If you choose to renegotiate your lease to eliminate part or all of his security deposit, you will be in the position of having a tenant with a smaller or no security deposit. And how long do you think it will take before you're in the same position, but with no security deposit.

If you don't want to evict him, you are going to have to live with the fact that he pays rent late. When his lease is up you can consider bumping up his rent (consistent with any state laws or local ordinances governing rent increases).