NY Post report:

Despite its having been touted as a way to close budget gaps, city and state officials have backed off plans to crack down on the $1.6 billion black market for cigarettes.

The sole city unit targeting illegal tobacco full time has been reassigned, and a new law aimed at Indian reservations — the prime source of the butts — hasn’t been enforced.

A city squad formed in 2007 to sting stores selling unstamped, untaxed cigarettes — which cost the city $195 million in lost tax revenue a year — has been reassigned by the Finance Department.

The six officers — who seized 554 cartons of illegal cigarettes during 622 retail inspections in 2008, issuing $200,000 in fines — will be shifted to other law-enforcement units, according to their union.

“We were totally shocked,” said one member of the Criminal Investigations Bureau of the city Sheriff’s Office. “We are highly trained and highly specialized. It makes no sense.”

The officers will be reassigned to the sheriff’s law-enforcement bureau, whose duties will be expanded to include illegal cigarettes. That will increase the total number of officers targeting butts to 59, improving enforcement, said Finance spokesman Owen Stone.

But Deputy Sheriffs’ Association head James Davis III said, “They can’t possibly keep up the same level of enforcement.”

Meanwhile, a law signed by Gov. Paterson in December was supposed to make enforcement on reservations easier but has been deemed unenforceable by courts.

Before it passed, Mayor Bloomberg urged the state to act and said it “could go a long ways in closing our budget gap.”

Rulings require the state to hand out coupons to the reservations so that residents can exchange them for tax-free cigarettes.

“The state has not handed out the coupons,” said city lawyer Eric Proshansky. “The law cannot be enforced unless those coupons are distributed.”

A Paterson spokesman declined comment.