He's also calling for further use of performance and competitive monies when doling out cash to local governments.
Education and Medicaid comprise the lion's share of state appropriations. Medicaid annually costs the state over $54 billion and is a significant part of the projected $10 billion 2011 deficit.
In what he's calling a reshaping of New York's governmental structure, Cuomo wants to recreate the programming to fit the funding level instead of the other way around.
"We have to find alternative ways to reach that cut. It's usually through the reimbursement rate," he said. "Let's see if we can find inefficiencies in the program so we can actually provide a better service for less money."
He's calling for the creation of commissions that would seek to dissolve or consolidate unnecessary state agencies and reduce outdated mandates on local governments. The commissions are slated to begin work as early as Friday.
Though using the example of costly and ineffective youth-offender penitentiaries, Cuomo did issue a warning to the many upstate towns that depend on state prisons to remain viable.
"An incarceration program is not an employment program," he said. "If people need jobs, lets get people jobs. Don't put other people in prison to give some people jobs."
While much of the speech focused on reducing state spending and taxes while focusing on private sector development, he did call for New York to return to its prominence as a leader in progressive politics.
Cuomo threw haymakers at state lawmakers, calling for legislative ethics reform - including full disclosure of outside incomes and the legalization of gay marriage. He placed much of the blame for New York's skyrocketing costs on lawmakers' commitment to special interests.
Though calling for bipartisan solutions, Republican state Senate Majority Leader Dean Skelos and Democratic Assembly Speaker Sheldon Silver drew some battle lines.