The acting chairman of the University of Maryland's English department says that a decision to terminate the sister of Maryland Gov. Marvin Mandel from her teaching position was reversed in the face of a threat from the governor's office to cut $3 million from the school's budget if the decision stood.

Dr. Calhoun Winton, acting chairman of the department, said that a member of the College Park campus administration told him of the threat and said that Mandel's sister, Esther Potash, had to be rehired if the budget cut were to be avoided.

Winton, who was responding to inquires from the Washington Post, declined to identify the administrator. A spokesman for Mandel said he could locate no one on the governor's staff who had made any overtures to the university on behalf of Potash. Winton said he was not told who Mandel's office allegedly made the threat.

Since July 7, The Washington Post has made repeated efforts to reach Potash. Dr. Robert Gluckstern, chancellor of the College Park Campus, and Dr. Robert Corrigan, Provost for arts and humanities at College Park and Winton's superior in the academic chain of command.

Telephone calls to Dr. Gluckstern's office on the afternoon of July 7 were not returned and he left that evening to attend a physics conference in Russia. His office declined to make his itinerary in Russia available and efforts by State Department officials in charge of cultural exchange programs to learn his whereabouts were unsuccessful.

Dr. Corrigan's office said he was traveling in Africa and that his itinerary, was available.

A person answering the telephone at Potash's house said she was in California and was not available.

A woman in her early 60s, Potash returned to school to work on an advanced degree after her children were grown.

She held a position as a $10,000 a year instructor-adviser until May, when she was terminated in accordance with a departmental policy to limit graduate students to a maximum of six years as instructors before they earn their PhD's.

Other department members have been upset by her subsequent rehiring. "This was not in accordance with the wishes of the department," said one faculty member who asked not to be identified. "We are disturbed by this, as you can realize."

According to faculty members in the English department, the instructor-adviser position held by Potash is one of several designed to assist graduate students financially while they work towards their doctorates.

The policy has been, they said, that students are expected to have earned their degrees after six years and move on. Potash's assignments, they said, included counseling of undergraduate English majors and some teaching assignments.

Mary Lou Ference, a fellow graduate student with Potash, said both she and Potash were given terminal one year contracts last fall to work three quarters time in the English department and one quarter time in a dean's office. There was a specific understanding, she said, that each would leave after the year was up.

"I didn't attempt to ask for reappointment because I knew that was the precedure," Frence said.

"I was a little upset by what seemed to be the pressure from above in Esther's case," she said. "There are a lot of PhD. candidates like me who are out of a job."

"Esther is not even all but disscertation," said another faculty member, adding that Frence had progressed further up the academic ladder than Potash. Ference had passed all her comprehensive exams and as beginning her dissertation. "The English department was, in effect, forced to do this," he said.

Morris Freedman, former chairman of the English department at College Paris, said the reaction of his colleagaes to the alleged incident was one of "astonishment, outrage, incredulity and indignation."

A spokesman for University President: Wilson H. Elkins said Elkins had no role in the matter and that issues on the level of Potash's appointment are generally left to the branch campuses. He said it was his understanding that Potash was being given the additional year to qualify her for retirement benefits.