Facing hurdles such as a new administration, a $4.6 billion budget deficit, a deadline of April 1 and an economy the governor said “has not been as dismal since the dark days of Sept. 11,” state leaders jump-started budget negotiations last Tuesday.

With the Division of the Budget declaring an economic recession in New York state, Gov. David Paterson has proposed a significant change that would cut an additional $800 million from the state budget.

And while legislative leaders did not agree on how much revenue is available, they did meet for the first time last Tuesday to begin budget talks.

The governor said as a result of difficulties on Wall Street, which accounts for nearly 20 percent of the state’s revenues, and the loss of private sector jobs for three consecutive months, the state must adapt to difficult economic times.

The governor is proposing a 2 percent reduction in spending on operating state agencies and an additional 2 percent reduction in spending on assisting local governments and programs. Programs exempt from the governor’s cuts are education, health and public assistance.

“We have to hold off on spending,” said Assembly Minority Leader James Tedisco, R,C,I-Schenectady. “But what we do spend we have to spend on priorities [such as] infrastructure, education, health care … and we have to do something about the crushing burden of property taxes.”

The cuts would reduce total state operating funds in the budget from $81.6 billion to $80.8 billion and reduce year-to-year spending growth from 4.8 percent to 3.7 percent in the Executive Budget.

Paterson said the Legislature must work within its means as a result of the fiscal challenges faced by the state.

“We can’t just budget for today,” said Assembly Speaker Sheldon Silver, D,WF-Manhattan. “We have to budget for tomorrow.”

Elizabeth Lynam, the deputy research director of the Citizen’s Budget Commission, said the $800 million reduction in spending is a “good start” for the governor. “The spending that was proposed in the Executive Budget is not going to be sustainable for the full year considering what is happening with the revenues,” Lynam said.

Lyman said the commission is also supportive of the across-the-board 2 percent spending decrease in state operations. “It’s important to set some targets there and be more productive,” Lynam said.

Peter A. Baynes, executive director of the New York State Conference of Mayors and Municipal Officials, voiced his concerns with the governor’s 2 percent cut in funding for local aid programs. “These proposed cuts in local government aid would be a direct hit on New York’s already-overburdened real property taxpayers,” Baynes said. “The governor and legislative leaders have declared property tax relief their top priority, but this proposal, if enacted, would force municipal property taxes even higher.”

NYCOM is particularly concerned with how this cut will affect their Aid and Incentives for Municipalities program, which Baynes said would suffer the most. According to the conference, this program provides funding for local governments, specifically in economically distressed cities, and provides property tax relief. “This proposal would add insult to injury by shifting the state’s fiscal challenges onto local governments and their residents,” Baynes said. “NYCOM urges the governor, Senate and Assembly to negotiate a budget that helps, rather than harms, New York’s property taxpayers.

At the leaders first budget meeting, where Paterson was joined by Senate Majority Leader Joseph L. Bruno, Senate Minority Leader Malcom Smith, Silver and Tedisco, a disagreement arose over how much revenue is available for the final budget.

Bruno, R,C,I-Brunswick, attributed the differing opinions among the leaders to the fact that they all “count differently.” The governor said the available funds should be a “finite” number.

In order to reach a conclusive bottom-line on the amount of revenue available for the budget, Silver said the Legislature needs to work with the budget committee and various other financial committees.

In order to reduce spending, Tedisco suggested an emergency hiring freeze for the state workfoce until the budget is in place. Although he received little support from the governor on this suggestion, Paterson said he would consider cutting some of the vacant state job positions.

According to the Division of the Budget, revenue projections for the state have declined by $634 million since the release of the Executive Budget. During the 21-day amendment period in mid-February, revenue projections decreased by an estimated $384 million, and a “Consensus Economic and Revenue Forecast” that received the joint approval of legislative leaders lowered projected revenues by another $250 million on March 1.

Kenneth Adams, president and CEO of the Business Council of New York State, agreed that the governor is taking “an important step in the right direction” by cutting spending by $800 million. Adams said that although driving spending down is important, he would like to see what he calls $1.3 billion in taxes and fees in the proposed Executive Budget eliminated. Adams said the state’s business community is being “clobbered” by taxes during difficult economic times.

To help close the gap, Silver is pushing for a tax increase on New Yorkers who make more than $1 million in order to generate more revenue.

Bruno said the state should be cutting taxes not be increasing them. Echoing his remarks, Smith, D,WF-St. Albans, said that raising taxes is not the way to cope with declining revenue during difficult economic times.

The Senate majority leader said the Senate has made $1.5 billion in reductions from the Executive Budget in its spending proposal and urged the other state leaders to pass it.

Under Paterson’s proposal, the General Fund would be $56 billion, and the all-funds budget would be $123.5 billion. The proposal would also decrease the state’s structural deficit by a total of $1.6 billion over the next four years.

Paterson said he is cautious of pushing the state’s economy further into debt and does not want to have to come back in December to revise the budget.