On March 30, Lee Michael Katz lived the Washington reporter's dream -- and the suburban Washington reporter's nightmare.

A 24-year-old who covers four county beats for the Arlington Journal, Katz grew itchy watching television coverage of the assassination attempt on Ronald Reagan. So he assigned himself to the story, even though his editor had laid down the law: Nothing would appear in the Journal unless it had a local angle.

Through a combination of luck and perseverance, Katz obtained an interview with an Arlington medical student who saw President Reagan walk into the George Washington University Hospital emergency room, his knees buckling and apparently about to collapse. If Katz had been working for a metropolitan daily, it would have been a worldwide scoop.

None of the major newspapers or television networks reported Reagan's stumbling entrance into GW until the morning of April 1, more than 24 hours later. On that same morning, Katz's story appeared on page one of the 9,000-circulation Journal, and the local angle prevailed.

"Area Student," said the headline, "Aids President."

Keeping it local is the most golden of all the rules for Washington's 42 suburban newspapers. While the city's two daily newspapers cover Washington as an international and national news center, as well as hometown, to 2.9 million people, suburban papers focus on the people and institutions of their own turf, whether Arlington or Upper Marlboro, with profitable results.

Although exact dollar figures are unavailable, Washington's suburban newspapers, with their fare of planning commission news and home improvement tips, are fatter and more numerous than they were 10 years ago -- at the same time that metropolitan dailies around the country, including The Washington Star, are sputtering.

Suburban Washington's general interest papers -- 23 weeklies, 15 bi-weeklies, three dailies and a monthly -- circulate more than 700,000 copies and run more than 1,200 pages among them every week. But only rarely can one find in them who's at war, who's at peace or who's last in the American League. The bulk of the space goes to local politics, schools, youth sports and culture.

And, of course, to advertising.

Although it is impossible to determine with accuracy which papers are making money and which are not, one signpost indicates good news for suburban Washington's papers. In an average week, 65 percent of their space goes to ads and 35 percent to news. The average ratio for all American newspapers is about 57 percent ads to 43 percent news, according to several sources in the industry.

Meanwhile, the number of newspapers in the suburban Washington market has grown from 26 a decade ago to 42 today. Only 11 of the 42 have independently verified circulations and another 10 are giveaways or throwaways, but industry analysts believe that total circulation of suburban Washington newspapers increased by about 25 percent during the 1970s.

By far the biggest circulation gainer on the suburban Washington scene during the last 10 years -- and the biggest gainer around the Beltway of any newspaper -- The Washington Post included -- has been the five Journals created by the Army Times Publishing Company.

The Alexandria, Arlington, Fairfax, Montgomery and Prince George's Journals, which are packed with color photos and graphics, have a combined circulation of 127,000. This figure is up from 80,000 five years ago and from about 7,000 10 years ago (when only the Alexandria edition existed).

Glossy Journal sales material describes the circulation area of the suburban chain as a magical kingdom called "Journaland" -- where 69 percent of the Washington area population lives, but where 77 percent of the area's retail sales are rung up.

The implication is that the District of Columbia shoundn't be a prime target for advertisers, and the Journal's results seem to bear that out. The chain put together a 34 percent increase in advertising revenue in just one year -- much of it at The Star's expense and much of it by attracting for the first time such large and prestigious retailers as Giant Food, Safeway, Hecht's and Woodward and Lothrop, according to Journal publisher Geoffrey Edwards.

The average age of Journal reporters is 28 -- "young and hungry" is how Katz describes them. The starting salary is about $200 a week. Still, Journal editors and reporters can cite dozens of cases where better-paid reporters missed stories the Journals got, or had to follow up on stories the Journals got first.

"Morale is excellent here, and so is the journalism we produce," says Susan Hedling, a 35-year-old reporter for the Montgomery Journal who spent much of her early career working for metropolitan dailies.

But for all their visibility and good looks, the Journals have never made money, do not now make money and may not soon make money, according to publisher Edwards.

"We're getting closer and closer all the time," Edwards said. "We're making significant financial progress; let me put it that way. I'm convinced that one day it'll be a worthwhile business."

This year? "No."

Next year? "I'm not going to say."

A persistent rumor is that the Journals might start publishing daily, especially if Time Inc., owner of The Star, ever decided to close the paper and leave Washington a one-newspaper town."We're always considering the right frequency for the Journal newspapers," says Edwards. "It would depend on whether there's an overwhelming desire. We can't stand a business failure. We'd only go daily to improve our [business] position."

As a journalistic product, the Journals "realized a long time ago we couldn't compete with The Post and Star in terms of resources," says Tom Wuriu, editor of the three Virginia editions.

"We're not set up to beat the dailies on their type of stories. On the other end of the spectrum, there were a lot of local papers that do a good job on the chicken-dinner circuit. We felt there was an area in between."

Aiming to provide what Wuriu calls "The Big Small Picture," the Journals concentrate on three subjects -- taxes, roads and homes. "I keep trying to favor the guy who doesn't want to pay more real estate taxes," says Wuriu.

Journal readership surveys bear out his judgment. The typical Journal subscriber is slightly over 40, the parent of more than two children and part of a household whose median income is $27,000 a year.

Newspapers have always sold well to people whose names are published in them, and the Journals make a special effort to include names in their sports coverage. The sports editor for the three Virginia editions is also the dean of suburban Washington's sportswriters -- 42-year-old Bill McDowell.

"Basically, names are it," says McDowell, a flat-topped former public relations man who chainsmokes unfiltered Pall Malls and wears rumpled jogging shoes. "Our job is to give the community something to identify with." The vehicle: six pages of sports every issue, half devoted to youth leagues.

The liveliest suburban battle the Journal faces is in Montgomery County, where the Montgomery County Sentinel reigned unchallenged until the Journal's arrival in 1973.

Leonard (Doc) Kapiloff, a dentist and real estate developer, and his brother Bernie, a Baltimore plastic surgeon, bought the 126-year-old Sentinel in 1961. "We've been in the forefront of liberal progress in a liberal county," says Doc Kapiloff. "That and good writing have been the hallmark of the paper since we bought it."

But the Journal's appearance in Montgomery County in 1973, was followed two years later by the arrival of the Maryland Weekly, a weekly section of state and county news published by The Post, and in 1976 by The Montgomery Star, a daily section of state and county news published by The Star. As a result of the increased competition, the Sentinel's circulation has fallen from 35,000 five years ago to 21,000 today.

"I feel beleaguered occasionally," says John Cranford, the editor. "We still haven't had time to figure out what we should give our readers."

Elizabeth Wiener, a 32-year-old reporter who left three years ago to join States News Service, says the Journal "came in like an army tank. It was made of steel. They had the Army Times behind them. The Sentinel had Doc. Doc wasn't a company. Doc was Doc."

Kapiloff insists that his paper "is on the verge of amking a good deal of money." He brought the County Advertiser, a throwaway with an announced circulation of 110,000, last fall," and that has made our situation good." While Kapiloff admits he has received offer to sell, he says he has always rejected them and always will.

"I guess I'm just a stubborn son of a bitch," says the 66-year-old publisher, "but I believe the Sentinel is vital to this community."

Smaller publishers around the Beltway are not so sure how much their communities hunger for their existence. "When you circulation is only 8,000, you aren't deeply needed by too many people," notes John Rouse, editor and general mangager of the 8,400-circulation weekly Bowie Blade-News. Still, adds Jim Coldsmith, editor and publisher of the 5,117-paid circulation weekly Alexandria Port Packet, "This is where the fun is, if not necessarily the money."

Occasionally, it's where the boldness it, too.

Last July, concerned over regular fatal car crashes where drinking was involved and where the victims were teen-agers, Rouse published a photo that few newspapers of any size would have touched. It showed an obviously dead 18-year-old man in the front seat of a mangled car, with firemen and rescue workers trying to extricate him.

"The phone never stopped ringing," said Rouse, 38, who began his career on a metropolitan daily in Connecticut. "I just told them what I tell you: that people seem to want true reporting about their community as long as it's rose-colored. I did it because it just might do some good."

To Rouse. "The gist of what I do is what's going on in this community. I give Bowie its Boy Scout news. The Washington Post will never print Boy Scout news."

Coldsmith, however, aims at an even thinner market than the 10,000 homes in Rouse's Bowie. The fifth largest newspaper (of five) in Alexandria, the Port Packet concentrates almost exclusively on the 3,000 homes in trendy Old Town.

"We've defined our market," Coldsmith explains. "If an atom bomb hit Washington, we wouldn't cover it unless there was fallout or refugees coming down the Potomac."

Jim Coldsmith spent 13 years as a correspondent for the Associated Press, "so I know what life in the big leagues is like.

"But I just love community journalism," he says. "I bet I'm the only newspaper editor in the Washington area who hasn't moved his car in 10 days. And look over there at that stack. That's resumes. I pay $190 a week, and I still get a stack of resumes like that."