RICHMOND, AUG. 1 -- Because of a faltering national economy and slowed defense spending, Virginia now expects $1.4 billion less in tax revenue over the next two fiscal years than it has budgeted, creating the state's worst fiscal crunch since World War II, Gov. L. Douglas Wilder said today.

As a result, the governor said at a news conference, he expects to divert more than $300 million in lottery profits that had been slated to pay for new buildings and other coveted capital projects and use it to help balance the budget.

The announcement represents a pivotal change in how the state plans to spend the money from its two-year-old lottery and could seriously delay projects at Northern Virginia's George Mason University, among other institutions.

Wilder said he remains opposed to a tax increase. To make up the shortfall, he said, virtually every area of state spending may be subject to some cuts, though he is trying to avoid cuts that will affect schoolchildren and people in need. By law, Virginia cannot run a deficit.

"We must choose between needs and niceties, between essential services and optional bricks and mortar," Wilder said.

He said that revenue from Northern Virginia has been particularly disappointing, and his aides said that both personal income and business-related revenue have been soft throughout the state.

Wilder said the situation makes it imperative that the state retain and, if possible, increase the $200 million rainy-day fund that the legislature approved at his request last winter.

Wilder also said he is considering the sale of some vacant land and other assets to raise money. The governor promised more specifics on Aug. 17, when he addresses the General Assembly's committees that oversee taxes and spending.

Since last autumn, a series of ever more dire fiscal projections has been issued by Wilder and his predecessor, fellow Democrat Gerald L. Baliles, but today's $1.4 billion figure -- most of which will be pared from the state's $13.1 billion two-year general fund budget -- was the largest yet. "The latest analysis indicates that our current revenue situation is the worst since World War II," Wilder said.

This prompted complaints from some Democrats, such as Mount Vernon state Sen. Joseph V. Gartlan Jr., that faulty projections may indicate "something is systematically wrong with our management of state finances."

In previous announcements, Wilder had agreed that the state was partly to blame for errant tax estimates. But today he put most of the fault squarely on the federal government and its management of the economy.

The "federal addiction to debt and spending as well as a failure to deal thoroughly and swiftly with the {savings and loan} crisis" has put a "fiscal noose" on Virginia's economy, Wilder said.

Some analysts said that such rhetoric is part of an attempt by the recently well-traveled Wilder to fashion himself nationally as a Democrat who is hard-nosed enough to make spending cuts and avoid tax increases. Instead of playing down hard times, Wilder seems inclined to amplify them, as he will do on Aug. 16, when he plans to go on statewide television for 30 minutes to talk about the budget.

"Clearly, Doug Wilder wants to portray himself as a person who can manage tough times efficiently," said Robert Holsworth, a political scientist at Virginia Commonwealth University. "He thinks this is a message that is good for Virginia and helps him."

The regular revisions of fiscal fortunes could also erode Wilder's credibility, Holsworth said, and spending cuts will likely sow discord among such key Democratic constituencies as teachers.

The Virginia Constitution grants governors vast authority to revise the state budget during the 10 months of the year that the General Assembly is not in session, and Wilder's aides asserted that he does not need legislative approval to redesignate the use of lottery profits.

Most legislators interviewed today said they agreed that the step may be necessary, but worried that raiding the lottery could become a habit.

"Given a choice, I'll choose flesh and blood over bricks and mortar," said Del. Warren G. Stambaugh (D-Arlington), who nonetheless worried that the state will "get hooked" on using lottery money for current spending instead of capital projects.

Among the lottery-funded projects left in limbo by Wilder's announcement are a variety of buildings and renovations at state universities.

At fast-growing George Mason University in Fairfax County, the action will put on hold two new $10 million buildings: a business and public policy building that would house Nobel Prize-winning economist James M. Buchanan and a new library complex that would include student union functions.

"We're disappointed because we definitely need the {new library} space," said university Senior Vice President J. Wade Gilley. The existing Fenwick Library is "wall to wall with books and students -- books covering the floors and students hanging from the rafters . . . . It looks like New Delhi airport."

At Northern Virginia Community College, Wilder's action will postpone two $5 million projects: a new humanities building on the Annandale campus and a major expansion of the Manassas campus that would double the size of that facility. The action would not affect two new cultural centers being built with privately raised funds.

NOVA President Richard J. Ernst took the loss in stride. "Better that than other possibilities, of course," he said. "Delaying capital projects for a couple of years is preferable to restructuring all of higher education."

Staff writer Peter Baker contributed to this report.