The Supreme Court yesterday let stand a South Dakota ruling allowing the use of religious materials in public school observances of holidays such as Christmas.

The justices refused to hear arguments by some Sioux Falls, S.D., parents that such observances violated First Amendment protections against church-state entanglement.

Justices William Brennan and Thurgood Marshall voted to hear the case, two votes short of the four justices required.

The case -- brought by the American Civil Liberties Union -- arose when Roger Florey objected to the religious content of a kindergarten program involving his son, Justin, in December 1977.

After Florey protested, a citizens committee was formed by the Sioux Falls school district to draw up guidelines covering the types of holiday programs permitted in the schools.

Under the guidelines, religious holdiays can be observed with religious symbols, music and literature.

Florey and several other parents later brought suit, alleging the guidelines violated the constitutional separation of church and state.

A federal district court ruled that much of the art, literature and music connected with traditional holidays has "acquired a significance which is no longer confined to the religious sphere of life. It has become integrated into our national culture and heritage," the court said.

Affirming the lower court, the 8th U.S. Circuit Court of Appeals held the Sioux Falls rules "are not unquestionably religious in nature."

The ACLU appealed the decision to the Supreme Court on behalf of Florey, arguing the appeals court erred by refusing to distinguish the "critical difference between teaching about, and observing, religion."

The Supreme Court yesterday also rebuffed a government attempt to reinstate a $10,000 fine against the AFL-CIO for illegal political campaign spending.

The justices, without comment, left intact a lower court ruling that the fine is not justified.

The Federal Election Commission filed a complaint against the AFL-CIO in 1978, charging that two of the union organization's entities and transferred money in violation of the Federal Election Campaign Act.

The AFL-CIO's Committee on Political Education Fund is a nonpartisan group that urges voter registration and politcal participation. It is financed from the AFL-CIO treasury.

But the Committee on Political Education-Political Contributions Committee (COPE-PCC) is a separate entity permitted by federal election law to make direct contributions to candidates for federal office. Its monies may not come from any source but voluntary political contributions from AFL-CIO union members.

COPE-PCC money not being used in nonelection years traditionally has been transferred, as interest-free loans, to the education fund. Eventually, the money would be transferred back to the COPE-PCC.

In 1977, the election commission notified the AFL-CIO that it considered the return transfers a violation of federal law.

Acting on the FEC lawsuit, U.S. District Court Judge George Hart Jr. fined the AFL-CIO $10,000.

The U.S. Circuit Court of Appeals in Washington ruled last April 1, however, that there should be no fine because it found no "willful" violation of the law.

The court also:

Let stand a ruling reinstating a $680,000 award to a New York family whose infant son suffered brain damage when his diabetic mother failed to receive her insulin shots while awaiting delivery.

Declined to step into a dispute between New Jersey and some cities in the state over ownership of large areas of land, including about half of the 23,000-acre Hackensack Meadowlands. The justices let stand a New Jersey Supreme Court ruling upholding state ownership.