ALBANY -- Gov. David Paterson warned Thursday that New York could lose $1 billion in revenue under the Obama administration's decision this week to cut pay to executives at major companies that received federal bailout money.

"I'm not going to defend the people who run these companies," Paterson said on WOR-AM (710) in New York City. "They frittered a lot of money away in reckless schemes. But the reality is that in the end, New York just lost $1 billion because of that act."

Paterson later put out a statement that expressed similar concerns, saying he understands the need to curb executive compensation, but "it is not good news for New York's tax revenue."

The Treasury Department on Wednesday announced that the 25 highest paid executives at the seven companies that received the most federal aid would have to severely cut bonuses and pay. Some include the top firms based in New York, including American International Group and Citigroup.

Members of Congress, including some from New York, have pushed for tighter controls over executive pay.

In response to Paterson's concerns, U.S. Sen. Charles Schumer, D-N.Y., who has sought tougher rules on Wall Street firms, said in a statement, "When you get financial assistance from taxpayers, the rules change. You cannot have the taxpayer paying for exorbitant salaries. Period."

Paterson has recognized the need to tighten controls over Wall Street, but also warned in recent months about the impact the results have on New York's revenue.

The Democratic governor cited the Obama administration's decision this week as another example why state lawmakers can't rely on a Wall Street recovery to help bail New York out of its fiscal woes. About 20 percent of state tax revenue had come from Wall Street before the economy soured.

The state faces a $3 billion mid-year deficit.

"It's like telling your spouse, 'Hey listen, I know we have a lot of bills, but I have eight lottery tickets in, let's see what happens,"' Paterson explained Thursday. "You cannot budget that way."

Paterson has fallen out of favor with the White House in recent weeks. White House officials last month asked Paterson to consider not running for election next year. He has vowed to continue his campaign.

Paterson also was critical Thursday of federal health care reforms being debated in Congress. He said while he understands that the discussions are well intended, New York could ultimately have a larger Medicaid bill if reforms are enacted.

Medicaid is already one of the biggest expenses for the state. In New York, the federal government pays about half of the medical insurance program for the poor, while the state and local governments pay the rest.

It represents about 32 percent of the state's current $132 billion budget, officials said.

Lt. Gov. Richard Ravitch was in Washington, D.C., on Thursday meeting with New York's congressional delegation to discuss the issue, Paterson said.