Gov. Ted Kulongoski's announcement that he will order sweeping budget cuts because of Oregon's $140 million deficit left Ashland School District, Southern Oregon University and other public agencies worried about making ends meet.

Gov. Kulongoski's announcement that he will order sweeping budget cuts because of Oregon's $140 million deficit left Ashland School District, Southern Oregon University and other public agencies worried about making ends meet.

"When we have a cut on state funding, that's a big enough slice in our revenue pie that we have to be concerned about it," said Craig Morris, vice president of finance and administration at SOU.

The governor will force roughly 5 percent cuts on all state agency budgets for the remaining six months of the two-year budget cycle, Kulongoski's office said Wednesday.

In effect, schools, universities, human services and other state agencies will have $850 million less to spend than they thought they would three months ago, when the previous budget forecast was released.

Due to the housing crisis, credit crunch and economic slowdown, Oregon is now in a recession, state economists said Wednesday in the latest revenue forecast report, which prompted Kulongoski to issue the cuts.

"The current financial crisis appears to be of magnitude to the situation in the Great Depression," the report said. "But unlike that time, governments around the world are moving swiftly to provide support to the financial system."

SOU has $3.3 million in reserves, but that may not be enough to cover the amount that will be eliminated from its two-year budget of $37 million, Morris said.

"The cuts are at the state agency level, so we don't know how they will trickle down to SOU. It's a little too early to tell," he said.

Kulongoski plans to release his proposed 2009-11 budget on Dec. 1. University administrators and other Ashland officials will find out then how deep the cuts will be.

About 40 percent of SOU's general fund comes from state money and the rest comes from student tuition and fees. The university's enrollment increased 5.1 percent this year, which, fortunately, will yield more revenue, Morris said.

"We're in a good position to weather some storms. How big a storm? That remains to be seen," he said.

Ashland School District faces a "very serious budget situation" but it is hopeful that education cuts won't be as drastic as reductions at other agencies, said Mat Marr, school board chair.

"This is going to be a very difficult time for all of us," he said. "It's bad news everywhere, but we're going to make sure we find a solution that is best for our kids."

The school board will discuss the district's budget at its 7 p.m. Monday meeting.

Some county divisions — especially alcohol, drug and developmental disability programs — will take hits because of the cuts, said Harvey Bragg, senior deputy county administrator. Nonprofits such as OnTrack, Inc. and ACES that partner with the county to provide rehabilitation services will likely be affected most by the reduced funding, Bragg said.

The public health department as a whole shouldn't be impacted much because it receives little state funding, Bragg said.

The City of Ashland will likely be minimally affected; however, it will continue to have had a tough time financing necessary infrastructure projects, because it usually borrows money from state agencies, said Lee Tuneberg, administrative services director for the city. He said he believes the city will still receive already designated state grants.

"At this point I wouldn't anticipate a great impact, but we'll have to wait and see," Tuneberg said.

Locals may notice the state cutting back on maintenance on Oregon highways such as Highway 99, and Highway Patrol officers on Interstate 5, he said.

The state revenue forecast for the next two years following this budget cycle is projected to be down $720 million, and will likely result in graver reductions in funding for state agencies.

It's difficult to say how the next few years will pan out for SOU and the state economy, Morris said.

"When we look at the national economy and the global economy, it's pretty scary," he said. "It's something most of us have not seen in our lifetimes. So to think that it's not going to impact the state of Oregon is not thinking clearly."

Staff writer Hannah Guzik can be reached at 482-3456 ext. 226.