The NSW corruption watchdog says it is facing a "funding crisis" and will be forced to fire 16 people after State Government cuts.

Key points: ICAC's staff budget to be reduced by around 9.5 per cent

ICAC's staff budget to be reduced by around 9.5 per cent PSA's Steve Turner says funding cut takes accountability away from government

PSA's Steve Turner says funding cut takes accountability away from government Premier leaves door open to future supplementation of watchdog's budget

A statement issued by the Independent Commission Against Corruption (ICAC) said its staff budget would be reduced by approximately 9.5 per cent for the next financial year, which means it will be forced to drop its workforce from 124 to 103 positions.

ICAC commissioner Megan Latham referred to the situation as a "crisis" in a letter to the Public Service Association (PSA) warning of the cuts.

She said those cuts would have to take place by the end of July.

The ICAC has been told that it will lose $1.3 million of its funding in cuts to the state budget.

The inspector of the ICAC, David Levine, recently called for an end to the corruption watchdog's public hearings, arguing they led to people's reputations being trashed.

Mr Levine's report was commissioned in the wake of the High Court's ruling that the ICAC did not have the power to pursue an investigation into crown prosecutor Margaret Cunneen.

He was previously questioned by a parliamentary inquiry into the scathing report into the ICAC's investigation, which labelled it the "low point" in the organisation's history.

This sparked a bitter public feud between Mr Levine and Ms Latham.

The watchdog will continue to receive its regular funding of $24 million, but will not receive the supplementary funds usually paid on top of that at the State Government's discretion.

Former ICAC commissioner David Ipp has told the ABC that the cuts were serious and would impact on the ICAC's ability to conduct investigations.

Cuts will 'take accountability away from government'

Steve Turner, the assistant general secretary of the PSA, said the funding cuts would mean there would no longer be a fully functioning corruption watchdog in the state.

"ICAC's needed supplementary funding over the past five years because of the investigations its had to carry out," Mr Turner said.

"We've seen them look into McDonald and Obeid, we've seen them look into the mining industry and five ministers in this current government.

"There's no obvious sign that the investigations and the work of ICAC is going to decline in coming times.

"To cut funding now is to take accountability away from this government."

The commission needs the extra funding to cope with its workload.

"ICAC is a very important institution, it's a very bad time to be cutting that funding away from ICAC and especially cutting it at such short notice.

"It's ability to investigate, to take issues up and look at them and to run those finding ... it puts all of that at jeopardy."

Redundancy process to begin at ICAC

The ICAC statement said Premier Mike Baird had asked the commission to use what was left of the 2015-16 budget to review its operations to determine where savings could be made.

"The redundancy process and the resulting restructure will impact on the commission's ability to maintain the current levels of investigative and corruption prevention work, complaint assessment turnaround times, and investigation report delivery," the statement said.

"Staff have been invited to apply initially for voluntary redundancies, with the full redundancy program to be implemented over the coming weeks."

The investigation into Margaret Cunneen has been one of the most controversial in the watchdog's history. ( AAP: Nikki Short, file photo )

A spokesman for the Premier said Mr Baird was prepared to monitor the organisation's financial situation, leaving the door open to future supplementation of the watchdog's budget.

"This Government has zero tolerance for corruption in NSW, which means a robust ICAC," he said.

The statement from the commission said it had already had a funding reduction of 7.5 per cent in the current financial year.

"The commission acknowledges that it has received supplementation from the Government in the past, including over four years from 2012-2013 to 2015-2016, and notes that there are staff reductions occurring across the NSW public sector," the statement said.

NSW Labor leader Luke Foley said when the ICAC was investigating the Labor party, no request for funding was ever denied.

"Now they're investigating the Liberals they have to do without 20 staff," Mr Foley said.

"This decision just does the bidding of all those people in the Liberal party who've been out there calling for ICAC's powers and resources to be gutted.

"It will certainly impact on its investigations, it will certainly impact on its ability too root out corruption."