A shortfall in Arlington tax revenue caused by the slumping real estate market and declining home values will consume most county funds set aside to cover federal and state budget cuts and leave a surplus too small for a hoped-for property tax cut this October, according to an Arlington County staff report.

Real estate tax revenues will fall $3.5 to $3.8 million below projections for the 1983 fiscal year that began this July, the report said. Failure to meet a higher assessment level, which will be felt in next spring's real estate tax collections, will eat up most of the county's projected $3.6 to $4.3 million in funds available to cover anticipated federal budget cuts and unexpected expenses, the report said.

County Board Chairman Stephen H. Detwiler, a Republican up for reelection in November, had ordered the report in the hopes that real estate taxes could be cut in time for the October tax collection.

"The report certainly lends a cloud over the follow-up action of providing for a midyear tax cut," said Detwiler, who added that he had not yet decided whether to support or oppose a tax cut and that he was surprised at the size of the projected shortfall.

"The report has no surprises in it," said board member Ellen M. Bozman, a Democratic-backed Independent who earlier this year argued that the county could not afford a tax cut.

She said yesterday that she would oppose a tax cut this year. Democratic board member John G. Milliken agreed.

But Republican board member Walter L. Frankland said "you can always cut taxes . . . It's a question of which programs you are prepared to cut . . . All you have to do is trim a program here or there and you can live within your income."

In addition to the shortfall in real estate tax revenue, the report identified "potential problem areas" where the county could come up short of funds this year.

They include federal and state allocations, a proposed fare increase that the budget assumes Metro will make in January 1983 and local revenue sources including sales tax receipts and receipts derived from hotels and car rental businesses.

"These . . . revenues could fall short of our original projections if the economy does not improve," the report concludes.

The county also has estimated that it could lose up to $400,000 as a result of federal and state social-service fund cuts this fiscal year.

Arlington had budgeted $1 million to cover possible federal and state budget cuts and shortfalls in local revenue. That fund, as well as a surplus from the last fiscal year estimated at $1.4 to $1.9 million and other surplus monies, will be be largely consumed by the shortfall in tax revenues, the report concluded.

The report estimated the average value of single family homes in Arlington would decline 3 percent this fiscal year, the first drop since World War II, if current trends continue. The projected drop is based in part on an estimated 4 percent reduction in home values caused by the increasing frequency of alternative financing methods that can cost home owners thousands of dollars.

Overall, the value of total real estate tax assessments would increase 0.8 percent this fiscal year, largely because of new buildings added to the tax rolls. That increase would be far below the projected 10 percent assessment increase in the budget.