HOW MUCH MONEY can the society now afford to spend on educating handicapped children? That question -- never squarely addressed by Congress -- lies at the heart of the controversy that forced the Department of Education last week to withdraw proposals for giving states and localities more control over education programs for the handicapped.

A federal law passed in 1975 established ambitious goals for schools. All handicapped children were to be sought out and given "free, appropriate education" and taught in the same classrooms with other children as much as possible. Congress left it up to the bureaucracy to spell out the details of what that meant. The resulting regulations have been the subject of hundreds of parent-school lawsuits. Congress also leftmost of the burden of paying for this special education to states and localities.

Roughly $1 billion in federal aid is currently provided, but the Department of Education estimates that covers only about 10 percent of the costs of educating handicapped children nationwide. Costs can also vary enormously from one school district to another, depending on the number of handicapped children and the extent of their disabilities. State aid helps make up the difference, but the amount a locality gets often depends more on how vocal and well-organized parents are than on the relative need of its students.

Under pressure from the department and the courts, most school districts have greatly improved treatment of handicapped students. States and localities, however, complain that federal rules give them too little flexibility in deciding what is reasonable treatment for a particular child, and that the resulting high cost means that the educational needs of other students must be neglected. Last July, the schools won a victory when the Supreme Court decided that very high-cost types of help -- such as a sign-language interpreter for a single child -- were not required.

No one wants to turn back the clock to the days when most handicapped children were ignored by the regular education system. But the administration is not alone in feeling that schools need more discretion with respect to such matters as high-cost medical treatment, disruptive children and highly specialized personnel. Handicapped advocacy groups--alarmed by the administration's attempt to fold handicapped aid in with other education programs and its plan to cut such aid by one-third next year--are, however, in no mood to compromise. They took their case to Congress, which pressured the administration into withdrawing its proposed rule changes.

It is understandably difficult for Congress to resist the claims of parents who face the emotional and financial strain of raising a handicapped child. That resistance is further weakened when Congress can pass on the bill for its generosity to another level of government. But in one way or another, the rules must be made to fit the resources available to meet them. It's not a pleasant task, but it's Congress' job to work with the department and interested parties toward a better balance.