Arizona Gov. Bruce Babbitt, exaggerating a bit for effect, warned his fellow governors today that if they did not act now to halt the spread of federal power their state capitols might become regional offices of the Department of Housing and Urban Development.

And Georgia Gov. George Busbee complained about federal "power grabs."

While Democratic politics have dominated this conference of the National Governors Association, in its second day here, one of the other big issues being discussed is what many governors describe as the steady erosion in the powers of state government as Congress and federal agencies, using the leverage of federal funds, become increasingly precise in telling governors how to run their states.

"Congress has lost all sense of restraint," Babbitt said.

The renewal of the age-old issue of federal vs. state power was triggered by budget cuts by Congress and the president last spring and this summer.

The governors fvaored balancing the federal budget but they wanted to do it with cuts in federal programs that have many strings attached, and the governors believe, allow them little administrative flexibility.

Instead, Congress eliminated the governors' favorite federal program, general revenue sharing, which had sent money to their states with few strings. g

"It is increasingly clear to me that if there is to be a sorting out, the states must force it," Gov. Otis R. Bowen of Indiana, the chairman of the governors association, said in remarks delivered for him by Virginia Gov. John Dalton.

A variety of proposals for shifting powers and taxing authority to states are being floated here.

Bowen suggested "a response that I believe should be based less on revenue sharing than on revenue keeping."

If a federal tax credit were permitted on state sales and income taxes, he said, the states would be better able to raise revenues for government programs.

Others, such as Kansas Gov. John Carlin, would not be that far. Carlin suggested that there might be greater efficiency if overlapping federal programs were consolidated and if the federal government issued less complex and lengthy regulations.

Several governors acknowledged that federal programs grew over the last several decades to take care of problems not being met by the states. But, they said, state bureaucracies have been modernized and are showing more compassion for the poor and toward urban problems.

It was not clear what resolutions, if any, would be approved before the convention adjourns Tuesday. Some governors, feeling that any resolution might be interpreted as favoring the platform of the Republican or Democratic party, suggested that nothing will be done until after the presidential inauguration next January.

But for the moment, many governors here are angry. Babbitt suggested that the francers of the constitution would be amazed at current interpretations of federal power.

"Hamilton and Jefferson would ask, is it really the role of the federal government to fund programs for jellyfish control?" Babbitt said.

"There is a sense in which Congress is coming into contempt of the states," said Vermont Gov. Richard A. Snelling. "What the people are demanding of us all is a well-ordered system which can do its job without excess taxation or duplication or waste or bureaucracy. What they really are demanding is a federal system more like the one originally intended than like the one which has evolved."