When John and Sue Hoven decided that their son, Niels, needed special reading, math and science classes, they asked the Montgomery County school board for permission to transfer him to a magnet program at East Silver Spring Elementary School.

But the Hovens soon found there was a problem. Because Niels' father is white and his mother is Asian, Niels was considered a minority student, and there were already too many minorities at East Silver Spring.

Yet being "white" would not have helped, the Hovens learned. That would have prevented Niels from transferring out of his current school, Montgomery Knolls, because there are too few white students there.

"I'm outraged," said John Hoven, a federal economist who, with his wife, visited three magnet schools before choosing the East Silver Spring school. "It's almost comical that these people have discovered a way to discriminate against both whites and minorities on the basis of race."

The complex transfer policy that was used to decide whether Niels Hoven could attend a different elementary school is the cornerstone of the county's 10-year-old magnet plan, designed to improve racial balance in 13 schools in lower Silver Spring known as the Blair cluster.

A long-awaited report on the success of the magnet programs and the effect of the controversial transfer policy on racial balance is expected to be released within the next few weeks.

The policy allows students to transfer from one school to another if the move does not hurt racial balance. But some parents from the Blair cluster say the policy has turned into a bureaucratic Frankenstein that is undermining one of the main goals of magnet schools: to give families in lower Montgomery County access to special programs as an incentive to keep their children in public schools.

"When I moved here I thought it would be so wonderful living in a part of the county where you get all these marvelous choices," Hoven said. "But when you really get into it you realize you can't have these choices unless you go through an appeals process."

Other parents from the area disagree, and say the top priority of the magnet program is to improve racial balance, not to provide special programs for any parents who want their children in them.

"I think there is a problem [with transfers] this year but I don't think the policy has been detrimental to cluster families," said Kay Davis, president of the Blair Advisory Council, a community group that advises the school board. "Not everyone can have everything they want."

Parents critical of the transfer policy contend that it is easier for white students from Bethesda, Chevy Chase, Gaithersburg and Germantown to enroll in the Blair cluster's magnet schools than for children like Niels Hoven who live there. In what may be a veiled threat to school officials, some parents have said they are considering sending their children to private schools out of frustration with the transfer policy.

"The only ones they want to draw in are white kids from white schools," complained Katherine Hubley, a white parent living in the Blair cluster who has appealed the system's decision to transfer her 5-year-old son from East Silver Spring to Highland View Elementary.

School officials said the transfer policy is working as well as it can and does not discriminate against parents who live in the Blair cluster. They say it protects against large numbers of white students suddenly flocking out of any single high-minority school.

"The policy doesn't work well for everybody all the time," said school board member Blair Ewing, who lives in Silver Spring. "But it works reasonably well for the community as a whole. In my view, the magnets have had a fairly stabilizing effect on the community because there has been no precipitous white flight from the area."

Like school systems across the nation, school officials say, Montgomery is struggling with the Herculean problem of keeping its schools as integrated as possible in the face of rapid demographic changes in the Silver Spring area, where growing numbers of Asian and Hispanic refugees have settled in the past decade.

Census figures show that in the decade between 1970 and 1980, the lower Silver Spring area gained 15,000 minority residents and lost nearly 10,000 whites.

"I think one of the concerns is that people are thinking that there isn't much movement [into magnet programs], but there is," said Baron Stroud, director of the office of Quality Integrated Education (QIE) and a member of a committee that meets often during the school year to decide which transfers will be approved.

Whatever the school system's contentions, dozens of white and minority parents in the Blair area have had transfers denied.

As of mid-April, the QIE office that reviews transfer applications had approved 88 requests for this fall into Blair cluster schools and had denied 61, said Sandy Robinson, director of the school system's magnet programs. Many of the denials were issued to Blair area families who wanted to transfer their children into a magnet program, according to Robinson.

One white Silver Spring mother said she decided to enroll her son in a parochial school after he was denied a transfer to Highland View from his assigned school, East Silver Spring. "It's unfair for me to say it was the process that discouraged me . . . but it played a big part in our decision," she said.

In granting transfers to magnet schools, the committee weighs not only racial balance but a school's size -- many of the schools in the Blair cluster are filled to capacity -- and whether there is an educational reason for a transfer, such as a student's handicap. The transfer policy works on the premise that any white student who leaves a high-minority school should be replaced by another white student. The same theory is used for minority students leaving predominantly white schools. If there is no match, the transfer is denied.

Those who are denied are placed on a waiting list in case a match turns up, and Stroud said chances are good that many of the transfers will later be approved.

According to parents, the policy sometimes is bent for parents who appeal or threaten to sue over transfers that are denied, a point that School Superintendent Wilmer S. Cody disputes.

"We don't cave in under persistence or pressure," he said. When an appeal reaches his level, Cody said, he relies on the findings of a hearing examiner to make his decision.

"At this level we spend more time looking into the particulars of each case," he said.

Michael Malbin, a Blair parent and a vice president of the Oakview PTA, said that several years ago two sets of parents -- one black, one white -- who were denied permission to transfer their children to the schools' popular French immersion program considered suing the school system over the policy.

Ultimately, the white family appealed to school officials and was allowed into the program. The black family did not appeal and was not allowed in.

"It was a classic case of a person who couldn't beat the system," Malbin said. The family "was not accustomed to fighting long paper battles."

The number of transfers turned down this year has prompted a community organization, the Blair Advisory Council, to resurrect a proposal it presented to the school board several years ago recommending an open transfer policy.

Under an open transfer system, school officials would allow all transfers but would closely monitor racial balance at high-minority schools.

Ewing said the school board rejected an open transfer policy partly out of fear of getting into legal trouble with the U.S. Office of Civil Rights, which monitors school desegregation. Federal civil rights law says a school system cannot take action that intentionally worsens racial imbalance.

"For us to have an open transfer policy we would have to change the current policy, and this may lead to a worsening racial situation," he said.