The American Federation of Government Employees, says Kenneth T. Blaylock, "Ain't dead and it ain't dying."

Blaylock, president of the nation's largest federal employee union for the past decade, acknowledges that AFGE has problems. "I don't minimize the problems that we have," he said in an interview last week. "I think we've got some tough times ahead of us."

But Blaylock said he is optimistic about the union's future. After struggling through the early months of a major restructuring plan, Blaylock said he is convinced AFGE will survive and grow.

AFGE, which represents nearly 100,000 government workers in the Washington-Baltimore area, is the bargaining agent for 700,000 federal workers, although only 207,000 belong to the union and pay dues. The union also represents 6,000 employees of the District of Columbia.

In the last 15 years, AFGE has seen its membership shrink nearly by half. Last month the AFL-CIO, at Blaylock's request, put together a $1.5 million financial rescue package to keep the union afloat while it tries to organize new members. Blaylock said it will take through 1999 to pay back the AFL-CIO loan.

The drop in AFGE membership coincided with a major slowdown in the growth of federal employment this decade. A recent study by the Congressional Budget Office showed that federal employment under the Reagan administration has grown approximately 7 percent. Civilian employment during that same period grew by 25 percent.

The CBO study also found that growth in federal employment has not been across the board. If increases in the Defense Department, Postal Service and Veterans Administration are excluded, the study showed, there has been a general drop in federal employment during the seven-year period.

Coinciding with the drop in nondefense employment has been an administration effort to "privatize" many government operations. The total budget for work that is contracted out, according to AFGE, is approximately $80 billion. The union said the federal payroll is $53 billion.

Blaylock said many of the recent problems confronting federal workers began with President Jimmy Carter and not with President Reagan. He said Carter ran against government in his first presidential campaign and helped foster a tremendous antigovernment mentality across the country. "Carter saddled the horse and Reagan has rode him damn well."

It is the drop in general federal employment, combined with the union's general distaste for organizing new members in recent years, that forced Blaylock to seek financial help from the AFL-CIO. While insisting that the "union is financially sound," Blaylock said it was "so close to the hub" on covering its operating expenses that it had to seek the loan to have any hope of expanding its organizing effort.

Blaylock said 1987 was the first year that AFGE has shown "positive real gains" in membership since the early 1970s.

The union claims that since the middle of last year, it has organized 3,200 new members a month. AFL-CIO officials said it was the result of the union's organizing efforts in recent months that persuaded them to put together the loan package.

The union has set a 1988 goal of increasing net membership by 14,000. Because of normal attrition among government employees, however, this means AFGE will need 4,200 new members a month to achieve its goal.

Rival unions are skeptical about AFGE's future. Several critics from unions with large public employee memberships say they believe Blaylock eventually will be forced to seek a merger with another union. They argue that Blaylock is saddled with a board of officers more interested in preserving their own nests than in the overall welfare of the union.

Blaylock said it has been tough to get some of his people to go along with his restructuring plan. But he insists he is over that hurdle and that a majority of the union's leadership is with him. Changing the attitude and focus of the union leadership, Blaylock said, "is our most difficult chore."

Blaylock said his long-term goal is to build the union membership back to the 300,000 to 350,000 level it achieved in the early 1970s.

To accomplish this, Blaylock has put in place a three-year plan to revamp the mission and finances of the union.

AFGE, Blaylock said, has been undergoing a cultural change this decade that is just as wrenching as the cultural changes that have taken place in corporate America.

"I've been president of this union during the most critical time in its entire history," Blaylock said. When he took over the union presidency in 1976, he said, "it was really like a lobbying association."

In the early 1970s, he said, the union developed the policy that "if you service your members you don't have to organize."

"I had a tremendous fight turning the head of this union," he said. "Some of the resources have to go back to building and maintaining the union. Absent that you've got no right and no ability to represent anybody."

Blaylock said younger government workers are more receptive to organizing campaigns than older ones. The message AFGE is sending, he said, is that "since we work for a political employer, we've got to be political. We've got no choice except to try to put pressure on enough congressmen and senators to see things our way. That's our bargaining table."

He said the union's new organizing effort is concentrated at the workplace during breaks and at lunch hour. "You can't organize them before work time because most people get to work by car pools or whatever. You can't organize in the community like you used to because people now commute 50 miles. So when the bell rings you better not get between them and the door because they'll run over you."

Blaylock said the union has developed a 30-minute "skit" or message for organizing prospective members that is shown during breaks. He said this approach, with the help of outside organizing representatives, has been successful. The union claims that in recent months it has been signing up at least 50 percent of the people it tries to recruit this way.

"I've got a rough time ahead of me and I know that," Blaylock said. "On the other hand, I think we've overcome every hurdle that's been thrown at us. I think we've got more understanding of what's necessary and more people involved.

"I think maybe it's one of those crises of transition that we had to go through to really turn the organization into a union." Blaylock said.