The Harvard-affiliated Cambridge Health Alliance will receive $40 million in federal funding next month, more than halving its $70 million budget deficit and potentially staving off dire cutbacks at the regional hospital network.

The funding infusion—announced Wednesday by Mass. Governor Deval L. Patrick ’78 at CHA headquarters as part of $764 million of federal stimulus funding the state will earmark for health care—follows recent moves at CHA to close clinics, cut services, and lay off hundreds of employees as the Alliance struggled to manage a $55 million cut in state and federal funds announced last October.

CHA will also receive an additional $40 million in supplemental federal funding for the 2010 fiscal year starting this July to spend on sustaining current services, according to CHA spokesman Doug M. Bailey.

“This funding will remove some of the anxiety surrounding the immediate future of the Alliance,” Cambridge Mayor E. Denise Simmons said in an interview Thursday. “It’ll get us off our knees and onto our feet and put us in somewhat of a more stable position.”

Bailey said that while the Governor’s January budget included a $40 million dollar allotment to the Alliance, the hospital network had been uncertain until now about how much of that funding would materialize.

“Yesterday’s announcement relieved us of any mystery of whether or not we would get the money,” Bailey said. “This brings us at least back to where we were in September.”

According to Bailey, the promised funding will decrease the Alliance’s deficit from a projected $70 million to $30 million, though clinics and services cut in earlier months will still not be restored.

“We still have to go ahead with the cuts we’ve already announced,” he said. “But the governor’s announcement is huge, since things could have been much worse—our existence was threatened.”

Simmons said that while the guarantee of federal funding relieves some of CHA’s budget burdens, the new challenge lies in determining how best to use and allocate the funding.

“This stimulus money is not the magic bullet,” she said. “What matters now is how we will get the money into our hospitals, how we will manage to use it so that we can ensure stability and continuity of [CHA’s] services.”

CHA includes more than twenty hospitals and clinics providing services throughout Cambridge, Somerville, and the northern metropolitan area of Boston.

Last February, the Alliance instituted a hiring freeze in anticipation of a large loss in funding due to statewide budget cuts. It announced that it planned to push reduced work hours, early retirement, and lay off 300 employees in an effort to manage its funding deficit.

The Alliance also planned to consolidate its clinics by closing six of them, including the North Cambridge Health Center and the Riverside Health Center. Last December, CHA eliminated the Oliver Farnum Senior Health Center, transferring all senior center services to other branches.

“We’re going to push new changes in such a way that it won’t hurt an already vulnerable population,” Simmons said. “But as I said, we’re on our feet but still have a long walk ahead of us until the economy stabilizes.”

Bailey said he believes CHA will be able to absorb the remaining $30 million dollar deficit in its 2010 fiscal year budget without further employee or service cuts.

“Going forward, we think we’ll be in a good position, especially if the economy begins to come back,” he said.

CHA operates on $480 million dollar annual revenue—85 percent of which comes from government sources—and employs well over 4,000 health-care workers and physicians. It currently services around 700,000 primary care patients.

—Staff writer Shan Wang can be reached at wang38@fas.harvard.edu.