THE TEACHER'S CAFETERIA at Bruce-Monroe Elementary School in Northwest Washington is usually a cheerless place, a windowless rectangle of green cinder block. But on a recent Wednesday morning it was transformed.

There were balloons, cake and punch, homemade posters, music from a portable record player and bunches upon bunches of books. It was a "Reading Is Fundamental" distribution, and that turned the room into a festive place.

To welcome the third graders, school librarian Barbara Wallace was dressed as Raggedy Ann; two school volunteers were Raggedy Andy and the Cat in the Hat. Then RIF staffer Mary Chor drew the children into a circle and described four books -- a title in the Choose Your Own Adventure series, a picture book on spiders, Africa, Land of the Great Cats, and the classic folk tale Stone Soup.

Alternately rapt and restless, the children watched Chor closely, shouting out the type of cats found in Africa, expressing suitable alarm at the spiders, and agreeing they had probably heard Stone Soup before.

"If a book is about something that's not true, what's it called?" she asked.

"Fairy tales!" they responded.

Well, not quite. But they discovered on their own the difference between fairy tales and other kinds of fiction in the array of paperbacks on the counter, from which they were each allowed to choose one.

A few of the children grabbed the first book they saw, but most deliberated as long as possible, weighing the merits of Clifford the Big Red Dog over Giant Dinosaurs, or deciding against Animals That Build Their Homes in favor of The Wonder of Seeds. Interest ran high, but squabbling was at a minimum.

"I love books," 9-year-old Nilla Green said as she searched through the titles.

Do her parents read to her?

"I read to them," she said, finally deciding on The Three Wishes, the Choose Your Own Adventure title described by Chor. "Books sing special things to me." Books Are Habit Forming

RIF, which celebrates this year two decades of giving books to kids, would like nothing better than to have books singing to every child in the country. Its aim is simple: get kids to read and encourage them to keep doing it.

"Children who read and are read to do better in language development and reading achievement than other children the same age. And once you do better in reading you do better in school," says Jeanne Chall, director of the Reading Laboratory at Harvard University. "To see that children have books is terribly important."

"In an environment starved of books, the hunger for reading can expire," says Jonathan Kozol, a teacher and author of Illiterate America. "RIF heightens the appetite to eat by putting steak and baked potatoes on the table."

The nonprofit reading organization began as a pilot program serving 61 District of Columbia schools, including Bruce and Monroe elementary schools, which later merged to form Bruce-Monroe. It has since expanded to 3,300 projects at 10,224 locations across the country, all of which offer at least three book distributions a year.

Seventy-five percent of the projects are in schools, with the rest in libraries, hospitals, day care centers, correctional facilities and migrant farmworker communities. More than 72 million books have been distributed; last year alone 7 million were given away to 2.1 million children. Enter Mrs. McNamara

The inspiration and initial impetus for RIF came from the late Margaret McNamara, wife of the former secretary of defense. She began the program after she met two fifth-grade boys while serving as a volunteer reading aide in D.C. elementary schools.

One of the boys told McNamara he had never had a book of his own, so she brought in some of her own son's books. "They were just amazed that anyone would give them a book," she later told a reporter.

McNamara used her political savvy to get the program established and obtain local and foundation funding. On the strength of a 3:1 federal matching grant instituted in 1976, RIF was able to move into all 50 states.

Slowed growth in federal aid, however, has turned the 1980s into a period of retrenchment. Of its $7.5 million budget this year, RIF is receiving $7 million from the government -- a figure that has neither grown as fast as the cost of books nor allows for new local distributions to be funded. Close to 400 new RIF projects receive no federal funds for books at all; twice that number have had to close because of lack of federal money.

Currently, 1 out of 19 school-age children is served by a RIF program. If the Gramm-Rudman law entails further cutbacks, the organization will be even further removed from its goal of providing books to every child in the country.

To RIF fans like Jim Trelease, author of The Read-Aloud Handbook and a passionate supporter of children's reading, that would be going in the wrong direction.

"There's a much better chance of a book becoming a permanant connection in your life if it's yours," Trelease says. "You can break a toy in the matter of an afternoon, but books can be passed from one generation to the next."

Says RIF president Ruth Graves: "By getting children involved in wanting to read, and by going a step further and actually letting them own the books, we're trying to prevent illiteracy before it happens."

There's an increasing amount of illiteracy to be prevented. The Department of Education reported last month that 17 to 21 million adults are unable to handle written English texts. RIF itself estimates that 13 percent of all 17-year-olds and 85 percent of the juveniles who appear in court are functionally illiterate.

"If we could capture just one generation of kids, we could make a real dent in the illiteracy problem," says Graves. "They would be a generation of parents that would encourage reading in the home."

The RIF theory is that if children choose something they like -- even if it's below their age level or about topics that might not appear to deepen their appreciation or knowledge of the world -- they're more likely to read it. And, with at least one book to their name, they will appreciate having books in their home. They can reread it, put their name in it, read it with their parents.

"One child wrote that what she loved about her RIF book was she could keep it until she was 50 -- it was the oldest age she could think of -- without having to pay an overdue fine," says Graves.

"While giving a child one book and then never coming back is not going to have a major impact, the distributions tend to have a cumulative effect," says RIF staffer Chor. "Children who get their first book and decide the cover was interesting but the book wasn't -- they'll get another chance at the next distribution, and they'll be more sure of themselves. At the same time, there's all these activities in support of reading that keep them reminded."

Meanwhile, other children may already be beginning a collection by the third distribution.

"I was looking at one third-grader and she picked a Curious George title, " says Chor. "I told her it was my favorite book, and she said, 'I have the whole collection.' Perhaps her parents started the collection for her, but now she has gotten a chance to internalize it. It's not some adult saying, 'Here, read this.' " Major Organizational Support

The major education and library associations have endorsed RIF, and educators speak highly of its enthusiasm and good intentions. But three questions have been reluctantly raised about RIF's ultimate effectiveness: how useful it is for children to read a book that might not be challenging; whether the program actually makes a difference in reading levels; and if RIF is reaching the right households.

In defense of letting the children choose their own books, Graves says that "It's better for a child to choose something too easy or too hard, and make the choice and have a crack at reading, than not to have a chance at all." She offers two examples -- one from an RIF program and one from a bookstore -- to prove her point. In the first, a child in an RIF program chose a book that was grade levels beyond his presumed reading level. "Everyone worried he was going to be turned off reading, but at the next distribution, he came back and chose a dictionary. He said he wanted to read the first book but there were some words he didn't understand. And he read it, too."

The second incident was observed by Graves when a mother took a young child into a bookstore. The child grabbed an easy book about a rabbit, while the mother wanted to get him something more challenging.

"Mother and child fussed and quarreled, and they ended up leaving without a book. Now, why didn't she just let him have the book about the rabbit?" asks Graves. "That was what he wanted. He would have read it, and he would have graduated to another book. Children learn by their mistakes, just the same way we do."

In the area of reading ability, it's uncertain whether RIF by itself has made a major difference. However, the organization receives high praise from pleased teachers and students, and the availability of books, magazines and newspapers in the home is acknowledged to have a positive affect on reading scores.

"A body of evidence builds up from the project self-evaluations regarding improved reading habits, greater numbers of books read, higher test score results, and increased use of the library," says U.S. Department of Education program analyst Carol Chelemer. So What's the Payoff

A 1980 study done by General Research Corporation for the Department of Education also found that the majority of students receiving RIF books increased their motivation toward reading and used the library more. And last year, the National Assessment of Educational Progress, after reporting that reading scores for 9-, 13- and 17-year-old schoolchildren had increased since 1971, noted that "children from homes with an abundance of reading material have substantially higher average reading proficiency levels" than children without such materials.

"The issue is, books versus no books," says Harvard's Chall. "Anyone who provides books for children is really helping.

The question of whether RIF is reaching the students that need it most is equally complex. Kozol, while generally full of praise for the organization, nevertheless thinks it should not be placing so much emphasis on distributions in schools.

"My gentle recommendation is, if we want to reach those children most disaffected from the public schools -- the truants and dropouts -- the distributions need to be anywhere except the scene of failure."

He suggests instead a tie-in between the distributions and effective literacy programs: "The best literacy programs are starved for material, and the best books are given away in settings where there is no literacy instruction. Now, a 12-year-old child who can barely read has an unfortunate choice: either to receive a book he can't follow, or learning to read in a program that has no books. It would be good to put the two together."

Trelease, however, argues that "there are culturally disadvantaged children who come from affluent homes, where the children go to the video store a lot more often than they go to the library. The obligation of an organization like RIF is to reach these families as much as the economically deprived."

It is the local RIF projects that determine which children will be served, and chooses the books from the 350 publishers and distributors from whom the national office has secured a discount. The local projects also work with the national office on ideas for encouraging reading, ranging from workshops for parents and story hours to special theme events related to reading and national reading contests. Huck Finn as Bait

"Any way to motivate children to read and become excited by reading is a plus," says National Education Association spokeswoman Nancy Young. "And any way that we can get parents involved in complementing what teachers do in the classroom is going to be helpful."

"The code word of the decade is excellence," adds Kozol. "But you can't terrify children into it -- you entice them. The best way to do this is with a copy of Huck Finn or The Call of the Wild. RIF, at the very least, heightens interest in books."

Give the final word to Tamara Johnson, a third-grader at the Bruce-Monroe RIF distribution who wants to be a "teacher and a ballet star and a skater" when she grows up.

She likes reading, she said, "because it's fun." Clutching the book she had chosen -- Your Own Magic Show -- she still looked longingly at an unclaimed title, If You Were A Ballet Dancer."

"Maybe next time," she said. David Streitfeld is a writer for the Style Plus section of The Washington Post.