ALBANY, New York (Reuters) - New York Gov. David Paterson Tuesday gave a more dire outlook on the state's economy, saying Wall Street bonuses could be slashed by 30 percent to 40 percent this year and tax revenues on capital gains could also fall much more than he previously estimated.

Paterson, who said the state may be facing its worst hardship since the Great Depression, said economists he had consulted told him tax revenues on capital gains could fall as much as 35 percent.

The governor, who took office in mid-March, has already pruned $630 million from the current budget and wants the legislature to slice another $600 million. The state's budget totals around $121 billion, and shortfalls over the next three years top $26 billion.

The governor spoke on Albany radio station WCBI ahead of an emergency legislative session on addressing the state's budget shortfall.

Paterson said his previous forecasts of a 10 percent to 20 percent drop in Wall Street bonuses and a 16 percent to 24 percent fall in capital gains tax revenues likely were wrong.

New York's banks and brokerages generate one of every five tax dollars in the state, and bonuses comprise a large portion of the income earned by many on Wall Street. The bonuses, which have fallen with Wall Street's earnings, are critical drivers of state revenues.

Paterson stressed that he is assessing the economic outlook, which Assembly Democrats have said is not as dire. "But sometimes you have to feel it. Like in Star Wars, when Luke flies a plane. Well, the plane is telling me that it's going to get much worse," he said.

Legislators have not officially agreed to any budget cuts, Paterson said.

A source familiar with the talks said there was a preliminary agreement to slash $400 million from Medicaid, the joint state-federal health plan for the poor, disabled and elderly. Another $115 million would be trimmed from state and city universities, as well as cuts in tuition assistance and perhaps local aid.

The Republican-led Senate and Democratic-controlled Assembly plan to enact bills that would amend the constitution by adding an annual spending cap set at the lower of 120 percent of the inflation rate or 4 percent.

If the state got extra revenues, the cash would be divided between a new reserve fund and residents, based on their income tax liability.

Republican Sen. Serphin Maltese said he doubted a revenue-raising plan involving additional video lottery terminals for Aqueduct Racetrack in Queens would be overhauled to instead add the machines at Belmont Park on Long Island. Maltese, who represents Queens, noted Senate Majority Leader Dean Skelos, who also is a Republican, has said he would consult local lawmakers.

SL Green Realty Corp , Delaware North and Capital Play, whose partners include the Mohegan Tribal Gaming Authority and Victoria Racing Club, have sought the gaming contract. Another source said a decision was "imminent."

Paterson said there were opportunities to raise some taxes, including having Indian reservation stores pay cigarette taxes. Such plans have repeatedly failed for over a decade.

"There are a certain number of taxes that we could raise in certain areas but that tax on the Indians would require some litigation and some real negotiation, which I've been meaning to do anyway," he said.

While the Senate enacted the governor's 4 percent property tax cut, the Assembly instead approved a so-called circuit-breaker that includes higher taxes on millionaires. (Reporting by Elizabeth Flood Morrow in Albany; Additional reporting by Joan Gralla in New York; Editing by Dan Grebler)