WASHINGTON - The nonpartisan Congressional Budget Office estimates the U.S. budget deficit for the current fiscal year will come in at $1.3 trillion, down slightly from its previous $1.38 trillion estimate, a source familiar with the matter said on Tuesday.

CBO projects deficits to fall somewhat over the coming decade, coming in at $687 billion in fiscal year 2020, the source said.

The CBO is scheduled to release its estimates at 1000 EST (1500 GMT).

President Barack Obama is expected to propose a freeze on many domestic spending programs to tame the record deficit in his State of the Union speech on Wednesday, though analysts say more will be needed to reduce deficits to a sustainable level.

Obama is also expected to set up a commission to examine ways to bring down the deficit if a similar proposal fails as expected in a Senate vote later on Tuesday.

The United States ran a record $1.4 trillion deficit in the last fiscal year, which ended on September 30, 2009, as the deepest recession since the 1930s hit tax revenue and drove up safety-net spending.

(Reporting by Andy Sullivan, editing by Vicki Allen)

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