NEW YORK (Reuters) - New York state employees should be asked to accept a wage freeze, and when their contracts expire, pay cuts could be on the table, Governor Andrew Cuomo said on Monday.

The Democrat, who must close a $9.2 billion deficit, said he was looking forward to working with labor unions in a cooperative way to negotiate less costly contracts.

But the state's economic plight makes a wage freeze a necessary first step.

"I said earlier in the campaign, we were talking about the new fiscal realities that we're going to have to face...I said that a wage freeze was going to be necessary and I believe it is," Cuomo told Albany reporters. Later, he said: "This is a multiple year problem and we will need a multi-year solution."

In a statement, Cuomo said he is reducing his pay and that of some of his top aides by 5 percent.

"Change starts at the top and we will lead by example," said Cuomo, who took office on January 1. New York governors are paid $179,000.

Also joining the list of cash-pinching states was Massachusetts, which docked its legislators' pay by 0.5 percent.

Since 1998, their pay has been linked to the median income in the state, and it fell by that same amount in 2009 and 2010, explained a spokeswoman for the Department of Administration and Finance.

New York's overall pay freeze, which the governor has the power to enact on his own, would affect approximately 137,000 people whose jobs he controls. The savings were estimated at $200 million to $400 million, according to Monday's New York Times, which first reported the plan.

The New York Times story also said the governor would propose capping spending increases at the inflation rate on Wednesday when he gives the annual State of the State address.

New York's outgoing governor, Democrat David Paterson, laid off nearly 900 workers before finishing his term on December 31, 2010. He lost a court fight over furloughing state workers, a strategy other cash-poor states have used.

Cuomo has also repeated campaign pledges not to raise taxes, including the personal income tax, which means a surcharge on millionaires' salaries will expire.

(Reporting by Joan Gralla; Editing by Kenneth Barry)