Bowing to financial pressures and a changing political tide, K Street earmarking trailblazer Gerald Cassidy laid off nearly 20 percent of his staff on Wednesday and announced plans to remake his decades-old lobbying shop.

“We’re going through a restructuring,” the Cassidy & Associates founder told Roll Call on Wednesday. “We’ve been here 35 years, so I’ve done this a few times. Sometimes you need to reduce staff to increase staff, so we’re trying to bring up a war chest so we can bring in new people.”

In addition to the layoffs, Cassidy said that former Rep. Marty Russo (D-Ill.), who was the shop’s CEO, is taking a buyout. Other details of the restructuring were unavailable as of press time, but Cassidy said the layoffs, which were first reported by Roll Call, will accelerate a shift away from the appropriations-based lobbying that he is widely credited with pioneering more than 30 years ago.

He confirmed that a dozen employees were fired Wednesday, including eight lobbyists and four administrative support staffers. The firm had 70 employees before the layoffs.

For now, Cassidy said he will temporarily handle the day-to-day executive duties of his eponymous firm, replacing Russo. The former Member has not announced what he will do next.

“We’re not going to fill that position,” Cassidy, 70, said. “I’m going to take over a lot of those duties.”

Russo, a play-by-play announcer for Roll Call’s annual Congressional baseball game, is considered a confidant to outgoing Speaker Nancy Pelosi (D-Calif.). Cassidy said Wednesday that there is no correlation between Pelosi’s recent demotion and Russo’s sudden departure.

“Marty is one of the best-liked and most-respected people in Washington,” Cassidy said. “His relationships go very deep in the House.”

Cassidy, a Democrat, declined to name the laid-off staffers or give their party affiliations, but he confirmed that those who were not laid off included Chief Operating Officer Gregg Hartley, Executive Vice President Kai Anderson and members of Barry Rhoads’ Rhoads Group, which recently merged into Cassidy & Associates.

Cassidy said he plans to replace his laid-off employees with policy-based lobbyists who specialize in financial services, environmental and health care issues.

Nonappropriations work at Cassidy & Associates now makes up about 60 percent of the firm’s revenue. Cassidy said he expects that figure to increase in the coming years as Members have pledged to ban many earmarks.

“I’d like to raise the number of policy clients we have,” Cassidy said. “We took a tangible step into integrating Barry Rhoads, and we will be hiring people.”

While perhaps not the gold rush of years past, revenue from appropriations work is included in Cassidy’s new business plan, which counts on earmarks remaining in spending bills for the foreseeable future. Cassidy said the omnibus package now before Members is proof that earmarks won’t disappear entirely.

Even more, he doubts that many new GOP Members will be able keep campaign promises and will ultimately “need to do things for their constituents and that their constituents demand them.”

“I’m a believer that appropriations are here to stay,” Cassidy said.

The firm, which Cassidy founded in the 1970s, was long the top revenue-earning shop on K Street. But in recent years, it has struggled to stay in the top five of the biggest lobbying firms. For the first half of 2010, Cassidy & Associates ranked No. 6 in Roll Call’s lobby revenue survey.

Cassidy’s aggressive drive to stay at the top has gotten the firm some bad press. For example, Cassidy briefly employed now-disgraced Republican lobbyist Jack Abramoff after his corruption scandal broke. Abramoff, later convicted of fraud and conspiracy, recently fulfilled the terms of his release from federal prison at a Baltimore-area pizzeria.

A former Cassidy employee said an overhaul of the shop has been a long time coming. Appropriations work has dried up in the past five years, the source said, and smaller firms — many of them founded by ex-Cassidy lobbyists — have swooped in and taken business from their bigger competitors such as Cassidy.

“The layoffs are just an example of the challenges a lobbying firm has in this environment; the only option for Cassidy is to change,” the former Cassidy employee said. “They can’t be the behemoth that they were. They have to catch up to the times and position themselves to really compete in a global marketplace and the changing nature of Capitol Hill.”

And Cassidy’s firm has done it before.

The former Cassidy employee said the shop successfully remade itself after President George W. Bush’s 2000 election victory, which precipitated more Republican hires.

“To give Gerry Cassidy credit, it’s not that he hasn’t realized this,” the former employee said. “Gerry knew he needed to evolve the firm, but I don’t think he did it fast enough. This is an example of being too reliant on a certain sector, and he’s being forced to cut spending.”