Musicians Union Agrees to New Contract : Entertainment: The accord preserves two special funds that the industry had sought to eliminate.

The American Federation of Musicians, which had threatened to strike over proposed record industry cutbacks to two special union funds, agreed Monday to a new contract that boosts wages and preserves the two controversial funds.

Agreement on the new contract, which totals $50 million over three years, was reached after a week of tense negotiations and a nationwide union lobbying effort to enlist public support for the continuation of the funds. The Music Performance Trust Fund was set up in 1948 to pay for free live concerts at schools and other public facilities, while the Special Payments Fund pays musicians royalties from the sale of records, tapes and compact discs.

The battle between the record industry and the union grew so heated that it drew Mayor Tom Bradley into the fray. Bradley wrote A&M; Records President Gil Friesen Jan. 26 to complain that “I am concerned about the possibility of drastic cuts . . . by the recording industry.”

“We started so far apart that it almost seemed impossible to reach an agreement,” federation President J. Martin Emerson said Monday. But “I was able to hammer home to the recording industry that if they took these (two) funds away, it would ruin the union, and they would be worse off not having a union to deal with.”

Emerson and record industry negotiator Norman Samnick said federation members will receive a 3% increase in wages in each year of the new agreement. The record industry also agreed to increase contributions to the musicians’ Health and Welfare Fund.

There was no change in the amounts that record companies will contribute to the controversial Music Trust Fund, which helped finance about 35,000 live musical performances last year, or to the Special Payments Fund, which has been shrinking over the past few years because royalty fees have been lowered for all recording formats and because sales of LPs, which have the highest royalty rate, have slumped.

The pact is subject to ratification by eligible musicians, which is expected to take about a month.

The music trust fund that touched off the union strike talk has been the subject of a heated dispute since at least 1973, when the record industry began arguing that its original purpose--to provide jobs for live concert musicians displaced by the growth of the modern studio-based recording industry--has become obsolete.

Samnick said about $320 million has been paid into the performance fund to finance free concerts. But federation officials said the fund has received less industry support in recent years. In 1989, for instance, royalty fees paid to the fund totaled $8.3 million, compared to $10 million in 1987.

Because of slumping LP sales, the Special Payments Fund, which pays royalties to about 4,000 musicians, had also shrunk to about $9 million currently from its peak of $24 million in the 1970s.