The embattled D.C. Lottery Board, which was forced last month to cut $500,000 from its budget, has been told by city officials to further reduce spending by $225,000, a move that lottery officials say could lead to more layoffs at the board.

Chester C. Carter, executive director of the board since January, revealed the new budget order during a City Council hearing yesterday and threatened to resign if he is forced to make the cuts after a scheduled meeting with Mayor Marion Barry's budget officials on Monday.

"I will submit my resignation because the lottery board would not be able to function" said Carter, throwing up his hands in frustration at the meeting with council member Nadine P. Winter (D-Ward 6) on a bill that would abolish the current five-member lottery board in favor of a seven-member panel to be appointed by the mayor.

Carter said the new cuts would require further layoffs on top of earlier staff reductions that dropped the number of employes from a high of 102 to 73 as of yesterday. The board already has agreed to cap its staff for the rest of the year at 65.

"I am being eroded every day," Carter added later, indicating he also was objecting to what he said were contradictory orders from the council, the mayor's budget office and the board members to do more with less.

The City Council last month approved changes giving the lottery board a $2 million budget for the current year. That amount was $500,000 less than the board had requested. The lottery games run by the board have brought in about $20 million to the city's treasury.

Carter described the earlier budget reduction as a "devastating cut that has caused disruption and upheaval."

Deputy Mayor for Finance Alphonse G. Hill said new cuts are needed because the lottery board is overspending its $2 million budget. "Just like any other agency they have to stay within their budget," he said.

The latest flap over the board's budget comes during a continuing, months-long dispute between the lottery board and Barry, who is trying to gain more control over legal gambling in Washington.

Both board members and representatives of the mayor said they were not satisfied with Winter's bill to restructure the board.

On a related issue, Winter, who recently has been a strong critic of Games Production Inc. (GPI), the private firm that runs the instant-winner lottery for the board, said after her meeting that she doubted allegations of serious wrongdoing by the company would be proved.

"They company officials probably made a lot of money, but that's all," Winter said yesterday.

The allegations against GPI were first raised by disgruntled officials of Scientific Games, an Atlanta-based partner in GPI's operation.

On still another lottery issue yesterday, officials of the D.C. Office of Campaign Finance said the agency has begun an informal inquiry into whether a former staff member of the lottery board violated city conflict-of-interest rules by accepting a trip to Brazil paid for by Scientific Games.

Ronald Cocome, 38, a special assistant to the board, defended the trip he took for Scientific Games, saying he had been told he was being removed from the lottery staff in the budget reduction before accepting the ticket.