Month-long negotiations to repair a $652 million budget shortfall gained new urgency Thursday, when a letter from another state official warned of consequences if talks drag on too long.

In his standard quarterly report to the Joint Committee on Finance, Administration Secretary Michael Morgan reminded lawmakers that a failure to reach a compromise by August would result in a cash shortage that exceeds allowable levels.

“The state’s ability to secure an operating note may be seriously compromised if the Legislature fails to act on budget adjustment legislation,” Morgan wrote.

If the deficit exceeds allowable levels, Morgan added, the state would be forced to delay payments to vendors, schools and local governments.

The shortfall, first announced at the end of January, was caused by a slowing state economy. Debate among legislative leaders on how to fix it hits a few key issues: delaying school payments, using any of the state’s rainy-day fund, dipping into the transportation fund, raising taxes or imposing the hospital tax Gov. Jim Doyle proposed the first time around in budget negotiations.

Doyle continued negotiations with Assembly Speaker Mike Huebsch, R-West Salem, and Senate Majority Leader Russ Decker, D-Weston, Thursday evening, despite the delay in what was promised to be a speedy fix.

“Things are moving along pretty well, it seems,” said Decker spokesperson Carrie Lynch.

John Murray, spokesperson for Huebsch, said today’s letter did not shake confidence that the negotiations were progressing as they should.

“Nothing in that letter came as a surprise to us,” Murray said.

Still, pressure to finish the deal also mounted earlier this week from the Department of Transportation.

A warning posted late last week on the DOT website warned the process of divvying up contracts for summer construction could be “negatively impacted” with funds low from the budget negotiations.

That warning had transportation workers’ groups up in arms, arguing that thousands of jobs are on the line, along with important work to repair Wisconsin’s weather-mangled roads.

Some projects, which the groups say are slated for the summer, include reworking I-94 between Madison and Milwaukee, as well as the Beltline.