March 12, 1983

Two English professors from City University who disappeared two months ago during a vacation in Indonesia are believed dead, killed during a robbery, the sister of one of the men said yesterday. The State Department confirmed yesterday that the Indonesian police have arrested five men in connection with the disappearance. The statement was made by John Caulfield, a press officer in the department's Bureau of Consular Affairs in Washington, Mr. Caulfield added that he could not confirm that the two professors were dead. Report of a Confession However, one of the Indonesians arrested has confessed to murdering the Americans, said Jean Grazer of Salt Lake City, the sister of Dr. James D. Allen of Kingsborough Community College in Brooklyn, one of the missing professors.

Black and Puerto Rican legislators said yesterday that they had asked Deputy Mayor Robert F. Wagner Jr. to withdraw from the competition for Schools Chancellor in favor of their candidate. Mr. Wagner said that he had declined to drop out and that he was in the running to stay. ''I feel I offer the kind of leadership the board will need in the next several years,'' he said after meeting with three members of the Black and Puerto Rican Legislators Caucus in his office at City Hall. ''He doesn't have the qualifications,'' said Assemblyman Angelo Del Toro, Democrat of Manhattan and chairman of the caucus. ''Does Robert F. Wagner Jr. want to be remembered as the white person who denied a black person the opportunity to run the largest public school system in the country?'' Deputy Chancellor Is Candidate Mr. Del Toro was referring to Dr. Thomas K. Minter, the deputy schools chancellor for Instruction, who is black and who won the endorsement of the caucus over Anthony Alvarado, superintendent of Community District 4 in East Harlem.

A flight engineer who had been disqualified for future pilot assignments because of ''proficiency'' problems was apparently flying the United Airlines DC-8 cargo plane that crashed while taking off from Detroit Jan. 11, according to Government documents made public yesterday. The documents, released by the National Transportation Safety Board, also disclosed that the ''trim'' mechanism governing the nose-up, nose-down balance of the horizontal tail was found set in a much more pronounced nose-up position than was called for. The four-engine jet, taking off in early morning darkness, climbed immediately at a precipitous angle. The captain shouted, ''Push forward, push forward!'' and the copilot, evidently riding at the engineer's station, shouted ''Trim!'' as the flight engineer wrestled with the controls. But it was too late.

President Reagan vowed today to veto a $3.7 billion job bill if it contained an amendment repealing the requirement that taxes be withheld from interest and dividend income. The fight over the amendment has paralyzed the bill in the Senate, raising the possibility that some states might cease paying unemployment benefits by the middle of next week. Twenty-seven states, plus the District of Columbia and the Virgin Islands, are almost out of funds to pay benefits. In addition to other provisions, the job bill contains $5 billion to replenish their accounts, which have been strained in the current recession.

President Reagan issued an order today tightening procedures for the handling of classified information by Federal employees, and, as a result, many more employees will have to sign secrecy agreements. The directive says employees throughout the Government are required to cooperate with Federal agents investigating unauthorized disclosures of classified information. It said further that an agency might decide ''adverse consequences will follow an employee's refusal to cooperate with a polygraph examination.'' Disciplining Is Possible Such consequences, the Justice Department said in a document explaining the President's directive, could include disciplinary action against the employee, including possible dismissal from the Government. But Justice Department officials said the results of a test by polygraph, or lie detector, must be considered in the light of evidence obtained from other sources.