The story is that Lady Bird Johnson didn't like the view when she looked out her automobile window and saw a forest of billboards and junkyards. Her interest in improving the vista provided the top-level impetus for the Highway Beautification Act of 1965.

Twenty years later, the General Accounting Office said in a report, part of the program has fallen on hard times, a victim of money shortages, bureaucratic indifference and a 1978 amendment, backed by the billboard industry, that made it more difficult to get the signs down.

The GAO report, officially released today by Senate Environment and Public Works Committee Chairman Robert T. Stafford (R-Vt.), is buttressed by a recent report by the Transportation Department's inspector general, Joseph P. Welsch. He looked at sign-removal programs in the Southeast and said that the "Outdoor Advertising Control Program had not significantly improved the aesthetic quality or the recreational value of the region's primary and interstate highways."

In many states, according to the two reports, more signs are going up than are coming down, the states aren't enforcing the law and the Federal Highway Administration (FHWA) isn't encouraging them to do so, and federal funds to back the program have disappeared.

Furthermore, Welsch reported, an FHWA policy permits sign owners to clear trees and other vegetation in the rights of way along federally supported highways. "If vegetation control was not permitted," Welsch noted, "many nonconforming signs would become obscured from highway view and acquisition would not be necessary." He strongly recommended that the policy be rescinded.

"Nonconforming" and "acquisition" are key words to understanding the federal program. A nonconforming sign is one that was legal when the law was written, but is no more. An illegal sign was and is illegal.

To get a nonconforming sign off the roadside, the state government first must buy it, and technically, it can use federal money to pay 75 percent of the cost. An illegal sign can be removed at any time and does not qualify for reimbursement.

The 1978 amendment extended the requirement for compensation to signs in towns and cities along federally supported highways. Those signs previously had been subject to local zoning laws, which meant nonconforming signs could be removed after a period. In many jurisdictions -- Montgomery County was one -- tough sign-control laws were having some effect. After the amendment was passed, those laws were preempted.

Congressional enthusiasm for the program declined to the point in fiscal 1984 that no money was appropriated for sign removal. At present, the GAO said, the FHWA estimates there are about 120,000 nonconforming signs across the country that would cost $427 million in federal funds to remove.

Even if the program had money, it doesn't work that well. The GAO found three signs in one Louisiana highway district that were still standing more than two years after being purchased by the state.

Welsch reported that under the present program, sign owners have been able to volunteer signs for sale and have "received income that could be used to erect new signs."

Under the 1965 law, the transportation secretary is authorized to withhold 10 percent of federal highway aid from any state that has not established an effective sign-control program. South Dakota lost some federal highway money in 1977 -- the only time such a sanction has been imposed for any reason.

In June 1983, the FHWA recommended new legislation to limit the federal program to rural interstate routes, which would thus restore local zoning laws. It also recommended the elimination of mandatory compensation to sign owners and other actions. Eighteen months later, that proposal resides somewhere in the transportation secretary's review process.

Federal Highway Administrator R.A. Barnhart said yesterday: "I think the program needs some drastic revision. I think that it's more imperative that we do what we can to improve safety on the highway and to save lives more than to worry about whether someone's aesthetic sense is offended by a billboard."

Someone whose aesthetic sense is offended is Georgian Charles Floyd, president of a small group called the Coalition for Scenic Beauty. Floyd, who for years has demanded that the law be enforced, said yesterday that the current law is "not meeting any of its original objectives, to prevent the spread of blight along our highways and to eliminate existing blight."

He is lobbying for legislation that would, among other things, prohibit new signs along highways and "the outrageous practice of cutting trees" to make signs easily visible.