HOUSTON, DEC. 1 -- The National League of Cities today canceled its 1991 convention in Phoenix because Arizona does not recognize Martin Luther King Jr.'s birthday as a state holiday.

The group, which has 9,000 members, said it would take its annual convention to Phoenix in 1995, provided the state adopt the holiday to honor the slain civil rights leader.

Next year's League gathering was expected to draw at least 10,000 visitors and generate $6.9 million, Phoenix officials said.

"Racism is not a problem that can be localized to Arizona . . . " said Phoenix Mayor Paul Johnson. He pointed out that Phoenix is the nation's only city with a King holiday.

Johnson said he was disappointed with League's decision to pull the convention but pleased the organization appeared to be open to visiting the city in 1995.

Taking the convention to Phoenix in 1995 was suggested by Tucson Mayor Tom Volgy, who said cities such as Phoenix and Tucson should not be penalized for their state's inaction. "This organization . . . has been built on diversity and mutual respect, and wherever this organization goes, it deserves to go only to the cities that do display that same mutual respect," he said.

The League consists of elected municipal leaders from more than 1,300 cities in 49 states.

"I want to send a negative message to the voters of Arizona who put us in this position," said George D. Goodman, executive director of the Michigan Municipal League. "And the only way we can do that is to postpone our convention in their state."

Montana and New Hampshire also do not recognize King's birthday as a legal holiday.