New York Gov. David Paterson yesterday called on the Legislature to change the way it crafts budgets in order to address the state’s fiscal mess.

“This is a winter of reckoning,” Paterson told a joint session in Albany during his second state of the state address. “We have to accept the old way of doing budgets is unsustainable.”

Paterson is expected to propose his fiscal 2011 executive budget on Jan. 19 and it will have to close a projected $6.8 billion deficit.

Deficits ahead will require “greater sacrifices” than in the past, Paterson said, though he did not spell out what kind of sacrifices.

The state’s revenues have taken a beating in the recession. New York’s general fund ended December with a negative $577 million balance, for the first time in recent history, the state comptroller’s office reported on Monday.

Last year, Paterson proposed a $121.1 billion fiscal 2010 budget, but by the time it was enacted and federal stimulus funds were added, the budget had grown to $131.9 billion. Stimulus money dries up after 2010, leaving open the question of how the cash-strapped state will deal with the loss.

Paterson repeated a call for a statutory cap on spending growth.

“Cultures of addiction to spending, power, and approval have ruined empires and now they threaten the Empire State,” he said. “It’s easier to deny reality and to demand that which we cannot afford than to accept that years of living on the margins of our means have had to end.”

Although much of the speech took a somber tone, the governor highlighted the success of the Minority and Women-Owned Business Enterprise task force he created in 2008. The group issued guidelines in December 2008 designed to increase the participation of minority- and women-owned firms in the marketing of state-backed bond deals. In 2007, such firms were involved in 4.2% of debt issuance on state deals. Today participation has risen to 23.9%, Paterson said.

Last year the state issued $6.5 billion of new-money and refunding personal income tax bonds, its main credit, according to Thomson Reuters.

On the economic development side, Paterson announced a new program to focus on new technologies and green energy technology. To accomplish this, he proposed a $25 million fund to seed high-tech projects and help develop partnerships between research institutions and business. He also called for replacing the state’s Empire Zone program that gives tax breaks to companies in designated areas with the Excelsior program that would provide tax credits to new technology firms. 

State Comptroller Thomas DiNapoli echoed Paterson’s call for fiscal restraint.

“Next year’s budget must reflect what New Yorkers desperately need — a state government that doesn’t make promises it can’t keep and bases its budget on reality, not political pipe dreams,” DiNapoli said in a statement. 

Senate Republicans called on the Democratic majority to engage in a more transparent budget process.

“We have seen what happens when one party controls every lever of state government,” Sen. Dean Skelos, R-Rockville Centre, said in a statement. “Democrat leaders went behind closed doors last year and refused to listen to our ideas. The result was more wasteful spending, higher taxes, and no accountability.”

But Senate Majority Conference Leader John Sampson, D-Brooklyn, blamed Republicans who lost control of the Senate last year.

“For decades, the Senate spent, borrowed, and taxed New York into fiscal crisis, and now millions of families have reached their breaking point, unable to survive more of the same old pass-the-buck politics,” Sampson said in a statement. “We will reverse decades of fiscal irresponsibility by reining in out-of-control spending, consolidating state agencies, and putting the taxpayers’ priorities above all else.”

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