ALBANY - Gov. David Paterson has frozen most hiring, ordered an additional 7 percent cut in agency spending and called on the Legislature to approve $600 million in additional cuts to shore up state finances in a New York economy that his budget director says is “officially” in recession.

Paterson on Wednesday proposed cutting state spending by a total of $1.23 billion in the current budget to offset a “mammoth” decline in revenues. He projects there will be $26.2 billion in budget deficits over the next three years, a high figure even for a state government that routinely contends with deficits because of rising spending.

“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 seek the Legislature's approval for $600 million in cuts spread throughout state programs, which may include midyear reductions to school districts. But Paterson said he doesn't currently any tax increases, including a temporary income tax hike for millionaires pushed by Assembly Democrats.

He said the 7 percent cut in agency funding, on top of a 3.35 percent cut in the spring, shouldn't hurt services at parks, in state police, for highway maintenance, or support for schools and hospitals.

Paterson has also called the Legislature back to Albany for an emergency economic session on Aug. 19 to enact the $600 million in cuts that need the Legislature's approval. That could include funding cuts to higher education, local hospitals and other programs as well as the leasing of state assets and services - such as the lottery --to private companies.

Those cuts, which could force higher local school tax bills, will contain most of the pain Paterson said is needed.

As for the $630 million in cuts Paterson can order alone within the executive branch, the Democrat said a “hard freeze” on hiring is now in effect. That doesn't mean any layoffs, but each of the thousands of openings each month must now be deemed essential by the

governor's office before it is filled. Layoffs are possible if the Legislature doesn't meet its cost-savings target.

“It is up to all of us to disengage from a kind of self-absorption,” Paterson said. He referred to years of high spending in the Legislature, where he served for 20 years, that created budget deficits bailed out by Wall Street tax revenue. “We have to wake up New York to the possibility that we all have to feel some pain.”

Paterson's proposal to cut $1.23 billion from the $56.3 billion general fund in the state budget amounts to about 2 percent, if the Legislature agrees to its $600 million part. But any cut in funding is rare in Albany, where special interests including public worker unions have great influence.

“It's a start, but it's only a start,” said E.J. McMahon of the Empire Center for New York State Policy, part of the fiscally conservative Manhattan Institute. “It's good that he's proactive. But the question is, could he be more proactive?”

State Conservative Party Chairman Michael Long likes the Democratic governor's tone, but called the cuts “a very small amount.”

“While it may be baby steps, it at least is a beginning,” Long said. He said Paterson issued a rallying cry against high spending and taxes that drive employers and young New Yorkers out of state.

He said this election year, whether a lawmaker is “Republican or Democrat, liberal or conservative, they should go back and say, `My concern was about my children and your children.' The time has come to spend within our means.”

As for the Legislature, the Senate's Republican majority has already taken cuts in school aid off the negotiating table. Meanwhile Assembly Speaker Sheldon Silver, a Manhattan Democrat, said his majority won't cut its highest priority health and education programs from pre-Kindergarten, school aid that has hired more teachers and reduced class sizes, and health care for the elderly.

“I would not support the layoff of state workers,” said Senate Majority Leader Dean Skelos, a Long Island Republican. “We don't balance the state budget by throwing people out on the street.”

Instead, Skelos said the state can save money through efficiencies, such as ending special commissions and task forces that cost the state in travel expenses. He also said the state should adopt the Senate Republicans' proposal to cap state spending at 4 percent, which he said would save about $2 billion a year.

While “everything is on the table,” he said he won't cut the state's $20 billion in school aid, which received a historic increase in April of about $1.8 billion. He also won't raise taxes or fees and said Paterson's idea of privatizing state assets and services through sale or lease won't work.

McMahon said the state has been here before.

“There are lessons to be learned here from history,” McMahon said.

He said former Democratic Gov. Mario Cuomo, in 1990-91, addressed a fiscal crisis with “tax increases, borrowing one-shots and denial,” which cost him his job.

His successor, Republican Gov. George Pataki, cut spending and taxes in 1995. It cost him his early popularity, but was a key element in two successful re-election campaigns.

“Paterson certainly sounds like Pataki circa 1995,” he said.

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AP Writer Karen Matthews in New York City contributed to this report.

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