To make things worse, the Legislature is trying to pare down a projected $3.5 billion state budget deficit that likely will result in cuts to services that counties provide under shared funding or contracts with state and federal agencies.

Federal timber payments are set to expire in 2012, carving big holes in the budgets of 18 Oregon counties, The Oregonian reported.

There's no provision for municipal bankruptcy under Oregon law, so counties "simply ratchet back services to the point the budget is balanced," said Mike McArthur, executive director of the Association of Oregon Counties.

In early November, voters in Curry County overwhelmingly rejected a public-safety levy to fund the sheriff's office, the Juvenile Department and the district attorney's office.

As things stand, even if the county eliminates every service it provides from its general fund budget over the next two years—juvenile, patrol deputies, 911, the DA, commissioners, the treasurer's office, the county clerk and others—the $1.3 million raised annually from property taxes may be insufficient to cover just the cost of running its jail.

"There has to be some form of government in rural coastal Oregon," Curry County Commissioner Bill Waddle said. "Is it going to be Curry County or some form that the state of Oregon imposes? I don't know."

Lincoln County Commissioner Don Lindly says his coastal county has been through the full menu of budget reductions: prioritizing services, freezing pay, laying off 25 percent of the county staff, and making employees cover two jobs.

The county considered shutting the animal shelter, but voters passed a five-year levy that actually increased the staff. Lindly notes that no similar groundswell resulted when the county decided to eliminate mental health specialists.

"I'm not saying anything against animals. ... I've got a yellow Lab that pretty much runs our family," Lindly said. "But it's interesting what people will choose to support."

Congress has twice reinstated the timber payments, avoiding a budget meltdown for many rural counties. But their decline gradually is sapping services and reserves.

Those counties have had a few years to wean themselves from the payments, establish reserves and go to voters for local levies to backstop services. But voters have refused to make up the gap until it's certain the government money has dried up.

If the federal payments expire, some counties simply won't be viable. The payments already have declined from $265 million in 2007 to about $200 million today. If they end in 2012, counties will be left with only a trickle of the river of money that once flowed—about 10 percent of the peak payments.

As recently as 2008, the payments made up two-thirds of the general fund in Curry, Douglas and Josephine counties, 40 percent in Coos County, and one-third in Jackson and Lane counties.

"We're past cutting," said Dave Toler, a commissioner in Josephine County, which eliminated 250 of its 650 employees during the last five years.

"We're talking about providing what normal American citizens would expect in a First World nation," Toler said.