SYRACUSE, N.Y. (AP) — Gov. David Paterson, who aims to cut the next state budget by up to 10 percent, said Tuesday that the Division of the Budget and key members of his staff will begin work on proposals to reduce future state spending.

What's your opinion? Discuss this story on the Economic Development forum of North Country BizConnect.

Paterson also said he intends to take a close look at the STAR property tax relief program in the next couple of months. STAR sends about $5 billion a year in state funds that are supposed to reduce property taxes, but Paterson has noted that most school property tax bills continue to rise faster than inflation.

"I don't know of any changes that I can tell you that I want to make to STAR," Paterson said. "I just know that when we put STAR in, property taxes went up 7 percent for five straight years. Our response as a government is to create more STAR."

To avoid the usual Albany ploy of limiting only the budget's rate of increase, Paterson's internal working group — including Budget Director Laura Anglin, deputy director Kristen Proud, senior adviser William Cunningham and other senior staff members — will develop recommendations for actual cuts. They will report back to Paterson before the end of the legislative session.

Earlier this week, Paterson directed department heads to cut costs and restrict hiring.

"The economic forecast is grim. We as a government have to tighten our belts and respond to the crisis that's going on," Paterson said in his keynote address to the Metropolitan Development Association, a central New York business group. "We've got to put a stop to this spending spree that's out of control, that comes from that planet called Albany. We can succeed. It can be done through a collaborative effort."

Areas the group will focus on include: state agency expenditures on equipment, services, staffing and contracting levels; spending by public authorities; capital projects not needed to protect the public's health and safety; programs funded by dedicated fees and fines that do not provide critical services; and discretionary local grants that may be more appropriately financed at the local level or privately, or not at all.

The analysis will focus on state operating funds, which Paterson called the most accurate measure of state spending. Once the study is complete, the administration will seek comment from groups that have been pushing for reforms in the budget process.

"This process will not be easy, but we must be realistic about where the economy is going and how New York can plan appropriately," Paterson said.

In 2007, former Gov. Eliot Spitzer and the Legislature provided a historic $1.3 billion increase in the STAR tax relief program for property owners. Yet school taxes still increased around the five-year average of 7 percent.

Before he resigned last month, Spitzer created a bipartisan commission with investigative and subpoena powers to back up recommendations for a tax cap that he championed. The commission will also reconsider the state's own unfunded mandates on schools and municipalities and recommend ways to cut waste in education without hurting instruction, as well as how to direct tax breaks more to middle class families.

The commission, headed by Nassau County Executive Tom Suozzi, is due to release its report in the coming week.