INDIANAPOLIS -- Gov. Mitch Daniels announced Friday a series of cuts prompted by an increasingly bleak state revenue picture.

October revenue was $46 million below the forecast, building a shortfall of more than $300 million in the first four months of the fiscal year and causing Daniels to implement a series of cuts he hopes will keep the state afloat, 6News' Norman Cox reported.

Daniels said the cuts, designed to reduce the budget by $300 million to $400 million, include an additional 10 percent cut for state agencies, reduced reimbursements to some Medicaid providers and no pay raise for state employees in 2010, marking the second year workers have gone without a raise.

The governor also put a plan in place to allow voluntary unpaid leave for state workers and said most capital projects will be deferred. Most employees 6News talked to said they understood the governor's position.

"It's probably what I expected. I think we're all learning to live with a little belt tightening," said one.

"It feels bad," said another. "But, you know, everybody's bad throughout the country. You know, just be thankful I got a job."

Reduced consumer spending and high unemployment have depressed the state's two biggest revenue sources -- sales and income tax.

Last month, Daniels announced that revenue for the first three months of the fiscal year had dropped nearly $500 million from the previous year.

Daniels said at the time that if the numbers didn't turn around quickly, budget cuts were inevitable.

"We are not without some positive signs. Yesterday, Moody's said Indiana is one of 11 states they see emerging from the recession. We've had lots of new investments and new jobs," Daniels said. "The unemployment rate shows some positive direction, so there are reasons to hope that the difficulties we've experienced will not last forever."

Even House Speaker Pat Bauer was more reserved than usual Friday.

"I know the governor's announced some cuts. Many of those are unavoidable," he said.

The governor said additional cuts may be coming that would include public schools, but he hopes to avoid that at all costs.