In a reversal of last year’s budget dynamic, Governor Spitzer’s upcoming spending proposal is coming under fire from the city’s teachers union but is encountering a subdued response from the hospital industry.

Last year, the United Federation of Teachers and education advocates praised Mr. Spitzer for supplying an infusion of aid for school districts with disadvantaged demographics, including New York City.

This year, they say Mr. Spitzer is reneging on his promise to sustain the sharp increases in funding to the city and other urban districts, and they are gearing up for a fight with a governor they had treated as an ally.

City schools will receive $8.1 billion in new school aid under Mr. Spitzer’s 2008–09 budget proposal, a $600 million increase over last year’s level, the Associated Press reported.

The increase in aid is less than what the union had expected, and includes a smaller-than-anticipated share of an important type of operating funding called foundation aid. The administration has projected an increase of $1.25 billion. Now it is offering just $900 million, Gannett News reported.

“The foundation formula money is what goes to funding the reforms we know directly help kids, such as pre-K, additional after-school programs, and lowering class size,” the president of the UFT, Randi Weingarten, said. “Our battle in the Legislature this year will be that, despite the economy, we need to hold kids harmless.”

On the health care side, the emerging response to the governor’s budget is splintered.

After being briefed on the administration’s fiscal 2008–09 Medicaid budget plan, officials at the Healthcare Association of New York State, a major hospital trade group, are now planning to cancel or scale back their annual health care rally scheduled for early March.

For years, the hospital group has sponsored the rally, which has drawn thousands of health care employees, patients, and industry officials to the steps of the Capitol and is typically one of the largest and noisiest interest group demonstrations at the Capitol.

“For the hospital community not to be planning that kind of protest is a dramatic shift from 10 to 15 years of history,” a Democratic assemblyman of Manhattan, Richard Gottfried, said.

The muted response stems from the fact that Mr. Spitzer, who sought to trim $1 billion from the Medicaid budget last year, is expected to call for only modest cuts tomorrow, including a slight drop in scheduled growth — called the trend factor — of reimbursement rates.

Mr. Spitzer is also expected to adjust the state’s base Medicaid patient reimbursement rate for the first time in more than 25 years.

The adjustment means that hospitals will get less money from the government for caring for inpatient Medicaid wards.

The governor is expected to use that money to pay hospitals more for outpatient care, a key plank of his health care agenda.

The hospital association is scaling back its rally in part because while some hospitals will see losses, many others will benefit from Mr. Spitzer’s budget. “It’s a much more complicated year,” a hospital official said.

“It’s not as simple as ‘fight the cuts.'”

Sources say Mr. Spitzer tomorrow will call for much deeper Medicaid cuts to pharmaceutical and insurance companies.

The health care industry was Mr. Spitzer’s prime target during last year’s budget battle. He sought to slam the brakes on funding growth for hospitals and nursing homes, while accusing the institutional heavyweights — the 275,000-member 1199SEIU United Healthcare Workers East and the major hospital associations — of “maintaining a status quo that does not work for anyone but them.”

The final budget passed by lawmakers enacted only about 25% of the hospital and nursing home cuts proposed by Mr. Spitzer, who was far more successful in trimming spending on Medicaid pharmaceuticals and managed care.

On the education front, Ms. Weingarten said she is prepared to go to battle over the foundation aid issue. By slashing foundation money, Mr. Spitzer is short-changing his signature education plan, she said.

Mr. Spitzer’s plan, known as Contracts for Excellence, requires school districts to spend their extra funds on a set list of policies — and then, at the end of the school year, to show how the policies have paid off.

The contracts govern only some portions of state education aid. Foundation aid is one of those portions, Ms. Weingarten said yesterday.

A Brooklyn parent who is a member of the Alliance for Quality Education, Zakiyah Ansari, called the governor’s budget proposal disappointing.

“For once we thought, ‘Wow, we’ve got a governor — he knows our kids need to go to college; he knows they need to succeed.’ And to even think that he would consider cutting the money,” she said.