President Bush on Saturday vetoed a $700 million appropriation for the District of Columbia's 1992 fiscal year, citing provisions that would allow the city to use locally generated money to fund abortions for poor women.

The move, which was expected, sends the measure back to Capitol Hill, where lawmakers are expected to remove the abortion language and send the bill back to the President. Action is expected before the beginning of the 1992 fiscal year, which for both the district and the federal government begins Oct. 1.

In what has become a perennial cat-and-mouse game, lawmakers inserted permissive abortion language into the district's appropriations bill, arguing that the city should be allowed to decide whether to use local tax money for abortions. They note that the U.S. Supreme Court, in its 1973 Roe v. Wade ruling, created a constitutionally protected privacy right for women to obtain abortions. But President Bush has continually stood firm against the provisions, vetoing several city appropriations bills in recent years.

In his veto message, President Bush reiterated his opposition to "abortion on demand," adding, "As a nation, we must protect the unborn."

But the president indicated in his veto message that he had no objection to the primary purpose of the bill, which is to provide the city with federal money during the coming fiscal year. Among other things, the legislation would provide the city with a record federal payment of $630.5 million.

The federal payment -- money the federal government provides the city annually to compensate it for the demands of hosting the nation's capital -- has stood at $430.5 million for several years, although Congress earlier this year approved an emergency appropriation of $100 million for the city.

Though President Bush vetoed the appropriations bill, he signed into law legislation that clears the way for the district to go to market with a $332 million bond isued designed to eliminate the city's accumulated deficit. The city plans to sell the 12-year, general obligation bonds in a competitive offering in mid-September.

He also signed legislation that will allow Mayor Sharon Pratt Dixon to lay off about 2,000 city workers and to gain greater control over the budgets of independent agencies. Mayor Dixon has said that, once implemented, the measures will help city officials gain greater control over the district's finances and position the city for a possible bond rating upgrade.

But the city still faces formidable problems, including a massive unfunded pension liability.

The district's bonds currently are rated Baa by Moody's Investors Service and A-minus by Standard & Poor's Corp.

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