Former New York State budget chief Dall W. Forsythe has agreed to join the investment banking firm of Lehman Brothers next summer as an executive in the company's public finance department.

Forsythe, a co-author of a recent city-sponsored report proposing solutions to New York City's structural budget deficit, said yesterday that he plans on joining the firm in July after finishing a semester as a lecturer at Harvard University's John F. Kennedy School of Government.

Until he officially join Lehman, Forsythe said he will work for the firm as a consultant in public finance. "I'll be doing some work to help them think about how issuers might look at some of their new derivative products," he said in a telephone interview.

When he joins Lehman, Forsythe said, he will work with municipal bond issuers on the state and local level.

Between 1988 and 1991, Forsythe served as New York's budget director in the administration of Gov. Mario M. Cuomo. In September 1991, he joined the Kennedy School as a lecturer. He has also worked as a consultant on public policy matters since leaving state government.

Walter C. Ayres, a spokesman for the state Ethics Commission, said state rules bar Forsythe from appearing before state agencies "on any matter that he was directly involved in, or personally participated" in.

A spokeswoman for Lehman Brothers refused to confirm Forsythe's future employment with the firm, or his specific duties when he joins. "Our statement is that we hope he joins our firm in July," the spokeswoman said.

Forsythe is widely regarded as an expert in municipal budget matters and public policy. Before joining the state budget division in 1988, he held financial posts in both state and city government. He worked in public finance for Shearson Lehman Brothers, a predecessor of Lehman Brothers, from 1983 through 1985.

In May, New York City Mayor David N. Dinkins appointed Forsythe to a three-member panel to determine how the city will deal with its structural budget deficit. The panel also included Donald D. Kummerfeld, president of the Magazine Publishers Association, and former Rep. Bill Gray, D-Pa., now president of the United Negro College Fund.

The panel produced a report earlier this month, calling on officials to overhaul the way the city does business. The report suggests that the city should raise taxes and make deep budget cuts in the face of a multi-billion-dollar budget gap between fiscal years 1995 and 1998.

Rudolph W. Giuliani, who beat Dinkins in the November mayoral election, has discounted the panel's suggestions to raise taxes. But a recent report from the New York State Financial Control Board urges the Giuliani Administration to reconsider the report's findings. The control board is a state-mandated monitor of city finances.

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