A bipartisan panel of city executives testifying before a House subcommittee this week opposed Reagan administration proposals to kill the Urban Development Action Grant program and drastically scale back the larger Community Development Block Grants.

Money provided by the two programs finances housing and other community projects, creating jobs and attracting private funds that double or triple the federal investment, the city executives told the housing and community development subcommittee.

"Each dollar reduction in CDBG funding in Omaha does not just reduce progam efforts by only one dollar," said Michael Boyle, the Democratic mayor of the Nebraska city. "It also costs us three to four dollars in private investments."

The Reagan budget proposal calls for $2.6 billion in CDBG funds, down from $3.12 billion voted for the current year. This year's funds could be reduced to $2.49 billion by cuts mandated under the Gramm-Rudman-Hollings deficit reduction law and an administration request to defer $500 million in spending. The administration also wants to rescind $235 million of UDAG's $330 million 1986 appropriation.

Budget deficits "are not caused by these kinds of community development programs. They are caused by huge Pentagon spending and tax loopholes," Rep. Mary Rose Oakar (D-Ohio) said during the hearing.

Rep. Al McCandless (R-Calif.) said his state's tax-rate-limiting legislation "made us more efficient" in using reduced revenues. "The basic problem we have today is that the federal government has been the court of first resort," he said.

Cleveland's Republican mayor, George V. Voinovich, said his administration used $9 million in 1984-85 CDBG money to "leverage" more than $42 million in private investments and public funds for "housing rehabilitation, new housing construction, public improvements, commercial revitalization, economic development and improvements in social service agencies."

Cleveland is "doing more with less" and has increased local taxes by 50 percent, "but we don't have the capacity to take care of all the problems of our community," said Voinovich.

Voinovich said the potential revenue sharing and CDBG loss to Cleveland totals $43 million. "To make up for that loss . . . local wages subject to payroll tax would have to grow by about 16 percent," almost an impossibility in Cleveland, which is grappling with a 13 percent unemployment rate.

The irony of the proposed cuts in grant programs "is that they run counter to part of the Reagan administration's general philosophy" calling for "returning responsibility for domestic programs to state and local government," according to Boyle.

Charleston, W.Va., Mayor James E. Roark, a Republican, said his city spent 33 percent of its $2.24 million in 1985 CDBG funds for housing programs. Housing would take the biggest hit from the $673,000 cut in Charleston's community development funds under the 1987 budget proposals, with the result that low- and moderate-income people who receive an amount of assistance that keeps their living conditions "at a minimum acceptable level will find it increasingly difficult to keep pace with their more fortunate neighbors."

With the massive cutbacks in community development money, many cities will be strained to provide housing for the poor, Voinovich said.

"Why don't we look at tax expenditures," the mortgage interest and property tax deductions allowed homeowners of all income levels, he said. "If the administration wants to get out of housing, it should get out of it for everyone."

The UDAG program has had a "significant impact on the economy of Maine" in recent years, said Augusta City Councilor William D. Burney Jr., a Democrat. Maine communities received $5.5 million in 1985 UDAG funds, but applications for 1986 money were returned because of the proposals to rescind the remaining 1986 funds, he said.

One project for which UDAG funds were sought would have upgraded a blighted section of Augusta, the state capital, providing 500 jobs, Burney said.

Democrat Joseph P. Riley Jr., mayor of Charleston, S.C., who said the city has used six UDAG grants to "generate new private investment exceeding $85 million and 2,500 new jobs" and CDBG grants for other projects, felt the 1987 budget proposals are an "all-out attack" on the nation's cities.

Burney and the four mayors testified on behalf of the National League of Cities, which recently filed a lawsuit challenging the constitutionality of administration plans to rescind $5.1 billion in subsidized-housing programs appropriated by Congress for fiscal 1986, and to defer until later years the spending of another $2.3 billion in housing money and $500 million in CDBG funds.