The D.C. City Council is expected to give approval today to a proposed pay increase for police officers that Mayor Marion Barry's administration contends may require some reductions in other department budgets or a tax increase.

Before sending the proposal to the council for a vote, Barry waged a lengthy legal battle to overturn an arbitration panel ruling that granted police a 15 percent pay increase during a three-year period. Barry had argued that the pay package of $57.4 million -- $23 million more in pay and benefits than the administration had offered -- would be too costly.

However, City Council Chairman David A. Clarke pointed out during a hearing yesterday that the council already has identified $2.3 million to cover a retroactive pay increase for the fiscal year just ended. He also said he has identified $23 million in unanticipated revenue that would be more than enough to cover $9 million needed for pay raises in the fiscal year that began Oct. 1.

Clarke said the unanticipated funds would come from two sources: $16.1 million from funds overbudgeted for the D.C. Retirement Board and an additional $7 million as part of a proposal for Blue Cross-Blue Shield to refund millions of dollars to a federal medical insurance program in which the city participates.

But Alphonse G. Hill, deputy mayor for finance, said the police pay raise could result in budget cuts, a tax increase or some combination of the two. In addition to the pay raise, Hill said, the city would be facing a number of unbudgeted items that would have to be covered in the fiscal 1986 supplemental budget.

"We're looking at a range of expenditures needed to be funded and we're looking at the revenue available," Hill said, adding that the total amount that will be required for unbudgeted expenses had not been determined.

If the council approves the pay increase today, as expected, Hill said, the administration plans to use cash on hand to give police the retroactive fiscal 1985 pay increase before the Christmas holidays.

Meanwhile, labor officials who testified during yesterday's hearing urged the council to approve the pay award.

"The Fraternal Order of Police did not enter into the negotiation process intending to go to arbitration," said Gary Hankins, chairman of the police union's labor committee. " . . . This award is the product of the laws of our city. It was won fairly through the exercise of the rights you have granted us and it deserves your affirmative vote."

Hankins, who had accused Barry of using the courts to frustrate the collective bargaining process, said police officers view the council members as "heroes and heroines" for insisting that Barry transmit the pay award for council consideration. After the hearing, Hankins hugged City Council member Wilhelmina J. Rolark (D-Ward 8), chairman of the Judiciary Committee and the sponsor of emergency legislation that forced Barry to end his battle against the pay proposal.

The arbitration panel's ruling for the first time granted larger pay increases to police officers than those granted firefighters. Joslyn N. Williams, president of the Metropolitan Washington Council AFL-CIO, testified that other unions do not object to the award and that parity is not an issue.