Martha Graham, one of the greatest modern dance choreographers, danced until she was 76 -- and that was 17 years ago. Few audiences and critics have intimidated her.

But yesterday, Graham found an audience she couldn't win over -- a conference of members of House and Senate appropriations subcommittees. The conferees rejected what had been an unprecedented attempt to get a direct congressional appropriation for the arts.

It's not unusual to see famous artists in the halls of Congress, asking for money for the National Endowment for the Arts, the major federal arts funding agency. But since last summer, Graham has lobbied Capitol Hill for a multimillion-dollar grant for the Martha Graham Center for Contemporary Dance.

Her gambit was unique. She bypassed the endowment altogether and went straight to the source to ask for a $7 million appropriation -- a sum she and her associates say would finance the preservation (largely on film) of her work and the renovation of her company's building.

In doing that, she set off a prickly debate over funding of the arts.

For two days last summer, Graham blitzed key members of the House and Senate, accompanied by ballet superstar Mikhail Baryshnikov, who is a Graham admirer. "Every female in the office was hanging around the senator's door," said Robert Maynes, press secretary to Sen. Dennis DeConcini (D-Ariz.), the recipient of a visit.

Graham wove stories from six decades of dancing and choreographing into her plea. She told Sen. Barbara Mikulski (D-Md.) that she was honored to be talking to a woman who had achieved so much. When she met with House Majority Leader Tom Foley (D-Wash.) and his wife Heather, who is also Foley's unpaid administrative assistant, Graham played with the Foleys' ever-present dog Alice.

But she left in her wake a considerable controversy. Those who spent their time trying to beef up federal funding for arts groups suddenly found themselves arguing against a whopping federal grant.

Within Congress, the most influential supporter of arts funding, Rep. Sidney Yates (D-Ill.), chairman of the House Appropriations subcommittee on the interior, was uncharacteristically silent. The House committee, which increased the president's NEA budget request, did not include money for Graham. The Senate Appropriations subcommittee, spurred by DeConcini, recommended $4.1 million for Graham's project. ("That was my compromise with Bennett Johnston {D-La.}," DeConcini said.) The Senate and House conferees have recommended an NEA budget of approximately $168 million.

NEA officials and arts groups contended that Graham's strategy circumvented the NEA's competitive peer review system. Both the National Council on the Arts (the presidentially appointed body that oversees the NEA) and the American Arts Alliance, the high-profile advocacy organization, said Graham's move set a "dangerous precedent."

"It opens the floodgates for regular and widespread direct grant appeals to Congress by arts institutions receiving inadequate support for their activities," said the American Arts Alliance in a statement.

And to make things even more uncomfortable, arts advocates found themselves lobbying against a legend. They didn't want to be against Martha Graham, but they didn't approve of this way of getting federal funds.

Frank Hodsoll, chairman of the NEA, who had advised against giving the funds to the company, said, "I think Martha Graham is the greatest dance artist of the 20th century." But asking for a separate appropriation from Congress, Hodsoll said, "essentially provides federal money for those with the most clout and those best at working the political system."

Apart from the principle at stake, the appropriation for the Graham Center would have been unusually large. By comparison, the entire amount available through the NEA to dance groups last year was $9.2 million.

DeConcini disagreed that this would set a bad precedent: "I wouldn't say we'd never do this again, but it isn't something I have anybody else in mind for."

And the Graham company itself lobbed this emotional argument:

"The bottom line is we're talking about preserving this national treasure and our time is short," said Ron Protas, associate artistic director. "Martha wants to do this, and she's enthusiastic. Even one gesture of her arm conveys so much life of the spirit, and to lose that while people quibbleabout details would be to me a supreme irony."

Yesterday, after the conferees turned down Graham, Protas said, "We're disappointed, and Miss Graham is disappointed, but we're not quitters and we're going to find some way to preserve these works. Martha's father said she was a horse that ran best on a muddy track. She's had rejections before, but we have gone on."

Had the appropriation been approved, all but $100,000 of the $4.1 million for the company would have to be matched equally with private funds. In the '40s, '50s and '60s, Graham enjoyed the support of such wealthy patrons as Lila Wallace (who gave Graham the building that now houses her company) and Bethsabee de Rothschild. But fund-raising since then has been difficult.

During the '80s, the NEA awarded Graham several six-figure grants, including an emergency grant for artists' salaries and a half-million-dollar challenge grant that had to be matched 3-to-1 with private monies. The company has not yet matched it. Nor has a $250,000 grant to do an archival film project been matched.

Protas says the company has beefed up its development office. "We have had strong indications from friends that should this {grant} go through we would have money," Protas said.

This afternoon, the company has planned something of a celebrity bake sale at its Manhattan building. Celebrities including Woody Allen, Jerome Robbins, Halston and Liza Minnelli will be donating cakes, as will restaurants ranging from Sardi's to the Hard Rock Cafe.