INDIANAPOLIS | Gov. Mitch Daniels will cut "at least" $300 million from K-12 education to balance the state budget.

A state revenue forecast released Tuesday estimates Indiana will spend $1.8 billion more than it takes in through June 2011.

"K-12 spending is half of the entire state budget, and it will have to contribute something to keeping us in the black," Daniels said.

The Republican governor said he wants schools to make the cuts without laying off teachers or increasing class sizes.

School City of Hammond Superintendent Walter J. Watkins said that will depend on how much money his schools lose.

"When we sit down and talk, we'll have to think creatively about ways to make do with the finances we have left," Watkins said.

The State Board of Education has scheduled an emergency meeting for Thursday to make recommendations to school corporations on what to cut.

Daniels said he expects the cuts to come from the 39 cents of every school dollar spent outside the classroom. He invited schools to partner with state government to save money on procurement and employee health insurance.

"There are so many things that our schools could do, and now is the time for leadership. Now is the time for statesmanship in the interest of children," Daniels said.

The new revenue forecast estimates Indiana will take in $12.1 billion in fiscal year 2010, which ends June 30, and $12.8 billion in fiscal year 2011.

However, state spending is based on May estimates predicting state revenue of $13.1 billion in 2010 and $13.6 billion in 2011, leading to the projected $1.8 billion deficit.

Daniels has repeatedly ruled out any tax increase, meaning Indiana must close the deficit by cutting the state budget.

The governor has already slashed state agency budgets 20 percent from their 2008 appropriations. Last month, he also ordered a 6 percent cut in state college and university budgets.

The $300 million cut to K-12 education is roughly 3 percent of the money schools receive. Schools were scheduled to get a 1 percent budget increase beginning Jan. 1. Canceling that increase saves $117 million. The remaining $183 million will come from cuts.

At least 39 other states have cut K-12 education recently, including Illinois, which cut $400 million from education, or 2 percent, in July.

The state budget approved in June included a $1 billion reserve fund. All of that money will need to be spent, in addition to the cuts, to balance the budget, Daniels said.

Assuming the revenue forecast is now accurate, the governor said Indiana will have no money in reserve when the budget cycle ends June 30, 2011.

Times reporter Carmen McCollum contributed to this story