The Prince George's County Health Department is "letting go" a number of its state mental health employees because there is no money in the budget to pay them, according to county health officer Donald K. Wallace.

Sources said nine employees, including two psychologists, three social workers, one occupational therapist, one mental health assistant and two typists would be transferred to other available slots or "let go" from the mental health department because of a fund shortage caused by a state-granted 6 per cent cost of living increase of its employees in June.

The personnel cuts come just one week after Wallace asked the county council for permission to fund 15 additional beds in an halfway house for alchoics in Laurel. Wallace said he could absorb the $39,000 cost in his budget without asking the council for more money. When questioned by council members as to how he could produce the money, Wallace said he had a surplus from "positions I hadn't filled" and could pay the rest through a stipend charged to halfway house patients.

The county, which pays the state employees through its budget, had to come up with $44,000 in matching funds to pay the salary increases and "just didn't have the money," Wallace said.

"It's very simple," he added. "The state expected the county to pick up its funding of the raise they granted in June. Well, we don't have the fiscal slack to do it."

Wallace said he had not decided whether to go to the council and ask for a supplementary budget to cover the pay raise. "I doubt I'll do it. If the county government had authorized us to overspend, we would do it. But last year the mental health department overspent its budget and we don't want to do it again. We do not want to be called poor managers."

Sources in the mental health department say the firings are just another slap in the face to their programs. "Wallace doesn't like mental health at all. Our programs are continually underfunded and understaffed. In terms of training, we get less money than anyone. In administration, they get $76 per person for training; we get $9 per person for training," said one staff member.

Other state employees say they have offered to give up their supplements, accept a freeze on travel or let the vacancies occur by attrition, but Wallace said the proposals would not create enough dollars to keep the postitions.

"The county has directed me to displace some old programs for some new ones. We are funding the Baden Clinic at $20,000, two handicapped students in the school systems and the halfway house. We have to make internal adjustments and they have to come from somewhere,e Wallace said.

He said four of the nine people affected by the cuts would be taken out of the mental health program and put into other areas in the county health department. But "five don't have a place here," he added."They are not fired, but under personnel rules, are let go. There are just no funds to pay them."

Wallace said the mental health department spent $260,000 over its appropriation last year. In 1977, mental health was alloted $1.3 million from an overall $14.4 million county health budget.