BOSTON, JAN. 25 -- Massachusetts Gov. Michael S. Dukakis and former Colorado senator Gary Hart testily challenged each other's budget expertise tonight during the latest debate among the Democratic presidential contenders.

The steely exchange began when Hart said he was "surprised, frankly" that Dukakis remains unwilling to put out a campaign document that outlines a proposed 1989 budget, something Hart has done.

"You've never gone through the process. You've never been a chief executive," Dukakis shot back in a tone that bordered on contempt. He noted he had produced nine balanced budgets as governor. "You've never voted for a balanced budget in your life."

"That's because the president has never sent us one," Hart protested.

"We may face a recession in 1989," Dukakis pressed on. "You're very naive if you think you can lay out a budget now."

"Unless you're able to put it together now, you don't deserve a chance in 1989," Hart countered.

The flare-up marked one of the rare instances in the dozen-and-a-half Democratic debates that Dukakis showed an instinct for the jugular. He chose his target carefully. In 1984 Hart was the surprise winner of the New Hampshire primary, which Dukakis must win this year if his campaign is to take off.

After the debate, the governor's campaign aides said they were thrilled by his performance. "He showed knowledge, experience, and realism," said campaign manager Susan Estrich.

The 90-minute debate, sponsored by the Boston Herald and WBZ-TV, was the third in three days in three states for the talk-weary Democrats. It was televised live throughout most of Iowa, where Democratic caucuses will be held Feb. 8, and in New Hampshire, which holds a presidential primary Feb. 16. Former Arizona governor Bruce Babbitt was the lone absentee; he flew to Flagstaff, Ariz., earlier today following the death of his 89-year-old father.

Among the evening's other highlights:

Rep. Richard A. Gephardt (D-Mo.) told Sen. Albert Gore Jr. (D-Tenn.) that "Lately, you've been sounding more like Al Haig than Al Gore," chiding him for his willingness to support aid of any kind to the contras in Nicaragua. Gore countered that he supports humanitarian aid only if it will help keep the Arias peace process alive.

Hart joined Jesse L. Jackson in criticizing Israel for its handling of the Palestinian protests on the West Bank. "Friends tell friends when they're wrong," Hart said, then called Israel to task for "exporting" the protest leaders. Jackson, asked whether the other Democrats were too afraid of the Jewish lobby in this country to speak out, said, "I do not understand the betrayal of silence, nor do I want to implicate anyone's integrity." He said that as a friend, the United States should help relieve Israel of the "burden of occupation. It is too draining emotionally, too divisive politically, too costly morally, too bloody militarily." None of the other candidates addressed the subject.

Gore described as "madness" a nomination system that gives so much weight to the "unrepresentative" Iowa caucus-goers and suggested that in the future, the first spot on the nomination calendar should be rotated among primary states. Sen. Paul Simon (D-Ill.) said the current system insures that candidates "just can't buy their way into being the nominee. You have to go into people's homes and talk to real people with real problems."

Jackson, referring to Gore's decision to pull out of Iowa and concentrate on the South, said, "People should be committed to 50-state marathon campaigns, as opposed to 30-yard dashes." Dukakis told Gore he was suprised Gore pulled out of agricultural Iowa, because "you're the only farmer in the race."

Gephardt tried to deflect a question about his "flip-flops" on abortion, school busing, and the MX missile by noting, "Circumstances change. Facts change." He pointed out that Simon was once against an oil import fee and now favors it; that Dukakis once broke a campaign promise not to raise taxes in Massachusetts and that the late Robert F. Kennedy changed his stance on the Vietnam war. "I'd rather be right than rigid and wrong," he said. Simon countered, "There ought to be a pattern of consistency," he said, "so we aren't just talking about election year conversions."

Hart, angered by a question that implied he knew, or should have known, of funding irregularites in his 1984 and 1988 campaigns, said he had never "consciously or knowingly violated any campaign law and I never will." Jackson said no candidate can monitor every contribution and said Hart should not be "subjected to a double standard."

Staff writer Maralee Schwartz contributed to this report.