ALBANY – A stand-off between Gov. Kathy Hochul and New York’s most powerful labor unions over public pensions is a major sticking point holding up the already delayed state budget — as the Empire State leader pushes back against outrageous demands that would cost taxpayers an eye-popping $1.5 billion.

Hochul is pushing to scale back the unions’ lofty request to improve retirement benefits for public workers hired after 2012 — when the Tier VI retirement law passed — to a more budget-friendly $500 million plan, sources told The Post.

Under the governor’s proposal, first reported by Gothamist, the retirement age for New York’s approximately 780,000 public employees would be decreased from 63 to 60 and contribution rates would be reduced by half a percent.

Meanwhile, the unions — represented by AFL-CIO President Mario Cilento in the negotiations — wanted to lower the retirement age to 55, in addition to lowering contribution rates.

Legislative leaders have signaled that they’ll go along with whatever deal is struck between Hochul and Cilento.

Assembly Speaker Carl Heastie (D-Bronx) said Cilento and Hochul met Wednesday night to discuss the counter proposal, which he doesn’t think is “final.”

“I think they were still working through that,” he acknowledged.

Still, whatever deal is struck is likely to put a major strain on local governments, schools, public hospitals and law enforcement — which risk a mass exodus that could lead to service cuts.

The cost of Albany’s public pension giveaway will also translate into higher property taxes and school taxes for New Yorkers.

“Tier 6 is not broken. It is not affecting our recruitment and retention,” Long Island Assemblyman Michael Fitzpatrick (R-Suffolk) told The Post, calling Hochul’s proposal the “reduced fat” version of her pork proposal.

“There is no reason to sweeten this benefit other than to try to get reelected. It is fiscally imprudent, and to me, in my mind, irresponsible to do this,” the longtime pension system critic added.

Lawmakers dashed from Albany for the weekend on Thursday after passing the ninth stopgap measure to keep the state government running while the budget is over a month past its April 1 deadline.

While Hochul said she expects the actual text of the state budget deal to begin being released publicly sometime next week, it’s unclear if lawmakers are totally on board and ready to begin locking down the plan after Heastie fiercely told reporters on Thursday there was “no deal.”

Still, the Speaker, Governor and state Senate Majority Leader Andrea Stewart-Cousins (D-Westchester) have said they’ve forged general agreements over the major non-fiscal items Hochul proposed as part of the plan.

They include sweeping new anti-ICE sanctuary policies, a delay of crushing climate change mandates that could’ve sent gas and utility costs soaring even further and a proposal meant to lower car insurance premiums by shaking up New York’s legal liability statutes.