ALBANY -- Gov. David Paterson sees New York's condition as "perilous," but the courage to balance the government's budget and priorities can create "a brighter, smarter future," though it could take months and even years.

In his first State of the State address, Paterson called Wednesday for "shared sacrifice" for a future where everyone has access to health care, excellent education and a good job and will breathe clean air and use clean energy.

"We still do not know the extent of the economic chaos that awaits us," Paterson told a joint session of the state Legislature. Noting New York entered a recession in August, he said an estimated 225,000 New Yorkers could lose their jobs before the crisis is over, and "the pillars of Wall Street have crumbled."

Paterson already proposed a $121.1 billion budget for the upcoming fiscal year, up 1.1 percent, that includes layoffs, a cut in school aid and 88 new or higher fees.

"We cannot solve our problems overnight or without sacrifice -- they run too deep for that," Paterson said. "These problems may last for many more months or even years. But we can solve them."

The Democratic governor proposed several initiatives Wednesday, including establishing an upstate research consortium to develop hybrid electric batteries and energy storage technologies.

"The future of America's energy and transportation policies rest on the development of plug-in hybrid electric vehicles," Paterson said. "The state that positions itself in this market will revitalize its economy for years to come."

He said a statewide goal of meeting 45 percent of electricity needs by 2015 through improved efficiency and clean renewable energy. That would include "greening" schools and hospitals, financing mechanisms from the Public Service Commission and other public authorities to provide financing for retrofitting homes and businesses for energy efficiency and renewables.

Paterson said hitting that goal would create an estimated 50,000 jobs.

He called for careful investments in infrastructure: roads, bridges, higher education institutions, statewide broadband installation, computerization of medical records and clean water and wastewater systems.

Paterson said property taxes should be capped and the cost of doing business in New York lowered. He said the state's Empire Zone program "does not work and we need to reform it."

Other initiatives included:

--A five-point plan to address widespread obesity, with a new revolving loan fund to increase healthy food markets in underserved communities, banning trans fats in restaurants, banning junk food sales in schools, putting surcharges on sugared beverages and requiring calorie posting in chain restaurants.

--Establishing a Higher Education Loan Program to provide more than $350 million in affordable loans to students in need.

--Reforming financial regulation so the savings and retirement funds of New Yorkers won't be at risk. "If the federal government does not act, then I shall," he said.

--Partnering more with the private sector to manage state assets.

--Working with non-profits to recruit, train and retain more volunteers and increase the Regional Volunteer Centers around New York.

--Further reform of the Rockefeller Drug Laws.