New York is one of only five states that requires local government to contribute to Medicaid, he said.

“The counties have been fighting for years for this while the Medicaid program was running unchecked. County taxpayers were having to write a blank check,” a spokeswoman for Rockland County executive’s office, C.J. Miller, said.