Details of the cuts are expected to be officially announced on Monday, but it is understood staff were told yesterday of the situation.
It is believed the announcement has resulted in some redundancies, but discussions around the possibility of part-time work for some staff may be continuing.
The hospice announced several weeks ago that it was facing a $300,000 deficit.
It wanted more government funding, through the Otago District Health Board, but that has not been forthcoming.
The board has offered $1.6 million funding, or about 53% of its total budget, but the hospice considers public funding should reach at least 70%.
Board regional planning and funding general manager David Chrisp told the board this week that the funding offered the hospice for this year was above the 2.8% increase many other community organisations received from the board.
He said the hospice service had grown beyond funding available from the board.
Board member Louise Rosson said it needed to be established whether the hospice was growing in response to "very real and visible community demand".
Mr Chrisp said he had not wished to imply it was a bad thing for the hospice to grow, rather that the board was only funding a proportion of its overall costs.
He presumed its growth was in response to demand.
Board member Peter Barron said if the hospice was unable to deliver some end-of-life services, then the board services could come under pressure and the impact of that needed to be discussed.
Board chairman Richard Thomson asked that the management respond to questions about the appropriateness of the board funding, how the hospice services had changed and whether there would be implications for health services if hospice services were reduced.
It was important to have any debate over the issue in context.
He pointed out that many other organisations funded by the board could also question or campaign about their money.
It was the hospice's right to make the issue public, but "we need to be careful we don't buy into that as opposed to any other organisation".
Board member Errol Millar said it could be a situation where "the squeaky wheel gets all the oil".
Hospice chief executive officer Ginny Green could not be reached for comment last night.
