Revenues from the income and sales taxes are off, as are dollars from the state's two casinos.
Deep cuts are necessary because, as she put it, "our state government is bigger than the taxpayers' ability to pay for it."
The cuts will be painful and every program, every facet of state government will be impacted, she said.
There were no specifics on where these spending cuts will take place.
She also called for an economic stimulus plan to be based on infrastructure improvements and development that would put people to work. She said she's opposed to any tax increases and will be focusing on the core missions of government, including public safety, education and taking care of those in need.
Lawmakers go into session on Jan. 7 and will have to deal with a $340 million deficit for the current fiscal year, along with an estimated $6 billion shortfall in fiscal years 2010 and 2011.