Metro general manager Theodore Lutz proposed a $197 million operating budget for the transit system yesterday that would require are a jurisdictions to increase their subsidy by $11 million.

The budget, which will take effect July 1 next year, is Lutz' first as general manager and presents the area's elected politicians with some hard choices about the quality and quantity of transit they want to provide citizens.

For example, Lutz proposes Saturday and Sunday subway service for the first time, but notes it will cost $1.9 million to provide it. Further, his budget assumes that the Metro board will increase both bus and subway fares by about 7 per cent by July 1, 1978. If they do not, local jurisdictions will have to increase their subsidy to Metro by $6.2 million.

Lutz also conceded during a budget briefing for the press Wednesday and again at the Metro Board meeting yesterday that the subway is carrying between 15,000 and 35,000 fewer people per day than Metro had predicted. The wide range in that estimate depends on when the prediction was made.

However, as Lutz pointed out, it has been only two weeks since Metro completed its realignment of bus routes to eliminate much parallel bus and subway service and it is too early to tell where subway ridership will level off.

Since Metro opened the Blue Line on July 1 and expanded subway service from 5 miles to 17 and from down-town-only to cross-Potomac, daily ridership has climbed from about 30,000 people to about 124,000 by the week ending last Friday.

Most of the increase Lutz proposes in his fiscal 1979 budget would go for new subway service, he said. By July 1, 1978, the present Red Line between Dupont Circle and Rhode Avenue NE is scheduled to be opened to Silver Spring.

In July, 1978, the Blue National Airport to Stadium-Armory is scheduled to be extended through Northeast Washington and out the U.S. 50 corridor to the Beltway at New Carrollton in Prince George's County.

The extensions mean, however, that many more technicians, train operators and station personal will be required to run the railroad - and their numbers will not be offset by a slight decrease in the size of the bus fleet and the number of bus drivers.

Lutz' $197 million operating budget represents a $29 million increase over the $168 million budget for the current fiscal year. He estimated that $12 million of that increase represents inflation (and the cost of living escalator in the drivers' contract), that $16 million represents new services, primarily the New Carrollton line, and the rest represents increased insurance and workmen's compensation costs.

In fact, a close look at Lutz' budget shows that there are no increases and csome slight decreases in almost every Metro department except rail operations.

Nevertheless, there is certain to be close board scrutiny of Lutz' budget because of the impact Metro deficits have on the budgets of local area jurisdictions. So far, the primary funding source the locals have found to be subsidize Metro is the property tax, and that is becoming politically untenable.

"There is a sizable increase in the operations budget," Metro board member Joseph Alexander, noted as he thumbed through the Lutz budget.

We're going t have to look closely at this." Alexander, a supporter of public transit, is alos a member of the Fairfax County Board of Supervisors.

Last year, Metro's budger committee cut more than $20 million from the proposed budget of then acting general manager Warren Quenstedt. Lutz is known to have cut about that much himself from his department heads' requests. "There's very little fat here," one knowledgeable Metro official said of the new budget. "If they cut, they're going to cut service."

Lutz also gave the board as update on how the current fiscal year - not quite 3 months old - is going. Because of lower rail ridership that projected, because of downward adjustments the board made in subway fares and changes it made in the dates the buses would be turned back at rail stations - Metro is projecting a $7 million shortfall from budget levels.

However, Lutz said, he is not seeking a revised current budget at this time and hopes to recover some of that loss through "aggressive management actions."

Lutz projected that the bus operations in the new budget will cost $126 million in revenue, mostly from fares and that a subsidy of $62.3 million will be needed.

For the subway, costs are projected at $65 million, revenues at $28.7 million and the subsidy at $32.8 million.

Lutz also proposed a series of options in the budget that the board can take or leave. Some save money, others cost money. For example, he said that weekday subway hours could be extended from 8 p.m. to 11 p.m. for another $505,000 beginning Jan. 1, 1976.

On the other hand, if local jurisdictions choose not to increase the bus subsidy, the budget would be cut by $4 million or 140 buses and 8 per cent of the schedule. "The bulk of the reduction," the budget message said, "would occur" on such heavily traveled trunks as Connecticut, Pennslyvania and Georgia Avenues and on 14th and 16th Streets.

Lutz also proposed a subway construction budget of $500 million, but conceded that any serious budgeting on the subway is impossible until a present regional restudy is completed.

He proposed a $39 million capital budget for the buses, including 175 new buses and sites for new bus barns in New Carrollton, Arlington and Southeast Washington.