INDIANAPOLIS — Indiana’s meat industry and farmers fear the state's plan to lay off some state meat inspectors for budget reasons is detrimental to the segment, according to The Associated Press.

How many of the state's 52 inspectors will be let go is currently not known, but meatpackers said any layoffs will prevent them from growing to meet demand for locally raised meat. Plus, if state inspectors are scarce or unavailable, small meatpackers who can't afford to upgrade for federal inspections could cut back their operations or go under.

Such fears highlight a dilemma lawmakers in many states face as tax revenues decline and they struggle to balance budgets: How deeply do they cut programs essential to growing segments of their economies and programs that could generate new tax revenues?

"We're one of the small businesses in Indiana that showed growth in a recession year," said Steve Beutler, past president of the Indiana Meat Packers and Processors Association. "Now we can't grow." Mr. Beutler said his payroll grew from 15 to 20 workers last year, and that's typical. At a recent meeting of 30 of the state's roughly 130 meat processors, all said their revenues and hiring increased last year, he added.

Upgrading to meet federal standards, which require such things as separate showers for federal inspectors, can also cost $250,000, nearly the average annual value of meat leaving state-inspected plants in Indiana.

Twenty-seven states have their own meat inspection programs, which must meet U.S. Department of Agriculture standards for pre-slaughter and post-mortem inspection of animals, record-keeping, sanitation and other matters. Several states have looked at their programs as places where money could be saved as they try to balance their budgets, said Bob Ehart, director of public policy for the National Association of State Departments of Agriculture.

In January, the Indiana Board of Animal Health announced a 50% cut in its inspection program but it backed off after complaints flooded the offices of Gov. Mitch Daniels and legislators.

Members understood how cutbacks could affect meatpackers and the reductions were "still a work in progress," said Doug Metcalf, the board's chief of staff. Most state-inspected meat and poultry processing plants have already begun operating under new, consolidated inspection schedules that have inspectors spending fewer days or partial days in slaughterhouses, he said.

The Indiana Meat Packers and Processors Association, said the group recognizes the need for the state to balance its budget but some processors have been reduced to just one inspection day per week, said Greg Fisher, I.M.P.P.A. president.

State budget cuts also mean less federal money for the state inspection program as the federal government matches state money dollar for dollar. This has opponents worried any big cuts to Indiana's inspection budget could result in the program falling short of federal requirements. The state budget cuts take effect July 1.