What was going on when I was born?

The State Legislature tonight approved a bill that would allow New York City to impose a surcharge on the city income taxes paid by its residents. The bill was passed by the Assembly by a vote of 83 to 51, and won approval minutes later in the State Senate, 51 to 4. The income tax proposal was among a series of bills allowing New York City to raise about $170 million in new taxes approved by both houses of the Legislature. Governor Carey is expected to sign all the bills, and the City Council is virtually certain to ratify all the taxes.

A State Supreme Court justice ruled yesterday that Consolidated Edison's ''gross negligence'' was responsible for the 1977 blackout in New York City and that a trial must be held to determine what damages may be owed to the city. The ruling, by Justice Michael J. Dontzin of Manhattan, came in a $123.1 million lawsuit that had been brought jointly in 1978 by Mayor Koch, on behalf of the city, and by 14 governmental agencies, including the Health and Hospitals Corporation, the Offtrack Betting Corporation and the Metropolitan Transportation Authority. The city has sought $110 million in damages. The blackout plunged the entire city, except part of Queens, into darkness at 9:36 P.M. on July 13, 1977. The blackout lasted up to 25 hours in some areas, and power was not completely restored until 10:40 P.M. on July 14. More than three million households were affected.

The House adopted a conservative budget plan, breaking a lengthy stalemate. The plan would provide the largest peacetime increase in military spending ever, at the expense of social programs. The vote, a triumph for President Reagan, came after he intervened by phone from Bonn. (Page A1.) Soon after the vote, prices of Treasury securities rose and interest rates fell. (D5.) The U.S. has decided to impose duties on certain steel imports from Europe after a finding that the products are being sold in the U.S. at unfairly low prices. A Commerce Department official said the finding would be announced today, unless a last-minute compromise could be reached on export quotas. Both American and European officials said that such an agreement seemed unlikely. (D1.)

The Agriculture Department today sharply reduced its earlier estimate of this year's Soviet grain crop, forecasting that the Russians would harvest only 185 million metric tons because of poor growing conditions this spring in the major crop areas. If the revised forecast is accurate, it would be the fourth consecutive year of disappointing harvests for the Soviet Union, which has become the world's leading importer of grains. Last month, the forecast was for 200 million tons.

A stage comedy, shadow puppets, dance and music are the fare of the Second Asian Summer Gala this weekend at Queens Theater in the Park in Flushing Meadow. The Pan Asian Repertory Theater will present Edward Sakamoto's comedy ''Yellow Is My Favorite Color'' today at 3 P.M. (free) and tonight at 8 and tomorrow at 3 and 8 ($7; $5 for students and the elderly). Chen Hsueh-Tung & Dancers will perform modern works on Sunday at 3. ($5; $4 for students and the elderly.) And on Sunday at 7, the Yueh Lung Shadow Theater will present a traditional drama with translucent figures manipulated behind a back-lit screen. The figures as well as Chinese musical instruments will be demonstrated. ($5; $4 for students and the elderly). Reservations: 592-5700. In addition, the Yueh Lung company will perform and demonstrate at the Snug Harbor Cultural Center, 914 Richmond Terrace on Staten Island Saturday at 1:30 and 4 P.M. ($1.50; $1 for children and the elderly). Reservations: 448-2500.

So long as there's outdoors, there'll be outdoor art.'' That was the confident prediction of an environmental artist the other day, and this city certainly bears him out. Not content with confinement to museums and galleries, artists have always been moved to challenge - or embellish - both nature and architecture, and there's nothing like the opportunity offered by New York, particularly its spectacular environment. Plazas, fields, woods, walls, trees, traffic islands, rivers, building fronts and even roofs - nothing, it seems, is safe from their invasive talents. This summer, as before, you can find the evidence of this creativity all over town. The entries range from works by old masters, such as George Rickey, to those of the new and trendy, like Jedd Garet and Keith Haring. Pitting their talents against the hazards of site, public opinion and the weather, they've managed in the process to enhance our lives.

As a result of its military performance in the last five days, Israel suddenly finds itself facing some tempting new opportunities in Lebanon, options that could carry the invasion far beyond its original concept. Officials insist that their only objective is the stated one: to liberate northern Israel from the shells and rockets of Palestinian forces by securing a zone 25 miles north of the border. But for some years Israel has also sought a broader solution to the turmoil in Lebanon, a solution that would involve the withdrawal of the 30,000 Syrian troops from the country and the re-establishment of a stable, sovereign Lebanese Government strong enough to keep its territory free of guerrillas and maintain a quiet border with Israel. With its troops on the outskirts of Beirut, at the key Beirut-Damascus highway and on the approaches to the Bekaa Valley, Israel is, in strictly military terms, in a position to move toward realizing some of those broader goals.

A year ago, there wasn't an idle drilling rig to be found in the rugged high country of southwestern Wyoming and northeastern Utah. Among the oil companies working the region, the great search was on to unlock the vast reserves of petroleum and natural gas that are trapped inside the crumpled rock formations that geologists call the Overthurst Belt. Drillers, roughnecks and oilfield suppliers flooded Evanston, more than doubling the city's population, to 12,000 people. Traffic and trucks snarled the narrow downtown streets and trailer parks mushroomed in the desolate sagebrush hills. But now, the great Rocky Mountain oil and exploration boom is leveling off, a direct result of the sluggish national economy and the worldwide decline in oil prices resulting from oversupply. Across the region, drilling activity is more than 40 percent lower that a year ago and hundreds of rigs are idle, stacked in yards and along roadsides.

President Reagan has sent Prime Minister Menachem Begin a ''firm'' message calling for Israeli forces to stop fighting in Lebanon and prepare to withdraw, senior Reagan Administration officials disclosed today. They indicated that there was rising American concern about the spreading conflict. Secretary of State Alexander M. Haig Jr. said that the Israeli Government had invited him to go to Jerusalem but that he had turned down the invitation. Mr. Haig's explanation for this suggested that his refusal was meant to convey American irritation with the Israeli advance toward Beirut and into the Bekaa Valley. ''I thought about it,'' Mr. Haig said of the invitation, ''but the discussions we have had with the Israelis today have not evidenced sufficient flexibility to make a visit worthwhile at this time.''

Charles J. Waidelich, chairman of the Cities Service Company, has had a rough month. First, T. Boone Pickens Jr., chairman of the Mesa Petroleum Company, wanted to walk away with his company, and then Mr. Pickens almost turned the merger battle between the two companies into a personality contest. ''I am no P.T. Barnum,'' Mr. Waidelich said yesterday in an interview at his company's New York office on Park Avenue. ''I have a low-key style, but I don't think we're getting fair treatment.''

Police Commissioner Robert J. McGuire warned yesterday that there could be ''massive congestion'' in New York City tomorrow, when thousands of demonstrators are expected to stream into Manhattan for a series of marches and a rally to protest the nuclear arms race. At a press conference, Mr. McGuire and Gordon J. Davis, City Parks Commissioner, said routine traffic tomorrow could be disrupted as early as 8 A.M. - when the demonstrators are scheduled to begin massing for their 10 A.M. march past the United Nations. Mr. Davis said he expected a number of demonstrators who wished only to attend the rally, and not to march, to begin filing into Central Park early in the morning. While Mr. McGuire stressed that the day's events were expected to be peaceful and orderly, he said that simply moving thousands of people into, out of and around the city was likely to mean major and lengthy disruptions of traffic. ''We want to urge people not to try to bring their cars into the city on that day and not to come into Manhattan if they are not attending the demonstration,'' Mr. McGuire said.

International Outskirts of Beirut were attacked by Israeli planes and gunboats. Israel dropped leaflets over the capital, warning that it would capture the city soon. The leaflets offered Syrian forces two safe routes from the capital, and asserted that resistance would be ''tantamount to suicide.'' (Page A1, Column 6.) Israel reported more heavy combat on the ground and in the air with Syrian forces in Lebanon. But for the first time since the Israelis' invasion Sunday, they expressed a willingness to accept a cease-fire. (A12:1-2.)