The District of Columbia's long-discussed budget crunch became a reality yesterday for 350 elementary school teachers who received dismissal notices as they left school for the day.

School officials said a still undetermined number of junior and senior high school teachers and 45 assistant principals would receive similar notices next week, in what school officials say will be the largest employe layoff in the school system in at least seven years.

Firing more than 10 percent of its 2,800 elementary school teachers is the school system's first attempt to whack $27 million from its projected operating costs in order to live within the leaner spending limits of a $25 million budget for the fiscal year that begins Oct. 1.

Several city departments have threatened widespread layoffs -- including the police, fire and corrections departments -- but the school system is among the first to actually issue dismissal notices -- technically called reduction-in-force announcements.

Deputy school superintendent Elizabeth Yancey said between 700 and 800 school employes -- including some administrators -- would be laid off in the coming weeks.

At least one teacher at each of the city's more than 100 elementary schools received a layoff notice yesterday, school officials said.

Because of dwindling school enrollments, few new teachers have been hired in recent years. Some of those fired yesterday have worked in the system for five and six years, Yancey said.

The terminations are based on seniority, with some consideration given to military service, she said.

The layoffs are expected to increase the elementary public-to-teacher ratio in elementary classes from 26-1 to 28-1.

Those teachers who received layoff notices yesterday will be the first hired when older teachers retire or others fail to obtain recertification, Yancey explained.

The dismissal of hundreds of teachers, aides and other school personnel constitutes the first general layoff of school personnel in at least seven years, said School Superintendent Vincent E. Reed when he proposed the layoffs in March. The school board approved his plan two months later.

Since 88 percent of the school system's budget is spent on salaries, most of its cost-cutting must come by reducing employment.

There are currently 6,600 teachers for the city's 99,000 youngsters and school officials expect that enrollment to decline by 7,000 by this September. s

The layoffs are part of a general city belt-tightening that is occurring as the District government tries to come to grips with an accumulated budget deficit of $284 million through September of last year and another $172 million potential deficit for the current fiscal year. Projections are that the deficit could be even larger in coming years.

School officials estimate that the laying off of 700 teachers will save about $15.4 million. A further saving of $2.4 million is expected to result from reductions in staff positions in the central administration.