The Smithsonian's highly acclaimed division of performing arts, one of the most creative and aggressive cultural programs in the country, has been in disarray since last week when word filtered down to the staff that the 15-year-old organization may be drastically reorganized.

The source of concern: a recommendation from Charles Blitzer, outgoing assistant secretary for history and art, to Smithsonian Secretary S. Dillon Ripley that the division's federal employes move under the jurisdiction of the Museum of American History, while the Discovery Theatre space and Smithsonian Trust Fund and private-side employes move to the Resident Associates program.

Blitzer, who has just become director of the National Humanities Center in North Carolina, declined to discuss specifics about the recommendation, saying only that his aim was to better integrate the performing arts with the rest of the institution.

James R. Morris, director of the performing arts division since its formation in 1967, said that the proposal "would cut off our access to box-office and advertising campaigns, artists fees and so forth and reduce us to an organization that would have a little bit of federal money to produce a few concerts a year. In terms of the programs that we have, it would be disastrous. Rather than just book concert artists, most of our programs are the result of a good deal of research, the on-going accumulation of materials and interviews, a total programmatic effort which ultimately manifests itself as a concert. I feel this would be the virtual destruction of the performance programs that we have known in the past."

On Tuesday, Ripley said he did not recall asking Blitzer for the recommendation. He added that he had "only heard about this yesterday. I haven't seen any papers, I've made no decision or had any discussion of the recommendation with my colleagues."

Larry Taylor, a spokesman for the Smithsonian, added yesterday that "the secretary has not to my knowledge yet formally made the decision; on the other hand I think he'll be doing it by sometime early next week. I am still not informed as to what changes will be made, but I consider it hogwash that people say the division is being closed because that isn't going to happen."

Besides developing the "living museum" concept widely imitated across the country, and instituting programs that have been internationally acclaimed, the division has had considerable impact on cultural life in Washington through its continuing programs in jazz, country music, chamber music, black American culture, children's theater, dance and American musical theater. All these programs included considerable research and study of each discipline's history and contemporary practice, supported by concerts, recordings and publications.

The division originated many general museum programs, including using authentic period instruments and costumes for concerts. It started the Smithsonian Chamber Players, Romantic Chamber Players and the Smithsonian Jazz Repertory Company and sponsored the 20th Century Consort.

It also established the Smithsonian Collection of Recordings and the annual Festival of American Folklife, though these are no longer under its jurisdiction. The recent transfer of the recordings division to the Smithsonian Press was a particularly serious blow. In past years, its profits had helped offset losses from concert programming. Morris says that "concerts have always lost money because we don't have a big enough house and we don't sell tickets at that high a price."

However last year, the division suffered a loss reported to be close to $2 million, much of it from the recordings division. "You can't run a first-class concert series at 250- or 500-seat houses and break even. What we had done was to subsidize that loss with the income from the recordings. One of the arguments for doing that was that many of the concerts we did each year resulted in recordings."

As with so many aspects of business affairs of the often byzantine Castle on the Mall, the problems at performings arts apparently run deeper than the "simple housekeeping" description attached to Blitzer's memo. "It is obviously not unusual for the Smithsonian to look at various programs and ponder ways they can be improved," says Larry Taylor. The performing arts division's funding figures for last year were fairly low: $470,000 in federal appropriations, $230,000 from box-office returns and $350,000 from the Smithsonian Trust Funds. But last year was, as one source in the division said, "a financial disaster," with a cumulative loss of close to $2 million.

There were also reports of personality conflicts between Morris and other Smithsonian officials. Morris has a reputation as an independent spirit who sometimes disregards Smithsonian boundaries. Morris himself says that a reorganization had been suggested at the beginning of the new fiscal year last October, but that he felt the division was prepared "to operate under that reor- ganization."

Some critics, all of whom demanded anonymity, said that new competition for funding is coming from the Quadrangle Center for Asian, Near Eastern and African Culture currently being constructed underground behind the Castle. "The Big Hole is being given priority," said one source.

Funding cutbacks had already led to the cancellation of a jazz series scheduled to begin in January and a black American culture program set for this weekend; the American Musical Theatre series had already been cut for the season, as well, while marketing and promotion positions had been eliminated. Discovery Theatre, whose spending last year exceeded its revenues by $20,000, has just shot a well-received pilot program for television that could increase earned income through national syndication.