Just last month the state projected a $4 billion budget shortfall. Now the number could be more than double that, reaching $8.6 billion. So how does the state plan to plug the budget gap? Medicaid, school aid, state employee benefits and salaries could all be on the chopping block.

New York's finances appear to be a lot worse than originally thought.

Just last month the state projected a $4 billion budget shortfall. Now the number could be more than double that, reaching $8.6 billion.

State Comptroller Tom Dinapoli released a report showing income tax receipts are down. A second report predicts the problem could continue into next year.

So how does the state plan to plug the budget gap? Medicaid, school aid, state employee benefits and salaries could all be on the chopping block.

"There's always been a lot of givens, certain areas like education, are going to see a $1 billion increase,” says Assemblyman John McDonald. “I don't know if that's going to happen this year."

"I think the bottom line is that, it's especially important now at this juncture for the state to be cautious,” said Deputy Comptroller Robert Ward.

Fiscal watchdog groups also say there's a real possibility of some tax increases but they're not sure where. State budget office officials say they are closely monitoring the situation.