Hard times are forcing hard choices as this once-wealthy version of the modern welfare state confronts the cold new reality of dwindling public treasuries and a relentless surge in demand for public assistance.

Men of progressive outlook, with visions of using government for a better existence, now are faced with such dilemmas as whether to cut care for the mentally retarded or mentally ill, whether to eliminate university Latin American and Asian history courses entirely or pare back more popular American history classes, or, when it snows, as it does frequently here these days, whether to shovel side streets or use shrunken public works crews to pick up garbage.

Tough choices. Bad choices. Mean ironies.

The numbers of thefts and murders are rising here.Mayor Coleman Young has had to lay off 1,000 police officers over the last year.

Tuition in state colleges here is being raised as programs are cut back and some instructors are laid off.

Laid-off autoworkers and others hurled out on the streets here -- the same people whose taxes for years supported a relatively generous welfare system -- now reluctantly head for the welfare window, just as Gov. William Milliken is having to cut benefit checks.

Young has cut bus service, public works and parks programs, but still it has not been enough. He is, he says, $100 million to $130 million short of what he needs to meet the payroll when the city's budget year ends in July and he cannot easily borrow. Detroit's credit rating has fallen off the charts and the city's bonds are no longer considered by Wall Street to be a sound investment. Prospective buyers are warned that the city's paper is regarded as a "speculative."

The mayor went for advice to financier Felix Rohatyn, who helped guide New York City back from bankruptcy a few years ago. Rohatyn considered the problems of Detroit and told him, Young recalled the other day: "You have no good choices. Your choices are between extreme pain and agony."

Over the past year, Milliken has had hastily to cut nearly a billion dollars out of the state budget in order to bring the books into balance. Though the state's bonds still are well-regarded, their rating has been knocked down a notch by Wall Street over the last year.

The decline of the auto industry has made Michigan's financial problems the worst of any state in the nation, by virtually all accounts. But it is not alone in encountering new problems balancing its books.

A few years back, cash piled up in the "rainy weather funds" the states kept as the chronically ailing big cities battled budget problems and the federal government ran up higher and higher budgets.

Today, the states find themselves attempting to balance the demands caused by recession, inflation -- especially in Medicaid costs -- at least a temporary curtailment of federal revenue-sharing grants to states, and a citizen revolt against tax increases that has spread from California to Massachusetts.

In Pennsylvania, Gov. William Thornburgh talks of a $200 million "hole" in the coming year's budget which he said he intends to plug without raising taxes, preferring instead, he said, to take a hard look at "administrative costs."

Minnesota had to borrow $100 million to carry the state over a cash flow shortage in November and December.

Former Arkansas governor Bill Clinton won the enmity of teachers budget problems, and he was thrown out of office. His successor, Frank White, has proposed cuts that state university officials say may force them to limit open enrollment and raise tuition.

Former Washington governor Dixy Lee Ray proposed a package of tax increases to raise $500 million to cover anticipated shortfalls over the next two years. Her successor, John Spellman, said he would scrap that plan but said soberly in his swearing-in speech: "We must learn the lesson of the biblical story of the fat years and the lean, and develop resources upon which we may draw in times of need like these."

The energy-rich "little OPEC" states such as Texas, Louisiana, Colorado and Alaska are the major exceptions to the lean years. The oil boom has gushed so much money into Alaska's coffers that the state is giving money back to residents in the form of tax rebates and "dividends" of $50 for each year they have lived there since 1959.

Meanwhile, here in Michigan, the state has scheduled six unpaid holidays to save about $24 million and one in 10 state government workers has voluntarily offered to forgo one day of pay every two weeks to avoid layoffs. But the suspension notices come anyway. Seventy-eight state troopers have been pulled off the highways and sent home. Social workers who counsel welfare clients have been brought in from the streets to handle paperwork and applications left by payments assistance clerks who have been laid off.

This has been a blue-collar paradise where jobs on the auto assembly line, which require few skills and little education, pay an average of $22,000 a year plus fringes and overtime. Michigan has had the highest rate of home ownership of any state in the nation, more boats per driveway than any other state. Here they talk about the three-car family.

Its union-dominated state politics produced governments that built outstanding universities, gave serious worry to such problems as mental health that are all but ignored elsewhere, and permitted workers fed up with their jobs to quit, claim "mental anguish" and draw unemployment pay.

Now, three of every 20 men and women in the labor force of this city are out of work as the long auto recession's effects have moved beyond the plants to the rest of the economy. Savings are being eaten up and home loans foreclosed. About 6,800 firms in the Detroit metropolitan area went out of business last year, double the number two years ago. A third of the auto dealerships in this city closed last year.

The welfare rolls have been climbing steadily -- 3,000 new cases added each month recently. They come reluctantly and often after all other resources have been exhausted.Welfare workers tell of the countless numbers of men and women who show up at the window to plead for help, saying there is no more food in the refrigerator, or the utility company has said it will turn off the heat that night if the bill is not paid. More than a million persons -- slightly more than one in every 10 men, women and children -- are now on welfare.

This has put a staggering burden on the state, just as its own income from workers' salaries and industry taxes unexpectedly declined in real dollars.

Paring budgets to meet this crisis has meant dispensing with cherished social goals.

Inheriting a police department that was overwhelmingly white in a majority black city when he took office, Mayor Young had instituted an affirmative action program that brought hundreds of blacks and women on the force. But layoffs, coupled with union contracts containing last-hired, first-fired provisions, substantially rolled back those efforts. When 700 officers were laid off last fall, three of every four getting notices were black or female, meaning that the proportion of minorities dropped from 40 percent to 25 percent in one day.

Gov. Milliken recruited an internationally renowned psychiatrist, Dr. Frank Ochberg, from the National Institute of Mental Health to this state to build a model mental health system. Now, Ochberg finds himself making cuts that eventually will reduce his labor force by a third. He has decided to avoid cutting programs for the mentally retarded since they are federally funded and every dollar of state aid cut would mean a federal dollar lost. Instead the knife has fallen on programs for the mentally ill. In coming weeks, Ochberg said, he intends reluctantly to pull 300 to 400 of the mentally ill out of state institutions and put them in "domiciles" where they will be watched over by low-salaried attendants but will not receive treatment.

In the state legislature, the "mental anguish" provision for receiving unemployment benefits has been eliminated and other requirements for that program and for worker's compensation made tighter.