Estimated gaps over the next four years have increased by more than $20 billion since July, including a $1.5 billion shortfall in the current year ending in March, Governor David Paterson said at a briefing in Manhattan today, citing Division of Budget figures.

``New York is at the epicenter of an extraordinary financial crisis on Wall Street,'' Paterson, a Democrat, said. ``We will have no choice but to take bold and aggressive action to reduce state spending.''

New York, which typically derives 20 percent of its tax revenue from Wall Street, expects the state's financial-sector job losses to total 45,000, higher than after the 2001 terrorist attacks, when cuts totaled 30,000. Total job losses in the state during this economic slowdown will reach 160,000, Paterson's Budget Director Laura Anglin said.

The state's unemployment rate is expected to reach 6.5 percent next year, up from the current 5.8 percent, which is its highest level in more than four years.

More Than Double

Next year's gap is more than double the $5.4 billion deficit projected in August, after lawmakers agreed to reduce spending and Paterson froze hiring. Earlier this month, the governor set a special legislative session for Nov. 18 to make more cuts.

The goal for the November meeting is $2 billion in savings for the current year, more than the projected deficit, ``in order to accommodate further deficits,'' Paterson said.

The state's budget plan for the current fiscal year, which is about halfway over, calls for $85.2 billion in spending on operations and capital projects, up 4.7 percent from last year. Before changes to be negotiated in November, next year's spending plan would be $94.2 billion, an increase of almost 11 percent.

This year's tax revenue is expected to be $1.48 billion less than projected in July, and next year's may be $5.8 billion less, according to the budget division.

Personal income-tax receipts this year are expected to be $1.17 billion below projections, with business taxes falling short by $404 million and sales-tax estimates dropping by $101 million.

`No Segment' Untouched

``There is no segment of this budget that will not be cut,'' Paterson said. He asked leaders of the Senate and Assembly to come up with their plans for $2 billion in savings.

``With budget gaps this large, the state won't be able to keep a lot of the spending promises they made in the past,'' said Elizabeth Lynam, deputy research director at the Citizens Budget Commission, a New York-based group that promotes efficiency in government.

The largest category of state spending, $20.7 billion in aid to local school districts, was spared from cuts earlier this year. Next year's planned increase of about $2 billion might be cut while still sparing the neediest schools, Lynam said.

To further shrink the state's payroll, which the budget office said will fall by 851 jobs to 199,400 this year, ``layoffs might be required,'' Lynam said. ``The state needs to get tougher with unions and ask them to come to the table with some savings proposals.''

Income Taxes

Labor unions and nonprofit groups urged state leaders to consider increasing revenue through higher taxes rather than relying exclusively on spending cuts. A combination of spending cuts, use of available reserves and tax increases would be less damaging to the state's economy, said Frank Mauro, executive director of the Fiscal Policy Institute.

Paterson said he and legislative leaders have agreed not to seek higher taxes for now. Paterson joined Senate Republicans earlier this year to oppose increases in the state's tax rate on incomes of more than $1 million, which he has called ``a last resort.''

Assembly Speaker Sheldon Silver, a Democrat from Manhattan, said yesterday he will work in November to balance this year's budget without raising taxes. For next year, when more spending cuts will be needed, Silver said higher income-tax rates should be considered. The state's top rate of 6.85 percent applies to incomes of more than $60,000.

The drop in stock prices and other investments has cost New York's pension fund about 20 percent of its value since April 1, when its assets totaled $153.9 billion, according to state Comptroller Thomas DiNapoli. The decline may require increases in state contributions beginning in April 2010, the Budget Division said.

In an open letter to congressional leaders, Paterson urged the federal government to give states representation on the panel overseeing spending under the Emergency Economic Stabilization Act. He also plans to ask Congress to provide states with ``immediate, direct fiscal relief'' when he testifies tomorrow before the House Ways and Means Committee in Washington.

``We are going to need federal assistance,'' Paterson said.

To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net; Henry Goldman in New York at hgoldman@bloomberg.net.

bloomberg.com/apps/news