Laying Off Employee with Wrong Skill Set in R&D Environment - How do I tell the rest of the division?

I am a division manager for 24 research professionals in an applied research organization at a major engineering academic institution. 

How should I handle the lack of funding for an employ with the rest of the division? I am concerned about the other researcher's reactions and what people will think it says about the stability of our funding. I don’t want people to think that this letter is the first of many more to follow due to the state budget cuts. Our funding from outside funding agencies is increasing and we are positioning ourselves to have a very good year if we can land a few of the contracts that we are working. As a matter of fact, we might need to hire 1-2 people IF everything came in (of course, everything never comes in). However, those 1-2 positions are in different skill sets from the employee that we are lay had might lay off.

I know that once he receives the letter, word will get out to entire divisioin. I don’t want to embarrass the employee being laid off by doing anything too public, but at the same time, I feel that if I don’t do something, worry will spread. I also don’t want to talk about how good our financial situation is and then have to explain why an employee was laid off.

Any suggestions on how to handle this situation? Do I address this as soon as it happens or do I wait? Most people will completely understand why this is happening and will not question it.

Thanks!