Prominent Victorian arts organisations including Next Wave festival, Red Stitch Actors Theatre and Express Media are reeling after having their funding cut by the Australia Council.
The council announced on Friday that 128 arts organisations nationally will receive a total of $112 million over four years from next year, but 134 of the 262 applicants missed out - among them Phillip Adams BalletLab, the Emerging Writers Festival, KAGE dance company and Arena Theatre Company.
Georgie Meagher, artistic director of Next Wave emerging arts festival, said the news was "heartbreaking". 
"It makes me question how the next generation of artists are going to receive the support that they need to develop their careers and to become professional artists," she said.
Next Wave was receiving $150,000 a year from the Australia Council as an "emerging key organisation", which the festival has now lost. This comes on top of the discontinuation of its $500,000 JUMP mentorship program, also funded by the Australia Council, last year.
"It means we lose our ability to plan and think strategically about the programs we present, and it also means we have to spend that money purely on projects and can't direct it to infrastructure and staff," said Meagher.
The cuts are the direct result of the $105 million that was stripped from the Australia Council in the 2014 budget and diverted to a new fund controlled by the Coalition government.
Replacing Senator George Brandis, Arts Minister Mitch Fifield restored $32 million to the Australia Council last   November, leaving a $73 million shortfall, while the Coalition's controversial Catalyst arts funding program quietly promised $12 million in funding to 45 arts organisations on Monday, many of which - including the Australian Ballet, the Australian Chamber Orchestra and Circus Oz - already benefit from significant government arts spending.
Express Media, a hub for young writers based at the Wheeler Centre with alumni including authors Benjamin Law and Hannah Kent, also missed out on funding.
"It's a significant blow to the organisation and puts increasing pressure on staff to find alternative sources of income, but the real damage is the risk that there will be no development opportunities available for the future generation of young writers," said Express Media's CEO Pippa Bainbridge.
"The impact of such a comparatively small loss will have a devastating ripple effect on the Australian cultural landscape," she said.
Yet 43 organisations, a third of successful applicants, are receiving multi-year Australia Council funding for the first time under the new program, chief executive officer Tony Grybowski said.
"I'm so ... proud and in many ways pleased about this," Grybowski said of the grants restructure, the culmination of three years' work following the passage of the 2013 Australia Council Act.
The successful applicants will receive an average of $219,000, compared with $157,000 under the previous programs, he said.
In what has been dubbed by some as the worst week ever in the Australian arts, Grybowski rejected the characterisation of doom and gloom in the sector. And amid the disappointment expressed by those denied funding on Friday were strong statements of resolve.
"It's disheartening but I can find hope in the fact that we have such a strong history and brilliant community behind us," said Ella Caldwell, artistic director of Red Stitch theatre company.
The Media Entertainment and Arts Alliance, Live Performance Australia, the Australian Labor Party and the Greens all decried the cuts and called for money to be returned to the Australia Council.