Jerome Williams was waived yesterday by the Knicks under the NBA’s one-time amnesty provision, saving the franchise $21.3 million in future luxury tax payments.

Williams, who had three years remaining on his contract, will continue to be paid and cannot re-sign with the Knicks until the summer of 2008. But in a sign that Williams’s playing days could be over, the Knicks said they had offered him a position in scouting, community service, or broadcasting.

“Jerome was a big asset in our rebuilding program, and he was great with our young players,” team president Isiah Thomas said. “But this was a tremendous opportunity to save more than $21 million.”

The decision showed New York remains willing to await the recovery of Allan Houston, who has two years and nearly $40 million remaining on his contract. The former Olympian and two-time All-Star played in just 20 games last season before chronic knee soreness sidelined him in mid-January.

When the amnesty rule was announced earlier this summer, many believed it was a certainty that the Knicks would cut their ties with Houston, the longest-tenured member of the team. Some even nicknamed the amnesty provision the “Allan Houston Rule.”

But Houston’s close ties with Knicks owner James Dolan, along with incoming coach Larry Brown’s history of coaching Houston with the 2000 U.S. Olympic team, also factored into the decision for him to remain on the roster.

“He’s working hard, trying to get back, and he believes one day he’ll get back to his original form,” Thomas said. “When you have players that have been injured for some time, you have to find a way to move on and make the roster better. If Allan was to come back and regain his form, then it’s an added bonus.”

Williams, a nine-year veteran nicknamed “Junkyard Dog” and known for his defensive energy, averaged 4.5 points and 3.6 rebounds in 79 games for the Knicks last season. New York has a glut at the power forward position, and Williams didn’t figure into the mix that includes Michael Sweetney, Malik Rose, Maurice Taylor, and rookie Channing Frye.

Williams was acquired by the Knicks from Chicago a year ago in the deal that brought Jamal Crawford to New York.

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Also taking advantage of the amnesty provision yesterday were the Nets, who waived guard Ron Mercer.

Mercer, who missed more than 60 games last season due to injury, averaged 7.6 points. He missed 42 games after having arthroscopic surgery on November 15, and then sat out the final 20 games with a lower back strain.

The Nets signed Mercer as a free agent on Aug. 12, 2004.