About 50 Montgomery County business executives, homeowners and civic activists turned out last night for the first of five public hearings on the county budget to ask that funds for economic development be maintained in the face of impending federal cutbacks.

The County Council heard most speakers urge support for spending $1.71 million for the county's Office of Economic Development as recommended in the $1.041 billion budget proposed by County Executive Charles W. Gilchrist. The expenditure, they argued, could lead to development that would generate new tax revenue and offset federal cuts.

"Economic development is not something that county government can make an optional thing," said Harvey Kushner, chairman of the Economic Advisory Council, a citizen board. "Nobody's been put out of business yet, but that's what we view as the threat" of the federal Gramm-Rudman-Hollings budget-balancing law, he said.

Gilchrist's budget represents a 7.4 percent increase in spending and would make Montgomery one of the few counties in the country to have an operating budget greater than a billion dollars.

The budget contains a small reduction in the real estate tax rate, but would still raise homeowners' tax bills because assessments have risen. The executive has estimated that 60 percent of homeowners would pay $25 more in property tax and those in rapid growth areas, such as Damascus, would pay an average of $161 more.

Such increases drew little concern last night. What the speakers said they wanted were assurances that development and redevelopment would still be encouraged despite budget constraints.

Daniel Neal, representing Takoma Park, said the budget proposal "slashes some of the programs" that would lead to the enhanced development of his city.

The city had asked for $378,000 in community development block grant money and would get only $129,000 in the budget, he said. "We've proven we can take substantial sums of money and invest them wisely," Neal said, asking the council to grant the full request.

In all, Gilchrist proposes spending $5.16 million on the county's 12-year-old community development block grant program. According to county budget figures, $5.07 million is allocated for the purpose in the current fiscal year.

Gilchrist had pointed to a reduction in federal funds -- from $4.1 million this year to an estimated $3 million next year -- as a reason for the county to increase local involvement in community development.

More public hearings will be held today, tomorrow and Thursday.