WASHINGTON (AP)—President Reagan proposed Thursday his smallest Pentagon increase but sharply higher spending for AIDS research and airline safety in a $1.1 trillion fiscal 1989 budget that was largely pre-ordained in a deal with Congress.

“This budget does not fully reflect my priorities,” the president said in his message accompanying the last spending plan he’ll see through to completion. “But … abandoning the deficit reduction compromise would threaten our economic progress and burden future generations.”

The spending plan only hints of the “Reagan revolution” years as it strives to comply with the administration’s agreement with congressional leaders last November to reduce the federal deficit.

The agreement set overall spending limits for domestic, military and foreign aid spending. Reagan has already signed the tax increase required under the agreement, adding $14 billion to the Treasury’s receipts for next year.

The president’s plan envisions overall spending of $1.094 trillion, offset by $965 billion in receipts. That would leave a deficit of about $129.5 billion in the fiscal year beginning Oct. 1, within the guidelines of the Gramm-Rudman, budget-balancing law and down from $150.4 billion last year and an estimated $146 billion this year.

Because of the agreement with congressional leaders, Reagan was forced for the first time to submit a military budget that would not keep pace with inflation.

Restrained to $294 billion in outlays, up from $285.4 billion this year, the president proposed reducing the nation’s active-duty forces and abandoning the goal of a 600-ship Navy.

On the domestic side of the ledger, the president requested new spending authority that he has resisted in the past but which Congress would likely favor anyway in an election year, including:

_$1.3 billion for AIDS research, a 38 percent increase.

_An increase of $1.5 billion, or 8 percent, on education.

_A 13 percent boost, to $3.9 billion, for drug law enforcement and treatment programs.

_$363 million to begin construction of the Superconducting Super Collider, a huge new atomic research facility.

_Full funding for a $2.5 billion, five-year program to combat acid rain, and an increase in spending on hazardous waste cleanup.

_A 44 percent increase, to $1.6 billion, for the Federal Aviation Administration to modernize its air traffic control system.

_$11.5 billion for space programs, including the manned space station and space shuttle improvements.

Reagan offsets those increases by calling for a halt to Amtrak and mass transit subsidies, ending Urban Development Action Grants and eliminating the Interstate Commerce Commission and Economic Development Administration. In addition, government assets such as loan portfolios, the Alaska power administration and the Naval Petroleum Reserve would be sold.

The president’s budget director, James C. Miller III, told reporters that, even though Congress has rejected many Reagan budget propoals like asset sales in the past, he believed they would fare better this time.

“Congress will have to come up with these additional savings one way or another,” Miller said, suggesting that the cuts outlined in Reagan’s budget might be “the course of least resistance for Congress.”

House Majority Leader Thomas S. Foley, D-Wash., said Congress would live within the agreement but “there is obviously room for setting priorities in a different way than the president’s budget proposes.”

The administration predicts that if its budget is adopted deficits would continue to retreat from the record levels earlier in Reagan’s term. When Reagan took office in 1981, the annual deficit was $78 billion, and he promised to bring the budget into balance within three years. Instead annual deficits nearly tripled by fiscal 1986.

To keep below the $136 billion deficit target for fiscal 1989 in the Gramm-Rudman law, the budget includes more than $10 billion in receipts from selling government assets and other one-time receipts.

But those sales won’t help meet the goals for future years. Reagan’s own estimates show it will be up to a future president to find the path to Gramm-Rudman’s goal of a balanced budget by fiscal 1993.

Rep. Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee, said he doubted either the White House or Congress would face up to the continuing deficit problem this year.

The administration figures are based on projections that economic growth will continue undiminished by last fall’s stock market collapse, and that inflation will ease.

GNP growth will rebound in 1989 to a 3.5 percent rate and stay above 3 percent through 1993, according to the budget. Consumer prices, which rose 4.4 percent last year, will rise by 4.3 percent this year. The jobless rate of 5.8 percent will hold steady, according to the budget.

The forecast is more optimstic than that of the Congressional Budget Office and private economists, but not so far out of line with them as in past years.