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By Joan Gralla

NEW YORK, July 29 (Reuters) - New York Gov. David Paterson on Tuesday said he will recall the legislature next month to solve a budget crisis that he said reflects Wall Street's sliding fortunes, saying public-private partnerships and spending cuts will be needed.

Paterson said the state's budget shortfall for the multiyear period starting next April has soared 22 percent in just 90 days, to an estimated $26.2 billion from $21.5 billion.

"The damage on Wall Street is infecting all of our communities and its effects on New York state finances are devastating," the Democratic governor said in a televised address. He said he also will be "addressing the size of the state work force."

Paterson is recalling the legislature on Aug. 19 to solve what some pundits have called the state's worst fiscal crisis since the 1970s.

About one out of every five tax dollars that the state collects comes from Wall Street banks and brokerages, which have written down hundreds of billions of dollars of losses from their ill-fated subprime mortgage investments.

In June, New York's tax take from its top 16 financial companies plunged by 97 percent to $5 million, down from $173 million in June 2007.

"It is time for us and other governments to cut up our credit cards," Paterson said, urging elected officials from Albany to Washington and business and labor leaders to "join us in this great effort."