Del. Walter E. Fauntroy (D-D.C.) led a chorus of city officials expressing outrage yesterday at Thursday's offer from a key congressional subcommittee to increase the annual federal payment to the District of Columbia if city officials scuttle plans to implement a voter-approved lottery in the nation's capital.

"The action of the subcommittee is a deliberate violation of the principles of home rule," Fauntroy said.

On Thursday, the House District appropriations subcommittee agreed to remove $628,000 from the District's proposed budget for the fiscal year that begins Oct. 1. The money had been earmarked to fund a gaming control board authorized when city voters approved a referendum last year to permit some legalized gambling in the city.

Many of the subcommittee members expressed distaste for gambling in the nation's capital. Supporters of legal gambling had argued that the cash-strapped city government could raise $25 million a year by running its own lottery.

As an incentive for the city to drop the plan, the subcommittee offered to increase the federal payment, now set a maximum of $300 million, by $20 million. Yesterday's action was preliminary. Final action on the budget is not expected to take place until this fall.

But even while genuinely optismistic that the funding would be restored eventually, most city officials interviewed yesterday reacted with outrage to what many saw as the most serious assault to the city's young form of limited self government since the House struck down a city law restricting the location of chanceries here.

"I am appalled," said City Council member Nadine P. Winter (D-Ward 6), who, like Fauntroy, opposed passage of the gambling initiative but supported it on home rule principles once the voters approved it.

"I would hope that the Congress would let the elected officials run the District of Columbia, " Winter said. "I don't understand their frame of mind for doing that. I just cannot believe that human beings could be that inhuman. We have to find a way to let the people across this national know that we want our freedom."

Council member Polly Shackleton (D-Ward 3) said, "The Congress had a chance to shoot this thing down," during the 30-day congressional review period following the measure's approval. "I don't think they have the right to do this. It's our money, not theirs -- it's our tax money."

Rep. Lawrence Couplace (R-Pa.) was one of those who led the assault on the gaming board budget. "If he feels so strongly about gambling," Shackelton said, "why doesn't he go veto it in Pennsylvania," a state with a legal lottery.

But not everybody was completely unhappy with the subcommittee's action.

Council member John L. Ray (D-at-large), a principal opponent of the gambling initiative before it passed, said that while he opposed the congressional intervention from a home rule standpoint, "I'm not all that upset about them knocking the money out."

The Rev. John D. Bussey, who led the fight against legalizing any form of gambling here, said he received news of the subcommittee's action with joy.

"I think it makes good sense," said Bussey, pastor of Bethesda Baptist Church in Northeast Washington. "It's an act of good sense and good economics."