Reagan administration and congressional budget officials have proposed cutting the current year's federal payment to the District by $23.5 million, drawing an angry reaction from D.C. officials who say they have spent most of the payment.

The proposed reduction, guided by the Gramm-Rudman-Hollings budget deficit law, could cut deeply into funding for criminal justice, mental health and retirement programs in the city, according to Alphonse G. Hill, D.C. deputy mayor for finance. In addition, the funding cuts for the fiscal year that began Oct. 1 could wipe out a large part of the federal government's debt to the city for water and sewer services.

The reductions, representing 4.3 percent of the overall $547 million payment to the District, are contained in a compilation of fiscal 1986 federal spending cuts prepared by the Office of Management and Budget and the Congressional Budget Office. The proposed cutbacks would take effect March 1 -- almost midway through the fiscal year -- unless the president and Congress agree on an alternative plan.

Administration officials have said Reagan has ruled out proposing an alternative budget plan.

"We don't think they can do this," said Hill. "I think we are going to protest this because we have already drawn down $504 million of the $546 (million). We spent the money."

Nationally, proposed Gramm-Rudman-Hollings cutbacks, which would affect a broad spectrum of domestic and military spending, would be the first to take effect under the federal government's plan to eliminate its budget deficit by 1991.

The reduction in the federal payment is the largest in a series of proposed cutbacks in federal spending that would affect District programs, according to Vic Miller, director of Federal Funds Information for States. A report by the organization projected that several million additional dollars would be cut in federal outlays for social services, mass transit, low-income energy assistance, job training and roads.

Hill said the $23.5 million cutback would be unfair to the city particularly because of the way OMB and CBO officials defined the federal payment to cover a $30 million bill for water and sewer services that the city provides to federal office buildings.

District officials said that in the past they considered the federal government's payment for water and sewer services to be separate from the federal payment and that they do not believe that it should be subject to the 4.3 percent reduction.

"There's no way they can apply Gramm-Rudman to water and sewer," he said. "That's a user charge. What they are asking is that the citizens of the District of Columbia absorb the water and sewer bill for the federal government."

City Council Chairman David A. Clarke said the city was "disadvantaged by the lumping of the water and sewer" outlay with the federal payment.

"We'll just keep the toilets from flushing 4.3 percent of the time," he said.

The bulk of this year's federal payment includes $425 million in lieu of taxes on tax-exempt federal property, a $52 million contribution to city government retirement funds, $25 million to help finance the transfer of St. Elizabeths Hospital from the federal government to the District in 1987 and $13.9 million for prison construction and other corrections programs.

The announced reductions in fiscal 1986 spending come as budget officials in the District and state and local governments around the country are preparing budget proposals for fiscal 1987. The cutbacks triggered by Gramm-Rudman-Hollings, according to Miller and other analysts, are expected to wreak havoc on the budget-making process, which relies on accurate revenue projections.

"We are so busy trying to get a budget done, we don't have the luxury of figuring out Gramm-Rudman," Hill said of possible 1987 cuts.

John Barnes, administrative aide to D.C. Del. Walter Fauntroy, said the cuts proposed for this year were applied "without regard to policy" by the "number crunchers" in federal budget offices. He said Congress still has "opportunities to inject policy decisions" into the budget-cutting process before the March 1 cuts take place.