The first national observance of the Rev. Martin Luther King Jr.'s birthday will reflect a dilemma of the civil rights movement he led: It has attracted a wide spectrum of rhetorical support and volunteer energy but has fallen far short of its economic goals.

The King Federal Holiday Commission started its preparations last spring with a budget projection of about $1.5 million but has had to make do with $400,000, including $300,000 raised from private sources, officials said.

The grand national parade Jan. 20 in Atlanta, which is to climax more than a week of activities around the United States and in some foreign countries, has been pared from $185,000 to $60,000 worth of floats and bands. Plans to bring in marching bands from around the country were scrapped and the parade itself was in danger until the city of Atlanta stepped in with $45,000.

However, the organizers -- an amalgam that includes conservative Republicans and corporate chiefs as well as civil rights veterans -- seem determined to make up in enthusiasm what they lack in money.

"This will be the best damn parade that any city in America has had on a federal holiday to honor Dr. King," quipped Col. Jack T. Downey, Third Army Chief of War Plans, one of many federal officials and staff on loan to the King holiday commission. He directs the Atlanta office.

Under the guidance of Coretta Scott King, her husband's birthplace has planned teach-ins, films, rallies, a network television special and other events in tribute to the civil rights leader who was assassinated April 4, 1968, in Memphis. The holiday's theme, a reference to King's famous "I have a dream" speech, is "Living the Dream."

Among the varied VIPs expected next week are Sen. Edward M. Kennedy (D-Mass.) and Secretary of Education William J. Bennett; civil rights leader Jesse L. Jackson and Sen. Robert J. Dole (R-Kan.), Bishop Desmond M. Tutu of South Africa and Vice President Bush.

The McDonald's Corp. helped produce a film called "Happy Birthday Dr. King" and the American Can Co. provided a video.

"This celebration is about the community coming together, about the barriers being down that day," said commission official James C. Karantonis. "The spirit is to be all-inclusive rather than exclusive."

The 1983 law creating the holiday designated the third Monday of each January, although King's birthday falls on the 15th. The law authorized federal agencies to lend personnel to the special first-observance commission, but it provided no money.

There is disagreement about the reasons for the lack of contributions. Some commission officials blame their late start and the general climate of federal cutbacks and business slowdown. They had no office or staff until late last spring, by which time many private companies said they had already committed all their money.

"We really weren't about fund-raising," said Karantonis. "We 'networked' the holiday, getting state commissions organized around the country" and seeking volunteer help from such groups as the U.S. Conference of Mayors, the Urban League and the Grey Panthers.

But Clarence Pendleton, chairman of the U.S. Commission on Civil Rights and a member of the holiday commission, called the lack of contributions, particularly from the black community, "embarrassing" and added, "Black groups spent $100 million convening last summer but now, when we have an opportunity to celebrate the first national holiday dedicated to a black leader, where are they?"

Atlanta Mayor Andrew Young attributes the shortfall to "a lack of understanding the importance of the holiday by businessmen and the public," according to his spokeswoman, Sandra Walker.

Albert Davis, a vice president of the Atlanta-based Coca-Cola Co., who has taken time off to work with the King Center on the celebration, said at least some of the problem was political. Some people, he said, had decided that "it was politically unwise to give this major support."

Among the commission's principal fund-raisers were Nicholas Katzenbach, former U.S. attorney general and now a senior vice president of IBM; Edward J. Jefferson, chairman of E.I. du Pont de Nemours and Co.; Jesse Hill Jr., president of Atlanta Life Insurance Co.; and Dole.

Lack of money has forced organizers to rely heavily on volunteers for such services as public relations, officials said. Phone lines in and out of the King Center for Nonviolent Social Change in Atlanta, which has coordinated activities with the holiday commission, have been jammed. Officials said new lines were being installed Friday.

Officials say they are pleased about at least one event that will not be taking place next week: Georgia Gov. Joe Frank Harris has refused the request of a Ku Klux Klan splinter group to hold an anti-King rally on the state Capitol steps the same day as the big parade.