New York Local News

CBS 2's Magee Hickey contributed to this report.
NEW YORK (CBS/AP) ― New York Gov. David Paterson on Tuesday said he wants to freeze hiring and cut state agency spending by an additional 7 percent to shore up a state economy that his budget director said is in "officially" in recession.

A budget document Paterson announced Wednesday morning laid out specifics to address a budget deficit he said will hit $26.2 billion in three years because of high state spending and declining revenues, including a 97-percent drop in banking taxes from a year ago.

He is also seeking approval of measures that have failed to gain support in the Legislature, including privatizing some state assets and resources.

One of the most ambitious proposals, made a year ago by former Gov.  Eliot Spitzer, would privatize the state lottery, providing the state with billions of dollars up front and billions more over the life of the contract.

"We are now officially saying New York is in a recession," said Budget Director Laura Anglin. She said New York's recessions have historically lasted 25 months, longer than national recessions.

Paterson said he will cut $630 million from the executive budget and ask the Legislature to cut another $600 million. That will rebalance the current budget -- now $630 million out of balance -- and stave off further imbalance. Paterson said the cuts will set up a responsible process for the 2009-2010 budget due April 1.

The Democrat said the state is suffering "a mammoth collapse in revenue." Banking revenue that was $179 million for June 2007 totaled just $5 million this year, he said.

Agency spending was already cut by 3.35 percent in April.

"Our state now faces increasingly harsh economic times. When I travel across the state, I see communities suffering. Everywhere I go I see people losing their jobs and their homes," he said. "My message to the Legislature is that next year's budget process starts now.

Paterson also said the budget deficit is estimated to grow 22 percent over the next three years and called for a special legislative session on Aug. 19.

"The damage on Wall Street is infecting all of our communities and its effects on New York state's finances are devastating," he said."It is time for New York and other government to cut up our credit cards. The era of buy now and pay later and later is over. The faster we address this crisis, the faster and stronger we will emerge from it."

In June, the governor stated under the current $122 billion budget there would be a $5 billion deficit. Now the situation has gotten considerably worse.

"I think he was put behind the 8-ball to begin with -- with the way he came into office. I know he's doing the best he can. But this is not just a statewide issue, it's a nationwide issue," said John Wing.

The governor presided over a meeting of the Financial Control Board, which in the mid-1970s led the city back from the brink of bankruptcy.

The problem today is tax revenues are vanishing. While tourism is up, the all important financial sector, Wall Street, is struggling.

"For the first quarter of 2008, Wall Street firms posted $22.8 billion in losses," NYC Mayor Michael Bloomberg said.

Wall Street lost 4,300 jobs during the month of June alone. The city is facing a budget gap of $2.3 billion.

And our course, financially, when the city sneezes, Albany catches a cold; and this appears to be a bad one.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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