New Yorkers can be tricky to appease. Perhaps that's one of the reasons they have such a boring flag:
To the majority of people who don't live in the state, the term "New York" refers to New York City more often then not. To those who live in New York City, it means the same thing. To the 11 million or so who don't live in the Five Boroughs, it refers to the whole state. Thus the problem of finding symbols that would represent the state in both New Yorkers' eyes and for everyone else. Obvious choices of the Empire State Building or Statue of Liberty are out because they don't have the same resonance for people in Binghamton, Rochester, or Utica (also, the Statue of Liberty is technically in New Jersey). On the flip side is the fact that Upstate New York has relatively few landmarks that would be easily recognizable. Niagara Falls is a possibility, as is the State House in Albany, but the former is shared with Canada and the latter looks too much like a mansion Vanderbilt or Hearst might have owned.
A greater unifying theme, and one that is unique to New York, is their history as a Dutch colony. Before they were named for the Duke of York, New Amsterdam was the capital of New Netherland. The first president from New York, Martin Van Buren, actually grew up speaking Dutch and learned English as a second language. The current flags of New York City and Albany reflect this, using the orange, blue, and white taken from the Dutch flag:
The Dutch flag consists of horizontal stripes, like the flag of Albany, so the NYC flag is a bit more distinctive when it rotates them. However, sticking too close to the NYC flag would doubtless be unpopular elsewhere. Plus, they both have seals in the center, and we can't have that. Instead I propose to keep the color scheme, but include a icon to represent the whole state:
Orange, blue, and white remain, speaking to the history of the state and by making orange the most prominent color, giving the flag a unique look that would make it easily distinguishable from the other states. The narrowness of the blue stripe is meant to represent the Erie Canal, an Upstate landmark that greatly influenced the City as well. When it was completed in 1825, goods could be taken by water from Chicago and the rest of the Old Northwest (Ohio, Indiana, Wisconsin, etc.) to the harbors of New York City, bringing even more business to that already thriving metropolis, as well as other areas of the state. The Erie canal is one of the few symbols that really tie the state together and this simple, clean rendering is far easier to draw, distinguish, and remember than their current seal on blue arrangement.