OLYMPIA, Wash. (AP) - The state will begin to reduce the number of people on its Basic Health Plan starting Friday, a moneysaving move critics say couldn't come at a worse time.

The plan, subsidized by taxpayers, covers 105,000 low-income people. The state Health Care Authority plans to lower that number by 7,700 over the next seven months.

After Friday, authority director Steve Hill told The Olympian newspaper, the state will limit enrollments, allowing a new person to receive benefits only if two other people drop off the plan. The goal is to save $6.7 million in the budget year, which ends in June.

The cuts are part of drastic spending reductions ordered by Gov. Chris Gregoire to help balance the state budget.

"We obviously appreciate the magnitude of the problem the state is facing, but feel very strongly that cutting basic health during a recession is exactly the wrong direction," said Rebecca Kavoussi of the Community Health Network of Washington.

People on the Basic Health Plan pay a fee based on how much they earn. The most an individual can make and qualify is $22,800 a year, and the average cost to taxpayers for each person is $217 a month.

Enrollment in the plan peaked in 2001 at 133,000, but was capped at 100,000 during a budget crunch in 2003. It nearly reached its most recent 106,500-person capacity again last summer.

"We've been in this position to fight for these slots all along, and there has been no more critical time for the program," Kavoussi said. "You have people losing their jobs, and very tight on cash. They're more likely now than ever to use emergency rooms, which is more expensive."

Last week, Gregoire ordered another $260 million in emergency spending cuts this fiscal year, on top of $330 million in reductions planned earlier. She took that action after state economists said a bleak revenue forecast, hurt by the deeply troubled economy and tight consumer spending, had driven the 2009 budget into deficit for the first time and set up a total shortfall of about $5.1 billion through the next two-year state budget.

Gregoire, who will propose her 2009-2011 budget next month, is expecting conditions to get even worse, pushing the eventual deficit to about $6 billion. State legislators convene in January to begin work on plugging the gap.

Hill noted this is the third round of cuts for his agency since the summer, and that layoffs are a possibility. In addition to reducing the Basic Health Plan, the authority is ending a project to replace a 30-year-old computer system that handles public employee insurance transactions, and will end the Health Insurance Partnership, a plan to help small businesses offer coverage to workers.