Preheat oven to 350 degrees. Coat a one-quart casserole dish with nonstick spray.
In a small saucepan over medium-high heat, melt butter until foaming. Whisk in flour until cooked through, about 1 minute.
Whisk in milk until smooth. Bring sauce to a boil, reduce heat, and cook until thickened. Stir in 1 cup cheese and season to taste with salt and pepper (I like 1 teaspoon salt and 1/2 teaspoon pepper).
Layer half the sliced potatoes in bottom of prepared casserole dish. Top with half the cheese sauce. Layer the second half of potatoes on top and top with remaining cheese sauce.
Sprinkle remaining 1/2 cup cheese on top. Sprinkle with paprika for color. Bake uncovered for 1 hour. Let stand 10 minutes before serving.