New York Gov. David Paterson proposed a state budget on Tuesday that uses a wide array of spending cuts, plus $1 billion of new taxes, to erase the state’s deficit.

The proposed budget for the state’s 2010-11 fiscal year totals $134 billion, an increase of $787 million, or 0.6 percent, above current spending. The budget plan eliminates the state’s $7.4 billion deficit.

The fiscal year starts April 1. State legislators will have to approve any budget proposal for it to become law.

“These are unprecedented times,” Paterson said. “The days of continuous taxation and the days of continuous spending have got to end. The era of irresponsibility has to stop. The age of accountability has arrived.”

The majority of Paterson’s plan relies on spending cuts, including reductions in school aid, the budgets of state agencies and aid to municipal governments.

Paterson also wants to enact at least $1 billion in tax hikes, including higher taxes on soft drinks and cigarettes. He wants to boost taxes on hospital revenue and add other surcharges onto health care providers, slicing into profits in the health care sector and likely making health care more expensive for business owners.

Also, Medicaid—by far the largest slice of the state budget—is scheduled to grow by $900 million, an increase of 2 percent.

Paterson justified the overall spending increase by noting the budget would grow at less than half of the expected 2.0 percent inflation rate for the state’s 2010-11 fiscal year.

He also said the spending increase is a result of fixed costs the state cannot control. For instance, debt payments are expected to grow 17 percent in the 2010-11 budget.

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