ALBANY — Ongoing investigations by the state attorney general's and comptroller's offices continue to uncover widespread abuse of New York's pension system.

Meanwhile, the state's financial picture grows bleaker, seemingly day by day. New legislation, designed to stanch pension fraud and save state money, is now on the books.

Gov. David A. Paterson signed on Friday a bill to curb abuses of the state pension system by certain personnel working for school districts and local governments. Among other things, the new legislation severely restricts "double-dipping," receiving a salary and a pension for the same job, and prevents independent contractors, primarily lawyers, from receiving benefits reserved for full-time employees.

"At a time when the state is facing an unprecedented fiscal crisis, we must be honest about flaws in current operations," Gov. Paterson said.

The bill:

■ Prohibits attorneys from serving simultaneously as employees and contractors at a school district or BOCES.

■ Disallows attorneys who are school district or BOCES contractors from receiving pension or health insurance benefits.

■ Mandates that school districts disclose administrator compensation during their budget processes, report employees receiving state pensions, and publish annual expenses.

■ Enacts criminal and civil penalties for defrauding the pension system.

■ Reforms the process via which retirees may obtain "211 waivers" (named for the appropriate section in the Retirement and Social Security Law) to retain their pensions while remaining on the job, if there are no other available candidates.

"While there are many cases where a retiree remains an asset to the state even after retirement, the attorney general's investigation revealed that this process was being misused, particularly in school districts," Gov. Paterson said. "State and local governments must be diligent to ensure that such waivers are subject to the most careful review."

Attorney General Andrew M. Cuomo, whose investigation includes all the state's school districts, more than 4,000 local governments and special districts, and all 37 of the state's BOCES, praised the bill and promised further investigations.

"This legislation strikes the right balance by continuing to allow government agencies to recruit and hire for specialized positions while helping to end the statewide fraud and abuse in the pension system that has cost New York's taxpayers millions," he said. "My office will continue rooting out and prosecuting corruption in the pension system."

The bill, A.11743/S.8699, was sponsored by Assemblyman Robert Sweeney, D-Lindenhurst, and Senate Majority Leader Dean G. Skelos, R-Rockville Centre.