Topeka ? Gov. Bill Graves will likely have to cut budgets because of the state’s worsening revenue situation, his budget director said Tuesday.

Budget director Duane Goossen told members of the Legislative Budget Committee that so-called “allotments”  where the governor can reduce spending to prevent a negative year-ending balance  probably would occur.

Graves would make a decision in August and had already warned state agencies about the possibility of reductions, Goossen said.

And even if the cuts were made, Goossen said, the next governor would face an approximately $700 million, or 14 percent, gap between available revenue and current-level spending when he or she took office in January.

Members of the committee asked Goossen where Graves was looking at cuts.

“I think everything has to be on the table,” Goossen said, but he added that furloughs of state employees weren’t under discussion at this time.

The state finished the 2002 fiscal year June 30 about $220 million below revenue projections that were made in March. Goossen said there was no reason to think there would be any kind of recovery in the near term.

One effect of the budget problems is that the state has delayed monthly payments to public schools five times during the 2002 fiscal year.

The last time was last week when the state delayed a $103 million payment until today, so the debt wouldn’t be logged against the previous fiscal year’s books.

But that move had apparently placed many school districts in violation of the state “cash-basis law” that requires schools to have certain amounts of monies on hand, officials said.

Violating the law could lead to audit problems and even bump up interest rates on outstanding bonds, officials said.

To avoid the problem, the Legislative Budget Committee on Tuesday recommended that the full Legislature adopt an amendment to the law that would hold schools harmless if the school’s expenditures were “a result of the late distribution of state aid.”