PORTLAND — With fewer people expecting the recession to be a short and shallow one, state leaders are warning agencies to prepare a list of steep spending cuts for the next two years.

Officials already expect tax revenues to fall short of what's necessary to continue the current level of services over the next two years. And that estimate was made before the bleak economic news of recent weeks.

State economists deliver their next quarterly forecast of Oregon's tax revenues on Nov. 19.

"I think it's going to be down dramatically," Chip Terhune, Kulongoski's chief of staff, told The Oregonian newspaper on Monday.

The question," he added, "is whether that will be the bottom."

About 90 percent of Oregon's general fund budget comes from income taxes. Tax revenues plunge during economic downturns, while demand for state services jumps.

State agencies typically prepare a list of 10 percent spending cuts as part of the budgeting process, in case cuts must be made. But bigger reductions are being floated this time around — perhaps as high as 20 percent.

"There's an inevitability, given our economy, that we will be talking about cuts larger than 10 percent," Terhune said.

Officials say they don't want a repeat of the last recession, when across-the-board cuts led schools to end their years early and the state removed many people from the Oregon Health Plan. They want the cuts to be more selective, and leave what they consider more essential services intact. Gov. Ted Kulongoski, for instance, hopes to preserve education and health care.

"Any way you do it, it affects real people," said Rep. Mary Nolan, D-Portland, who co-chairs the Legislature's budget-writing committee. "My point is we can make less painful decisions if we have access to information that allows us to make cuts selectively."

— The Associated Press