Place water in a saucepan; bring to a boil. Stir in rice. Cover, reduce heat, and simmer 20 minutes or until rice is tender and liquid is absorbed. Add milk and next 3 ingredients; stir. Stir in 1 cup cheese.
Spoon mixture into an 11- x 7- x 1 1/2-inch baking dish coated with cooking spray. Cover and bake at 350° for 30 minutes. Uncover; sprinkle with remaining cheese and paprika. Bake 5 additional minutes.