MANHATTAN - (AP) - New York Gov. David Paterson on Wednesday 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 "officially" in recession.

A budget document Paterson announced this 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 without cutting services to New Yorkers. He'll also ask the Legislature in the coming weeks to approve a plan to cut another $600 million "across all areas of the budget." 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.

Paterson said school aid and other funding areas highly protected by the Legislature will be considered.

Paterson doesn't support the Assembly Democrats' proposal for a temporary income tax increase on millionaires. He said tax increases are a last resort because, historically, New York tax increases get used for purposes other than reducing debt.

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.

For the full news conference, go to Channel 612 on your iO Digital Cable Box and select iO Extra.

Paterson calls emergency session to tacklefiscal woes

Gov. David Paterson's Web site

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