GOVERNORS ARE FURIOUS; local officials say they have been betrayed; and four justices of the Supreme Court believe the majority of their colleagues have profoundly misinterpreted the Constitution. The League of Cities case, decided only nine years ago, has been overruled.

At issue is the power of the federal government to impose laws and regulations on states and cities. The expansion of federal power, familiar since the New Deal, was stopped dead when the court ruled, in 1976, that the 10th Amendment prohibited Washington from imposing wage-and-hour laws on state and local governments performing ordinary government functions.

This week's case, Garcia v. San Antonio Metropolitan Transit Authority, presented the question of whether providing public mass transit was a normal government function. Instead of limiting itself to this narrow issue, however, the court took the unusual step of overruling its earlier decision. That presumably leaves all activities of states and local governments subject to federal law. This is the right result. It makes little practical sense to regulate some public activities but not others in an attempt to protect "states rights" as they existed 200 years ago. The phrase, over time and with the acquiescence of the courts, has come to mean something less than the Framers envisioned.

The difficulty for the states, however, is real. For years they have assumed, reasonably, that the League of Cities case could be relied upon. The shift of a single vote -- Justice Blackmun's -- has changed important understandings about their powers and responsibilities and, in particular, about their budget obligations. Few if any state and local employees are paid less than the federal minimum wage. But many, especially those in shift work, operate under different overtime regulations than those set by federal law. Budgets have been set, contracts signed and money obligated in communities that will now have to make changes. Congress can act to facilitate adjustments and it should do so.

Justice Rehnquist, though he favored the states' position, has given them cause for concern about the stability of the law in this area. In a separate dissenting opinion he warned that the principle set forth this week will, in time, be reconsidered. He is undoubtedly correct in implying that the composition of the court is likely to change and that justices appointed by President Reagan will be sympathetic to his position. But for the states and cities that need stable guidelines and a clear understanding of their rights and obligations, another reversal would be no favor.