New York Governor David Paterson estimated that Wall Street bonuses will shrink 20 percent this year, severely denting the state's financial outlook. The 20 percent figure is within the range of estimates released earlier in 2008 by private-sector forecasters such as Johnson Associates.

Despite the housing slowdown last year, Wall Street professionals raked in $33.2 billion in bonuses for 2007 - only slightly below 2006's $33.9 billion, according to the New York state comptroller’s office. The average employee collected $180,420 in bonus pay.

Paterson told a news conference that Wall Street's profit slump could cost the state $1.7 billion overall, according to Reuters. He estimated that each 10 percent reduction in bonus pay reduces New York's tax take by $350 million.

While most U.S. states face budget shortfalls this year as the economic slowdown crimps tax revenues, New York may be more vulnerable than most due to its heavy reliance on the hard-hit financial sector. Although Wall Street jobs constitute only 5 percent of all jobs in New York City, they make up 23 percent of the city's total wages, according to the New York State Department of Labor.

In May, Johnson Associates, a Wall Street compensation consulting firm, estimated that 2008 company-wide average bonuses will decline between 15 percent and 35 percent compared with 2007 among nine major investment and commercial banks.