HAMILTON - The Montana Department of Commerce is laying off its regional development officers, leaving communities across the state without a key service they have relied on for nearly two decades to help create local jobs, profits and tax revenue.

"It's a horrible mistake," Ravalli County Commissioner Greg Chilcott said. "This is truly a slap in the face to local communities. It just defies logic."

But Gov. Brian Schweitzer's administration said an increasingly negative budget picture makes this and other "austerity measures" necessary.

"I am also looking at the bigger picture of the revenue situation, and what kind of recommendation I may have to make to the governor," said David Ewer, Schweitzer's budget director. "Obviously we have some time, but so far we have been in a declining revenue situation for many, many months."

Since its creation in 1993, the RDO program has secured tens of millions of dollars in financing for mom-and-pop stores, bio-tech giants, ranches and a host of other employers statewide, which in turn has produced thousands of jobs and big tax revenue for local governments.

But in an apparent cost-cutting move, the Commerce Department told its four regional development officers - a fifth RDO position is already vacant - in an Oct. 16 memo and conference call that they were being laid off as of Dec. 31.

Commerce officials said the RDO program was being terminated due to a "reorganization," but they have released no further information, including whether the program will be replaced or what will happen to the roughly $400,000 remaining in the RDOs' coffers for the rest of the fiscal year.

Commerce Department Director Tony Preite said the reduction makes sense when weighed against the state budget concerns.

Three days after the layoffs were announced, the Montana Economic Developers Association, an umbrella group of local public and private development interests, held a conference call to express its concern about the RDO program's termination.

According to the call's minutes, Preite and Evan Barrett, chief business officer of the governor's Office of Economic Development, told MEDA officials they could offer ideas to "re-work" the RDO program and that no formal plans have been made about the remaining RDO funds.

MEDA appointed Dick King, president of the Missoula Area Economic Development Corp., as chairman of a MEDA committee to recommend how the Commerce Department should spend the remaining RDO funds to "build capacity of regional economic development activities."

The following day, MEDA sent Barrett a letter formally asking the Montana Economic Development Advisory Council to take no action on reallocating the RDO funds until MEDA completes its recommendations.

The regional development officers provide technical assistance to help local communities secure federal and state grants, low-interest loans and other financing for business start-ups, expansions, company relocations from out of state, infrastructure development, and job creation and retention.

The program has served as a model for other states looking to duplicate its success.

Montana's four RDOs live in their respective regions and are expected to develop close working relationships with local businesses, local development organizations, local governments, local banks, federal and state agencies and other business resource programs.

Ravalli County authorities were stunned when they learned the RDO program was being terminated and that no replacement program was in place.

"What this means for us, I don't know, but I fear a tremendous loss of technical and financial help that's needed to retain and create jobs," said Julie Foster, executive director of the Ravalli County Economic Development Authority.

"We're very concerned," said Rick O'Brien, executive director of the Bitterroot Valley Chamber of Commerce.

Foster and O'Brien said local communities - especially those in the state's economic engine region of western Montana - rely heavily on the RDO program to tap into financing that generates big profits, jobs and tax revenue.

"Some of these (application) documents are five inches thick and extremely complicated," Foster said. "We could never do them without" the RDO's help.

O'Brien said the Bitterroot Valley relies on the expertise of Charlie Wright, the Missoula-based RDO who covers seven counties in western Montana, including Ravalli and Missoula counties.

"We've witnessed a lot of success working with Charlie and the RDO in saving jobs in our own backyard," O'Brien said. "If he goes, we'll lose that local expertise, assistance and knowledge base."

Wright said he and the other development officers received no warning or explanation why their jobs were being terminated.

He said Commerce Department officials said the program's remaining funds would be diverted to "other economic development priorities."

State Rep. Bob Lake, R-Hamilton, said he and his fellow legislators also were surprised the RDO program was being axed. He said Preite hasn't responded to his inquiries.

"They decided to do this thing for what reason I don't know," he said. "It's one of those things that Preite has the authority to do - and I don't want to accuse him of self-serving interests - but I hate to see that authority used in such a manner."

Lake said he is worried the Commerce Department will replace the RDO program with one that gives large population centers such as Missoula priority over small counties.

"Then we'll find out all we get are the dregs, while the Missoula Area Economic Development Corporation gets the plums," he said.

Unlike Missoula County, small counties can't afford to hire business specialists who can provide the same technical expertise that the RDO program does, Lake said.

"These (financing) applications aren't just fill-in-the-blank forms," he said. "You have to have someone who knows how to do it right and at least get your community in the running to get these good industries and jobs."

According to Commerce Department figures, RDO Wright has obtained $47.3 million in public financing that has been coupled with $156.1 million in private financing for a range of projects involving 201 companies, business parks, community colleges, hospitals and other clients across western Montana since 2005.

Those projects include 15 business start-ups, 19 expansions and four infrastructure developments that have resulted in the creation of 3,120 jobs and the retention of 700 jobs.

Those projects also have generated an estimated $940 million annually in tax revenue for local governments in western Montana.

Among the RDO's 23 clients in Ravalli County are GlaxoSmithKline, Neville Log Homes and Rocky Mountain Log Homes, which received $2.4 million, $1 million and $750,000 in financing, respectively.

Other local clients include the Ravalli County Entrepreneurship Center, the new business incubator on Old Corvallis Road, and the Falcon Asset Management Group, a new firm that is expected to create 200 jobs over the next two years.

Wright also helped Hamilton to secure $200,000 for a new wastewater lift station to facilitate economic development along Old Corvallis Road and a $20,000 grant for Stevensville to help with its land planning efforts.

Lake said the RDO program produces far more money than it takes to operate.

"It's a pittance in the overall (state) budget, but it can make a big difference if it's put in the right place," he said. "It's been an extremely good return on investment. Charlie Wright alone has brought in much more than the program costs, so it bothers me if the Department of Commerce thinks this is a money-saving effort. It doesn't make sense to me."

Billie Lee, executive director of the Lake County Community Development Corp., which also represents Lincoln, Sanders and Mineral counties, said the Commerce Department didn't consult local business leaders about terminating the RDO program.

"There's been no rationale shared with anybody," she said. "We're as up in the air as everybody. We're all asking, ‘So, you're taking this program away. Are you going to put a heavier burden on the local economic development corporations? If so, are you going to compensate us out here for doing that?'"

Associated Press writer Matt Gouras contributed to this story.