SUMMER'S HERE, and the time is right for dancing in the streets.

And for acting and singing, too. So despite all the odds, the Everyman Street Theater is back out on the streets of the city with free performances of their exuberant 13th annual musical, this year called "Ribbon in the Sky."

"The budget cuts hurt us a lot, certainly," said executive producer Jewell Robinson Shepperd, sitting on the steps of Canal Square in Georgetown, watching the crew hurriedly assemble the set for the afternoon performance, while the band attracted curious shoppers with a churning funk number. "It meant that we could not get a work from someone else" because of royalty payments.

And the money isn't there to send the troupe on its annual visit to New York and the Lincoln Center's annual Out-of-Doors Theater Festival, a bitter disappointment to many in the cast, made up mostly of students from the Duke Ellington School of the Arts. "Up until the very end of June we didn't even know if we'd be able to travel around this city," Shepperd said.

Shepperd is also executive director of the Ellington Fund, formerly Workshops for Careers in the Arts. The Workshops program, founded in 1968 by Peggy Cooper Cafritz and Mike Malone, gave birth seven years ago to the Duke Ellington School of the Arts.

The Street Theater productions usually average out to around $100,000 for two weeks of performances, according to Shepperd, and this year's budget was pared down to $70,000, a lot of which came out of the performers' pockets, in the form of reduced paychecks. "Transportation alone cost $10,000," Shepperd said, nodding toward the two rented buses for the 31-member cast and 25-member crew, and two rented trucks for sets and sound equipment.

"It puts the kids at a disadvantage," Shepperd said. "A summer job is no longer a luxury."

"I would have cherished another week of rehearsals--we had to cram it all into four weeks, where we usually have six," said Mike Malone, who has directed and choreographed 12 of Everyman's 13 shows. This year's rehearsal schedule was limited "because we couldn't pay for the extra hours for the kids. The last week of the show, they all volunteered the extra hours and the weekend." Malone, now artistic director of Cleveland's Karamu House theater, said the company and crew are paid $83 per week.

" 'Ribbon in the Sky' was a group effort," Malone said. "We gave the concept to the company, who worked it through in improv in classes and workshops, then we took those ideas and scripted them. They've got an awful lot of energy and the level of talent is amazing."

Shepperd acknowledged the overwhelming abundance of talent and added that the Ellington School tries to limit students' performances to outlets such as the Street Theater, because "they're so easily carried away. It gets to the point where all they want to do is perform. And they'd have to give up their studies for that. And then what happens?"

"We haven't been around long enough to have the kind of 'success stories' that the High School for the Performing Arts has," Shepperd said of the school, but there are some impressive names on the Everyman alumni roster: former Howard University student Debbie Allen, star of the hit television series "Fame"; disco singer Amii Stewart, a Washington native with a large European following; and several members of the Brazilian Symphony and Alvin Ailey and Martha Mitchell dance companies.

"Ribbon in the Sky" is a revue tracing the bumpy path of the Ellington School's graduating class of 1982 through the travails and triumphs of their entertainment careers.

As usual, Malone's choreography is precise and energetic, and the singing is uniformly fine, with some standouts in Janette Howard and Valerie Scott, both 20. Howard has backed up Patti Labelle with her powerful, controlled voice, and said she is going to New York in the fall to audition for "Dreamgirls." Scott, who plays a singer who manipulates her way to stardom, said her ambition is "to go to Broadway, just like my character . . . but not the way my character does it."

"Ribbon in the Sky" can be seen today at the Municipal Center, Third and Indiana streets NW, at noon; Arthur Caper Center, 925 K St. SE, 6 p.m.; tomorrow, Western Plaza, 13th and E streets NW, at noon, and Shaw Recreational Center, 10th Street and Rhode Island Avenue NW, 6 p.m.; and Friday, Rawlings Park, 19th and E streets NW, noon, and Ft. Chaplin Apartments, East Capitol Street and Benning Road NE, 6 p.m.