The United States granted permanent residence to 660,477 foreigners last year, marking the lowest level of legal immigration in a decade as the federal immigration service struggled to deal with a growing backlog of green card applications.

The figures for fiscal 1998, announced yesterday by the Immigration and Naturalization Service, reflected a 17 percent drop from 1997 and a 28 percent drop from the year before that.

INS estimated it would have granted legal permanent residence to as many as 140,000 additional people last year had it been able to keep pace with its caseload. The backlog stands at 890,000--a sharp increase from its backlog of 121,000 applications in fiscal 1994.

The 1998 figure "doesn't reflect a drop in demand. It's actually a reflection of the growth in the adjustment-of-status backlog," said INS spokeswoman Eyleen Schmidt.

With the rising backlog, processing times have soared from an average of four months in 1994 to as much as three years now.

"The 'S' in INS does stand for service. They may want to remember that occasionally," said Matt Tallmer, spokesman for the American Immigration Lawyers Association. "Their backlog is just atrocious."

The legal immigration figure is only a partial snapshot of overall immigration rates. Last year, 637,000 people were granted citizenship. The citizenship backlog, for which INS has been roundly denounced on and off Capitol Hill, now stands at 1.7 million cases.

The INS's priority is to address the citizenship backlog before tackling the delay in green card adjudications, Schmidt said.

Much of the rising green card backlog owes to Congress's decision in the mid-1990s to allow illegal immigrants eligible for permanent residency to pay a fine and file their paperwork at INS offices within the United States. Before, they had to leave the country and apply at U.S. consulates abroad.

"Congress placed an enormous burden on the INS at the same time as citizenship applications increased dramatically," said Mark Krikorian, executive director of the Center for Immigration Studies, a think tank that favors reduced legal immigration rates. "Some people are going to point to this as another sign of the INS's dysfunction but in fact this is really a consequence of Congress's decision, not INS's."

Nearly three-quarters of the green cards granted last year went to relatives of U.S. citizens, as expected under a federal immigration policy that places highest priority on the reunification of families. Another 77,517 green cards were granted for business reasons, while refugees and people seeking asylum accounted for nearly 55,000 cases.