Gov. Chris Gregoire is ordering state agencies to cut their payrolls by 2 percent more, after the state's revenue forecaster this morning whacked revenue projections by nearly $500 million.

"We have been aware of the likelihood of a negative forecast and are prepared to take action," Gregoire said.

The order applies to the agencies Gregoire oversees, but she's also calling on colleges, community colleges and other state officials to make the same level of cuts. Agencies can hire critical staffers to continue their missions, the governor said, but must meet the cost-cutting goal.

Glenn Kuper, a spokesman for Gregoire's budget office, said that could mean more layoffs and furloughs. And limits on out-of-state travel, equipment purchases and state contracts will continue.

After cutting nearly $4 billion from the state budget, lawmakers left hundreds of millions in savings as a cushion against further drops in state revenue. But the changed forecast would eat up virtually all of that money. Even if the state spent all of its hard-to-tap "rainy day fund" savings, it would have just $53 million left. That's a tiny fraction of the state's $35 billion budget, and could easily be erased by even a slight budget uptick, such as more students enrolling in school.

"Certainly, this is nowhere near what we'd like to have in an ending fund balance" during good times, said Sen. Joe Zarelli, R-Ridgefield.

Still, compared the $9 billion shortfall that lawmakers were wrestling with last winter, the decrease is relatively modest. If the state budget cuts required big swaths of bandages to stem the red ink,Rep. Ross Hunter, D-Medina, said, "now we're looking at the band aid drawer."

Some lawmakers also pointed out that there's plenty of time to find the savings between now and mid-2011. And further revenue forecasts _ the next one's due in September _ may be brighter. If the governor feels she can manage for now, Hunter said, it would be a mistake for lawmakers to rush to Olympia for a kneejerk reaction.

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