Let’s recap the last week of the MTA funding saga. On Monday, Malcolm Smith and the Senate Democrats introduced a "conversation starter" bill that had already been lambasted as insufficient and backwards. On Tuesday, the MTA finance committee announced that revenues from taxes and fares have plummeted deeper than expected, turning the $1.2 billion doomsday budget gap into a $1.8 billion chasm. On Wednesday, Governor Paterson claimed that he had "some new ideas" to break the legislative impasse. Yesterday, some Paterson staffers started to let slip what the governor had in mind, and today we woke up to the big news.

The governor’s "new" solution is to cave to the Senate Dems.

According to multiple reports, Paterson is prepared to accept the framework laid out by Senate Majority Leader Malcolm Smith, and dilute the proposed revenue streams even further by granting some payroll tax exemptions and halving the surcharge on cab fares.

How it all adds up to a healthy transit system is a complete mystery. Even without the watered down provisions, the plan on the table in the Senate only generates $1.76 billion per year. That sum was supposed to cover the MTA operating deficit, its five-year capital plan, and a five-year road and bridge program for all of New York State. Well, now we know that it will take more money than that — $1.8 billion — just to keep the trains and buses running. So what’s it going to be?

One option — let’s call it "Armageddon" — would be to spend all the revenue to plug the MTA operating deficit. No money for maintenance or expansion. The system spirals into 1970s-style decrepitude and the region’s economy goes in the tank for the foreseeable future.

Another path — how about "Deferred Armageddon" — puts it all on a giant credit card. The MTA capital plan, roads and bridges, AND transit service. Bond every cent of the new revenue streams and borrow to pay for everything — even the day-to-day operations of the MTA. Taxes and fees collected in the MTA service region pay for the whole state’s transportation system, and in five years, we face the mother of all transit crises. (The Post thinks this is where we’re headed.)

There are other ways to go about funding transportation, of course. We could ask downstate car commuters to pay into the system that keeps traffic from totally clogging up New York City streets. We could ask upstate drivers to pay for roads and bridges through higher vehicles fees and gas taxes. Assuming that Republicans in the State Senate would bargain in good faith, these solutions are politically feasible.

I haven’t even reached the scariest part of Paterson’s recent pronouncements, which is that he wants to vote on a rescue deal Monday. With Mayor Bloomberg’s staff deeply involved in negotiations with the State Senate, the endgame could very well play out over the weekend. Is that how the most important transportation policy in New York State will get resolved — while no one is paying attention to the news, and Pedro Espada, Ruben Diaz, Sr., and Hiram Monserrate enjoy sunny Puerto Rico?