What was going on when I was born?

Sandra Hillary, wearing a new wide-brimmed hat, said she had decided to end her retirement from acting to audition for a part in ''Cotton Club,'' a movie about the famous Harlem nightclub of the 1920's and 30's. She was among more than 4,600 people who showed up at St. Paul the Apostle Church on Ninth Avenue and 59th Street yesterday. Many wore costumes of the period for a chance to be looked over by Riccardo Bertoni and Esther Navarro, who were casting 5,000 small parts in the film.

STREET musicians will serenade on the sidewalks of Times Square. The bluegrass veteran Peter Stampfel will bring his new quintet, Bottlecaps, to Folk City. The Lone Star Cafe will be host to a doo-wop show. And David Amram, New York's ubiquitous ''man of all musics,'' and his quintet, will give two concerts celebrating the ethnic diversity of the city's musical culture. These are a few of the nearly two dozen events in the third New York Folk Festival, which begins today and runs for nine days in the clubs and parks and on the street corners of Manhattan and Brooklyn.

Secretary of State George P. Shultz said today that United States military forces exercising in Central America and the Caribbean were not seeking a confrontation and would withdraw if attacked. ''Our forces will defend themselves but they will withdraw,'' Mr. Shultz said in an appearance before the Senate Foreign Relations Committee. He added, ''We have no intent to engage anyone actively.'' It was the first time an Administration official had specified exactly how American forces would respond if attacked.

A Superior Court judge ruled today that the Educational Testing Service had acted fairly in invalidating the scores of four high school students whom it had suspected of cheating on their college entrance examinations. The judge, Richard S. Cohen of the Chancery Division here, emphasized that he was not ruling on the guilt or innocence of the four recent Millburn High School graduates. The students had sued seeking to prevent the testing service from invalidating their scores on the Scholastic Aptitude Test. The judge limited the issue to whether the testing service - the largest in the country - had just cause to question the four test scores and had acted fairly in voiding them.

Governor Cuomo yesterday began the campaign for a $1.25 billion transportation bond issue to ''rebuild New York'' amid signs of opposition and uncertainty from industry groups and public officials. In a ceremony overlooking a deteriorated section of the Franklin D. Roosevelt Drive in Manhattan, Mr. Cuomo signed legislation putting the question on the ballot in November and pledged to conduct a campaign to ''enlighten the people'' about crumbling roads and bridges. ''It is going to be a campaign where Republicans and Democrats together are going to be running against ignorance,'' he said. The bond issue would provide about $1 billion for highway projects, $170 million for mass transit and $75 million for ports and waterways. But so far, the Governor and Legislature have been unable to agree on a list of projects to be financed.

''Questions of deployment and how many cops and where they were deployed divert attention from the very serious issue of whether a city like this can tolerate kids who just decide that they're going to maraud and terrorize other people.

International American military forces now holding exercises in Central America and the Caribbean are not seeking a confrontation, according to Secretary of State George P. Shultz. In Senate committee testimony, Mr. Shultz said that ''our forces will defend themselves but they will withdraw'' if attacked. (Page A1, Column 6.) Every Soviet ship that enters waters off Central America in coming weeks will meet a United States Navy ship, according to Reagan Administration officials. In some cases, the officials said, the Navy ship will hail Soviet vessels to make inquiries. (A3:1-2.)

Although Montedison, the giant Italian chemicals company, appears to be drowning in red ink, its stock is soaring, and so is morale at company headquarters here. The reason is that Montedison is seen by industry analysts, and apparently many of its own employees, as a company not only on the way up but also leading the way among Europe's chemicals companies. After spending a decade as one of Italy's bloated, loss-producing, Government-controlled companies, Montedison started a new life in June 1981, when a group of leading businessmen bought a controlling interest. Since then, the company, which had sales of $6.6 billion last year, has acquired a new management team and ruthlessly trimmed its operations at a cost of more than 10,000 jobs.

The International Harvester Company said today that the French Government had agreed to grant some form of financial assistance to its French subsidiary, a move that could prevent the closing of Harvester's tractor plant in St. Dizier. Harvester said in a filing with the Securities and Exchange Commission that the French subsidiary would probably default on its loan agreement without Government assistance or help from the parent. That could cause defaults on loan agreements of the parent company and of its British and German subsidiaries, Harvester said. The company's filing was a form S-1 registration statement in connection with the issuance of preferred stock to its dealers of trucks and agricultural machinery as part of a debt- for-equity swap.

An article July 21 describing the arrival of Siberian Pentecostals in St. Louis erred in a reference to the Christian calendar. Pentecost and Trinity Sundays are a week apart.

The Sports of The Times column Wednesday gave a horse owner's first name incorrectly. She is Hilda Silverstein.

Rita M. Lavelle was indicted today on five felony counts of lying about her actions when she headed the Environmental Protection Agency's toxic waste cleanup program. In one count, a Federal grand jury accused Miss Lavelle of perjuring herself at a Senate committee hearing in February by falsely denying that she had used ''political considerations'' as a basis for delaying or hastening cleanup of toxic waste sites. The charge contrasts with earlier denials by Administration officials that partisan motives had influenced cleanup decisions at the agency. The four other counts accused the 35- year-old Reagan appointee of lying to the Government and three Congressional panels in December and February to conceal her participation in agency actions involving the Stringfellow Acid Pits, a major toxic waste dump near Riverside, Calif., after learning that her former employer might be liable for cleanup costs.