Gov. Paterson yesterday bet a staggering $1.5 million a year on the salary of a Manhattan bankruptcy consultant to save the beleaguered city OTB — a move one critic called “nothing short of fiscal insanity.”

The surprise decision to install financier Greg Rayburn as president of the bankrupt bookmaking agency yesterday came moments after the OTB board accepted the resignation of longtime agency head Raymond Casey.

The shake-up was orchestrated by Lawrence Schwartz in his first official action as chairman of the OTB’s board.

Observers blasted the decision to hire another high-priced consultant at a betting operation that is drowning under a $220 million deficit.

“For Larry Schwartz to be giving out more than $1 million a year in taxpayer money to an employee of a bankrupt agency that has been looking for additional money from the state is nothing short of fiscal insanity,” one senior legislative aide said.

A source said the state plans to keep Rayburn’s month-to-month contract for “90 to 120 days.”