You will probably need a Batch Apex to do this operation.

Also you can do some re-structuring of code to reduce the number of lines executed.

global class OCrLine1 implements Schedulable {
    global void execute(SchedulableContext SC) {

        Set < Id > ids = new Set < Id > ();
        Map < Id, String > ocrMap = new Map < Id, String > ();
        Integer ifactor = 2;
        Integer iResult;
        Integer iSum = 0;
        Integer i;
        String total;
        List < Contact > contacts = new List < Contact > ();

        List < Contact > cons = [Select id, Total_Due__c, OCR_Check_Digit__c, OCR_ClientID__c, Billing_Cycle__c, PayNotIfType__c from Contact where Billing_Cycle__c = '1'
            AND PayNotIfType__c = 'Statement'
            AND Number_Of_Sponsored_Children__c != 0
        ];
        List < cv__Recurring_Gift_Designation_Relationship__c > rdg = [Select id, cv__Recurring_Gift__r.cv__Contact__c, cv__Recurring_Gift__r.cv__Recurring_Gift_Status__c, cv__Designation__r.Name from cv__Recurring_Gift_Designation_Relationship__c
            where cv__Designation__r.Name != 'Child Sponsorship'
            AND cv__Recurring_Gift__r.cv__Recurring_Gift_Status__c = 'Active'
        ];
        /* comment this one to save few iterations
        for (Contact c: cons) {
            ids.add(c.id);
        }
        */
        for (cv__Recurring_Gift_Designation_Relationship__c rr: rdg) {
            ids.add(rr.cv__Recurring_Gift__r.cv__Contact__c);
        }

        Map < Id, Double > ChildBalance = new Map < Id, Double > ();
        for (AggregateResult groupedResults: [SELECT sum(Total_Amount_Due__c) Due, cv__Contact__c from cv__Recurring_Gift__c Where cv__Recurring_Gift_Status__c = 'Active'
            AND cv__Payment_Type__c = 'Check'
            AND cv__Next_Payment_date__c <= THIS_MONTH AND (cv__Contact__c IN: ids OR cv_Contact__c IN:cons)Group By cv__Contact__c
        ]) {

            ChildBalance.put((String) groupedResults.get('cv__Contact__c'), (Double) groupedResults.get('Due'));
        }

        for (Contact c: cons) {
            if (ChildBalance.get(c.id) != null)
                c.Total_Due__c = ChildBalance.get(c.id);
            else
                c.Total_Due__c = 0;
            if (c.Total_Due__c == 0)
                total = '000000';
            else
                total = String.valueOf(c.Total_Due__c);
            if (total.contains('.'))
                total = total.remove('.');

            if (total.length() == 3)
                total = '00' + total + '0';
            if (total.Length() == 4)
                total = '0' + total + '0';
            if (total.length() == 5)
                total = total + '0';
            else
                total = total;
            ocrMap.put(c.id, c.OCR_ClientID__c + '01000000000000000000000000' + total);
            for (i = 0; i <= 40; i++) {
                if (i < 40)
                    iResult = Integer.valueOf(ocrMap.get(c.id).SubString(i, i + 1)) * iFactor;
                if (i == 40)
                    iResult = Integer.valueOf(ocrMap.get(c.id).right(1)) * iFactor;

                if (iResult > 9) {
                    iResult = Integer.valueOf(String.valueOf(iResult).SubString(1, 2)) + Integer.valueOf(String.valueOf(iResult).right(1));
                }
                iSum = iSum + iResult;

                if (iFactor == 1)
                    iFactor = 2;
                else
                    iFactor = 1;
            }

            iResult = math.mod(iSum, 10);

            if (iResult == 0)
                c.OCR_Check_Digit__c = '0';
            else
                c.OCR_Check_Digit__c = String.valueOf(10 - iResult);

            contacts.add(c);
        }
        if (contacts.size() > 0)
            update contacts;


    }
}