SALEM — Oregon state government is facing an immediate $140 million shortfall that spurred Gov. Ted Kulongoski on Wednesday to order across-the-board cuts in state agency spending.

SALEM — Oregon state government is facing an immediate $140 million shortfall that spurred Gov. Ted Kulongoski on Wednesday to order across-the-board cuts in state agency spending.

The development came in the wake of the state's new revenue forecast that also predicted that the state will be more than $800 million short of the amount needed to maintain current services through 2011.

State Economist Tom Potiowsky delivered the grim news to lawmakers Wednesday, saying that Oregon's economy could deteriorate in the coming months before any recovery begins.

In response, Kulongoski used his executive authority to order agencies to make cuts that will translate to about 1.2 percent of each agency's current two-year budget.

Because there are only six months left in the current budget, the cut will be closer to 5 percent of what each agency has to spend, Kulongoski's office said.

"This recession demands tough decisions and requires shared sacrifice — and today's action is the first of many difficult decisions that lie ahead," Kulongoski said in a statement.

In Jackson County, schools, state police, colleges and universities and human services were expected to feel the effects of the cuts.

Morgan Allen, a spokesman for the Oregon Department of Education, said the cuts would mean lower monthly payments to school districts through May, reduced grant and financial aid funds and a drop in school improvement funds.

"We are waiting for Dec. 1, the actual budget forecast," said Paulie Brading, a member of the Medford School Board. "That will really tell us what we'll face.

"This situation in terms of the economy is going to touch our lives in so many ways, including school district budgets and support the state gives to school districts."

The Medford schools central office has not yet identified specific cost-cutting measures, Brading said.

Local school officials, however, expressed relief that the executive order did not include an earlier proposal to stop the delivery of millions in school improvement funds, an attempt by the Legislature last year to bolster educational funding.

Although school improvement funds will be reduced from $130 million to $125 million statewide, the monies are still expected to be distributed next week, Allen said.

"Holding back the school improvement funds would have been devastating to the Ashland School District as well as any other school district in our county," said Ashland schools Superintendent Juli Di Chiro. "What I understand is that is not going to occur, which is good news."

Ramona Rodamaker, budget director for Oregon State Police, said she didn't know yet whether the cuts would affect staffing or patrols in Southern Oregon.

"Those decisions have not really been made," Rodamaker said. "But that's a fairly large cut for a short period of time."

Jackson County Administrator Danny Jordan said human services cuts would be determined by the state.

"Until the state agencies give us direction, we don't know what will be cut," Jordan said.

Potiowsky issued his quarterly revenue forecast only a few days after the release of what he called a "horrible" state jobless report. It showed that Oregon's unemployment rate soared to 7.3 percent last month, well above the national average of 6.5 percent.

He said Oregon's economy is in the same downward spiral as the rest of the nation, with home prices falling, thousands of Oregonians losing their jobs and consumers "missing in action," and not spending on anything beyond the essentials.

On Dec. 1, Kulongoski is to release his proposed 2009-11 budget that will have to take into account sharply reduced revenue available for the next two years.