District officials received stinging lectures on Capitol Hill yesterday for endorsing a nearly $300 million tax-cut package and a 15.6 percent pay raise for D.C. Council members, at a time when the city is struggling with poor schools, crime and dirty streets.

Sen. Richard J. Durbin (D-Ill.) said Mayor Anthony A. Williams and the D.C. Council are "naive" to think that cutting income taxes would attract new residents to a city that hasn't yet dealt with such problems, and he vowed to oppose the proposed tax reduction.

Meanwhile, Sen. Kay Bailey Hutchison (R-Tex.), chairman of the Senate Appropriations subcommittee on the District, said she wants to scale back a raise for council members -- which boosted their annual pay from $80,000 to $92,500 -- because it is excessive for part-time legislators who are permitted to hold outside jobs.

But it was Durbin's provocative rebukes of the tax-cut package that dominated yesterday's hearing, where Williams (D), council Chairman Linda W. Cropp (D) and financial control board member Darius Mans presented their proposed city budget for next year.

Durbin said that as a Georgetown University student in the 1960s, he witnessed a slaying near Dupont Circle and his car was broken into, and that more recently, he has been mugged on Capitol Hill. He said he could not fathom why D.C. officials voted to slash taxes rather than spend money on projects such as ridding neighborhoods of open-air drug markets and other crime.

He noted that Williams initially made simi lar arguments against a large tax-cut package before agreeing to a compromise plan that ruled out various proposals the mayor had made to improve key city services.

"I am startled at the suggestion of a tax cut for the District of Columbia," said Durbin, the ranking Democrat on the Senate panel.

"Is it safe to live in this town?" he asked. "Are schools worth attending? Are rats running all over the streets? . . . I don't think this is about creating a good mood. You're saying, `Don't worry, be happy. We can do it all.' I don't buy it."

Cropp challenged Durbin, saying city officials plan to cut taxes and improve services simultaneously. "I don't think you can take the tax cut in isolation," she said. "We did not take one issue and say, `This is going to be the panacea.' " The mayor also defended the city's budget.

The contentious Senate hearing, a prelude to votes in the House and the Senate on the District's proposed budget for fiscal 2000, made it clear that the spending plan agreed upon by Williams, the council and the control board is unlikely to glide through Capitol Hill without changes. But Hutchison and other lawmakers said they hope to move quickly on the $5.1 billion budget, and a vote by the full Senate Appropriations Committee has been scheduled for June 24.

Hutchison said that she favors tax cuts for individuals and businesses but that she has significant questions about the way D.C. officials intend to pay for it next year. She said the proposed tax cuts, projected to cost nearly $60 million in the fiscal year that begins Oct. 1, essentially would be paid for by stretching out the number of years the city has to repay millions of dollars in debt.

Hutchison said her panel's GOP majority favors cutting D.C. taxes to levels that are more competitive with the surrounding suburbs but added that she will examine other ways to pay for it. She also noted that the District's proposed reduction in income taxes for individuals and businesses, and a proposed reduction in commercial property tax rates, would be phased in over five years and halted if the economy falters.

"I do support tax cuts as an incentive to bring people back into the District," Hutchison said. "The majority of my colleagues favor tax cuts but want to be sure they are financed conservatively."

Williams described the District's more than $3 billion in outstanding debt as "front-end" loaded -- meaning too much of it must be repaid within a relatively short time -- and urged the senators not to link the debt restructuring and tax-cut issues. But Hutchison said she wants to see the District, which has a hefty debt burden, increase its financial cushion from 5 percent of revenue to about 6 percent, and wants the city to use at least half of any additional surplus to pay off debt.

Hutchison's criticism of the council's recently approved pay raises drew a defense from Cropp, who said the local legislators seem to work "seven days a week, 24 hours a day" and do not miss important meetings or other crucial business because of their outside employment.

But Cropp's arguments did not sway Hutchison, who noted that council members had a pay increase in 1997 and that federal employees are receiving raises of about 3 percent.

"I am looking at the option of lowering those pay raises," Hutchison said. "A part-time position at $92,000 is hard to justify."

Cropp's pay also was raised recently, from $90,000 to $102,000, but as chairman, she may not hold another job.

Cropp's colleagues on the council are allowed to hold outside employment. D.C. Council member Charlene Drew Jarvis (D-Ward 4) is paid about $120,000 a year as president of Southeastern University; Vincent B. Orange Sr. (D-Ward 5) reported about $117,000 in income last year from work as a lawyer and accountant, and council members Kevin P. Chavous (D-Ward 7), Harold Brazil (D-At Large), Jack Evans (D-Ward 2) and David Catania (R-At Large) each reported tens of thousands of dollars in income from work at D.C. law firms, according to recent disclosure filings.

Those filings also revealed that Williams had delayed reporting two consulting arrangements he had with city contractors last year as he campaigned for mayor; the D.C. Office of Campaign Finance has charged him with violating city law by not reporting the contracts within 30 days.

CAPTION: Mayor Anthony A. Williams, testifying before a Senate subcommittee, urged senators not to link debt and tax-cut issues.