As 2006 ended, McCain had cast himself as the inevitable candidate and built an expansive national campaign organization that melded top operatives from Bush's political team with his own base of longtime loyalists from his failed 2000 presidential run.

But the money hasn't come in as planned, and the initial spending was excessive. From January through March, McCain spent nearly $1.6 million on payroll for his staff, the highest among Republican candidates. Romney was second with $1.1 million and Giuliani spent nearly $900,000.

As the second financial quarter began in April, the campaign cut some consultant contracts and low-to-mid-level jobs, and revamped its finance operation.

Despite the changes, McCain's fundraising continued to lag, and officials said more staff cuts were needed to ensure he had enough money to compete in the early voting states and run television ads.

The shake-up comes as McCain embarks on his sixth trip to Iraq, where he will spend the July 4 holiday with U.S. troops. In his last visit to Iraq in April, he was widely criticized for saying he was cautiously optimistic of success even as he toured Baghdad under heavy military guard. Iraqis accused him of painting too rosy a picture and U.S. critics argued he was out of step with reality.