BOSTON -- The state's financial picture looks so bleak, primarily because of a big dip in tax revenues, that Gov. Deval Patrick says he's going to have to take drastic action to slash the budget before it gets worse.

"The national economy and the financial system on which the economy relies is under significant stress. As the impact spreads to local businesses and families, it has now spread to the state budget," Patrick said Thursday.

State revenues for the first quarter of the fiscal year are significantly lower than revenue officials had anticipated, he said.

"By the end of September, last month, state revenues for the first quarter of this fiscal year are $223 million below benchmark, excluding non-recurring receipts. When you count those one-time receipts, we're off $143 million," Patrick said.

Preliminary revenue collections for September 2008 totaled $2.100 billion, which is $188 million below the monthly benchmark based on the FY09 revenue estimate of $21.402 billion, Revenue Commissioner Navjeet K. Bal said.

Total tax collections for September were $108 million or 4.9 percent less than a year ago.

As a result, the governor said he will reduce his own office's $1.5 million budget by 7 percent and has asked other state offices to enact cuts in their areas.

"I will cut spending to the parts of the budget where I have the authority to do so," Patrick said Thursday.

Patrick said he has also directed the State Office of Transportation to dismantle the Transportation Authority and will work to restructure the state's Big Dig debt and reduce state health care costs.

He also wants existing state agency offices merged or consolidated and he wants to reform the state and MBTA pension systems, all in an effort to ensure a balanced budget come the end of the fiscal year.

"I know what I've outlined won't be easy," Patrick said, insisting that the state would try to meet its most pressing financial obligations, such as Local Aid and Chapter 70 funding.

At the same time, Patrick said, the state will continue to be marketing itself as a "home" for green and high-tech industries as well as a center for higher education.

"Here in Massachusetts we have been blessed to be less effected by the national downturn," he said, but state managers are trying hard to figure out how to deliver essential services in a more cost-efficient way.

He said the sales tax has continued to be in decline for some time now and the banking credit crunch has also had an impact on state finances.

“Weakness in withholding, sales and corporate/business tax collections dropped total revenues well below the monthly benchmark, which in turn caused collections for the year to fall below the benchmark for the first quarter of FY09,” Bal said.

Sales and use tax collections totaled $337 million, down $6 million or 1.8 percent from the same period last year and $23 million below benchmark, according to the state Department of Revenue.

In addition, both motor fuels and deeds excise tax collections were down. Fuels tax collections totaled $58 million, down $2 million from a year ago while deeds excise collections totaled $13 million, down $8 million from a year ago.

Year to date, income tax collections are $53 million below benchmark; sales and use tax collections are $75 million below benchmark; and corporate and business tax collections are $14 million above benchmark thanks to the settlement received in July.

The state's Speaker of the House, Therese Murray, and Senate President Sal DiMasi, responded to the governor's plan by saying they would attempt to make even deeper cuts than called for.

“The Governor has asked us, along with the constitutional officers and Judiciary, to cut 7 percent. The Senate and House of Representatives will go even further than this request by reducing our collective budget in FY09 by 10 percent, sending $9.1 million to the General Fund for other critical spending priorities," they said in a prepared statement.