Mayor Marion Barry said yesterday that he has rejected proposed cuts in the budget for the D.C. public library system that would have led to the closing of seven neighborhood libraries and the ending of Sunday service at the main library.

The announcement came on the eve of today's general election in which Barry is seeking an at-large seat on the D.C. Council.

Lurma Rackley, Barry's spokeswoman, said the mayor has been meeting with his budget officials to prepare the supplemental budget he expects to present to the council next week.

"This is the time of the year that the mayor's supplemental budget is being worked out," Rackley said. "There is nothing unusual about the timing."

Other candidates and some council members previously had criticized the proposed cuts, which would have amounted to a reduction of almost 11 percent of the library's $20.3 million operating budget.

Sharon Pratt Dixon, the Democratic nominee for mayor, had said she would restore funds to the library system.

And council member Hilda H.M. Mason (Statehood-At Large), who is running against Barry in the race for two at-large seats on the Council, had said at a public meeting two weeks ago that she would work to restore the money cut from the library budget.

"I'm glad that he decided to restore the money," Mason said yesterday. "I hope this means that he won't try to cut it again after the election."

Trustees for the library system had proposed closing the seven branches, ending Sunday service at the Martin Luther King Jr. Library and furloughing workers for 11 days next summer to save $2.15 million in the library system's budget for fiscal year 1991, which began Oct. 1.

The trustees' proposal was in response to an executive order by Barry directing all city agencies to restrict spending in fiscal 1991 to 1990 levels.

Library supporters had flooded the mayor's office and council offices with letters and petitions asking that the system be spared cuts, even as the city grapples with a worsening revenue shortfall.

The letters mentioned dozens of programs at neighborhood libraries for young children and older residents that would have been eliminated if the cuts were enacted.

In a statement released yesterday, Barry acknowledged those services, especially those aimed at younger residents.

"I firmly believe that if we educate our youth on the front end, we will reduce the demand for costly support services in the future," Barry said.

On Friday, Barry informed library trustees and Hardy R. Franklin Sr., director of the library system, of his decision to restore $1.5 million to the system's budget. The system will still have to find savings of $624,000 in its current budget, officials said.

"It could have been a ploy. It is election time," said John C. Hazel, president of the library system trustees. "I was pressing him {Barry} for full restoration. There are still things we'll have to do to save $600,000."

That includes forgoing new positions, including two new security officers. About $100,000 will be taken from the new book fund, almost half of the money marked to buy new books.

Those moves will amount to savings of about $505,000, Hazel said. The system will have to save an additional $119,000 through energy conservation and limiting overtime for employees.

The D.C. Council still can increase or decrease the budget for the library system.

It was the third such budget change Barry has made in recent months.

In early October, Barry proposed cutting $1.5 million from the budget of the University of the District of Columbia. He later changed his mind.

In late July, Barry vetoed a bill that would have provided an annual subsidy of about $250,000 to the Whitman-Walker Clinic, the city's major AIDS service organization, to help pay the cost of employee insurance premiums. Barry later signed the legislation after the council approved a revised version of the plan.