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Paterson says the plan does not include tax hikes.

The governor's announcement comes a day after state lawmakers refused to come up with their own ideas for cuts.

“During a time of uncommon difficulty, we need to work together for the common good and enact a consensus plan that helps us avoid the severe consequences faced by other states that failed to swiftly address their budget problems," said the governor. "This will mean hard and painful choices, but that is exactly the type of leadership New Yorkers deserve from their public officials.”

Paterson says the state will cut 10 percent from all agencies. Specifically, $480 million will be cut from education, $287 million will be cut from Medicaid, and $187 million will be cut from other health and mental hygiene programs.

Transportation and social services will also be hit.

"I wonder if you could ever imagine how it feels for me, who's been an advocate for resources for all these areas to actually participate in these cuts," Paterson said. "It is pain that's indescribable. But it is the only way to keep this state from going into default."

According to the governor, the cuts, which will save the city $9.3 billion over five years, are needed to move the state to financial recovery.

While there are no set plans for layoffs, the state's budget director said it is a possibility.

New York State Comptroller Thomas DiNapoli issued a report yesterday predicting the deficit could reach $4.1 billion by year's end -- $600 million more than the governor's recent estimate.
DiNapoli says if nothing is done by the governor and state lawmakers, the deficit could reach $9 billion by next year.

Paterson's proposal will now go before the state Legislature, which will have to approve the cuts. The governor has tentatively planned a special session for October 27.

Manhattanites who NY1 spoke with Thursday morning said they're preparing themselves for the worst.

"Well, all the cuts are going to go to the hospitals, schools, all that, you know. Once again, it's another cut for the average person," said one New Yorker.

"Hopefully, [the funding] goes to the schools and education, you know, or like a hospital. It's tough," said another.

"Yes, of course it worries me, the greatest part of New York so far was that the recession hasn't impacted us near what it's impacted the rest of the United States," said a third.

Paterson has asked state legislators to come up with a plan to cut more than $2 billion in cuts. But state leaders ignored Wednesday's deadline for proposals.

Paterson has already slashed a half-billion dollars from the budgets at executive branch agencies.

Meanwhile, Mayor Michael Bloomberg praised the governor for trying to get the state's fiscal house in order.

The mayor said he's seen the huge impact California's budget crisis has had on Los Angeles and that New York City cannot afford a similar fate.

Bloomberg also commended the governor for trying to treat everyone fairly with evenly distributed cuts.

In a statement, Bloomberg said, "Since his first days in office, the governor has tried to bring some needed sense of fiscal responsibility to Albany. He is continuing that effort with this plan through spending reductions and the new, more affordable pension tier we have been pushing for, which would produce enormous long-term savings for the city.”