"I wish I could have a magic wand and absorb all those people into this high-density city," said Department of Human Resources Director Albert P. Russo. "But that's a fantasy."

"They're going to have to stay at Forest Haven," Russo went on. "It will take time to make all the necessary preparations to move them out into the community. And while they stay we must do our best for them."

"Those people" are the 1,025 residents of Forest Haven, the D.C. home for the retarded, located in Laurel.

Critics of Forest Haven contend that it is little more than a warehouse in which residents get little opportunity to advance, mentally or socially.

Residents of Forest, Haven or similar institutions across the country, their faces and bodies often cruelly deformed, their speech and motions infantile, banging their heads against a wall, laughing and babbling seemingly without reason, have for centuries been locked away from society's sight and mind.

But the critics, including U.S. Justice Department lawyers, private attorneys and organizations advocating "deinstitutionalization" of Forest Haven, are demanding instead that most residents be placed in the community.

The argument is based on the successful placing of retarded people in private homes, apartments, of retarded people in private homes, apartments, group homes and other housing arrangements in several states.

In a recent Pennsylvania court case, a judge ruled that holding retarded Americans in mass institutions deprives them of their basic constitutional rights as well as inhibits their mental development. A related class action suit is scheduled to be heard here next month.

Although Russo and Forest Haven's acting superintendent, Fred Perry, say they favor moving residents out of institutions as quickly as possible, Forest Haven is now spending $4.2 million authorized by Congress in 1976 to improve and expand the facility - an indication that no early policy changes can be expected.

Most of the money is being spent to improve conditions for the most severely retarded residents. The federal government has threatened to cut off Medicaid funding for these persons unless Forest Haven meets more national standards.

Under its five-year plan, which is undergoing extensive revision, Forest Haven proposes deinstitutionalizing 200 residents by 1983. Former acting superintendent Roland Queens said in 1976 that 500 residents would benefit from immediate transfer into community life. These were mainly persons who could work for a living or otherwise blend readily into society.

In the past year, according to Theresa Johnson, a counselor in charge of some of the institution's most mentally advanced residents, "only one resident has been sent into the community." And by Russo's estimate," since October 1976, no more than 10 have been deinstitutionalized."

Replacing mass institutions for the retarded with small, community-based homes has been growing in the United States and other Western countries since the mid-1960s.

But the D.C. government, claiming rising public objections and costs, has bucked the trend. "Increasingly," Russo said in an interview at DHR headquarters the other day, "Washington residents are objecting and resisting additional community-based facilities, not just for the retarded, but for the mentally ill, alcoholics and juvenile delinquents.

"Their downright rejection of these facilities is increasing. This could prove to be an insurmountable barrier to deinstitutionalizing Forest Haven and other facilities.

Russo noted that virtually all community-based facilities were located in low-income areas and areas under rehabilitation in the lower Northwest and near Northeast. "People living in these areas just don't want any more of these facilities in their neighborhoods," he said, "and it's just about impossible to acquire housing in other areas for reasonable rates."

Commenting on recent remarks by Lorenzo Jacobs, director of the D.C. Department of Housing and Community Development, that 638 public housing units in the city had been abandoned and were vacant, Russo said, "I'm hopeful that when the time comes we'll get a piece of that action."

But, he cautioned, "there's growing resistance whenever an attempt is made to open new community-based facilities."

Russo noted, however, that the D.C. government operates two group homes with "six of eight residents each," and is seeking approval for two more, with private sector cooperation.

Recalling that in most states deinstitutionalization came about only after it was ordered by the courts, Russo said he is concerned about an impending class action suit against Forest Haven.

The suit, brought on behalf of six past and present residents by the Justice Department and the Urban Law Institute of Antioch Law School, is scheduled to be heard in U.S. District, Court here beginning June 6.

Russo, a veteran civil servant whose reputation for fair play is conceded by his foes on the sensitive issue, said he fears the trial could result in "a blood bath."

"I go to sleep each night with a clear conscience about the retarded people who sleep at Forest Haven because I sincerely believe we're doing our best," Russo said.

"But I'm afraid that this case could turn into a blood bath. It could throw totally out of perspective everything we're trying to do. They'll talk about Bertha Brown (a Forest Haven resident who suffocated last month), they'll talk about patients being lost, they'll talk about staff who may exploit patients.

"We're aware of these negative things and we're trying to redress them. But I'm afraid that they'll cast a totally different light on the institution."

Russo and Perry are proud of the improvements going on at Forest Haven. On a recent guided tour over the rolling and wooded campus-like site, a reporter was shown such work as sprawling, pale brick building under construction, at a cost of $2.7 million, which is to become a therapy center, freshly painted rooms and halls in the Curley Building, where the most severaly retarded residents are housed and which formerly was described as a "snake pit;" new supplies of clothing for patients, nearly arrayed in individual cupboards; a cleaner central kitchen and sun-filled dining rooms, newly furnished bedrooms and others destined for renovation and air conditioning.

With the trial so close, Justice Department and Antioch lawyers were reluctant to comment directly. But a source close to the case said he was "not impressed, not at all," by the effforts to improve the 53-year-old physical plant.

"This is not a question of perpetuating an institution whose day has passed," the source said. "We don't want to see Forest Haven improved, we want to see it closed."

Another source cautioned, through, that the purpose of the suit was "to have each resident of Forest Haven assessed and placed in the appropriate lease restrictive setting. We want the D.C. government to establish a full range of habitation services. The last thing in the world we want to do is dump any residents on the community."

Acting superintendent Perry said the assessment process is well under way, although it has been largely limited to the most severely retarded. As in the matter of refurbishing the plant, the decision on who is to be assessed is motivated by concern for losing Medicaid funding.

Dr. James Boyland, senior physician at Forest Haven, who is soon to retire after 20 years' service, said that although he subscribed to the advantages of deinstitutionalizing as many Forest Haven residents as possible to abolish the institution was "a dream."

Boyland, who also has a private practice as a pediatrician with Group Health Association Inc., said. "The smaller the group, the better the care and the development of the individual. It would be fabulous if we could deinstitutionalize everyone here, but I think it's a dream, especially when you look at the other needs of the community which already are not being met!"

Boyland said he believed that not all residents would be happy living out of the institution, "in the community with all its stresses." But he conceded that "large institutions are not as conducive to improved behavior as the community is. Things happen here that, with the tighter controls possible on smaller groups, would not happen."

He was referring to a number of cases in recent years of resident's deaths and abusive treatment by overtaxed staff members.

Although most top Forest Haven and DHR officials say they concur with Boyland's assessment, they cite financial constraints as a major hurdle. In its segment on Forest Haven, the pending 1979 D.C. budget states:

". . . active planning for residents in the non Medicaid-eligible units is seriously hampered by funding shortages. Therefore, adequate service cannot be provided for the approximately 600 resideents in this category. Further individual training and education will be inadequate. This will hamper any efforts to develop community-based programs to deinstitutionalize Forest Haven and to instill for the residents mechanisms for coping with community living."

Vincent Gray, local head of the non-profit Association for Retarded Citizens, which operates 1,900 community-based facilities throughout the country, noted that many mildly retarded persons are capable of earning a living, thus offsetting costs to the government.

Other experts have observed that retarted workers often perform better in certain kinds of tasks than do normal persons, who tend to find the work mudane or boring.

"I'm not saying it's cheap and I'm not saying it's easy," said Gray, who is a consultant to the President's Committee on Mental Retardation. "But it's cheaper than keeping these people in mass institutions. And its better.

Gray estimated that the annual cost of maintaining 200 Forest Haven residents in the community would be $3 million. Perry, asked for his estimate, put the figuer at "around $30 million, very roughtly."

In a special survey published late last year, the National Center for Law and the Handicapped found amixed bag of conditions for retarded persons in community-based facilities, such as boarding houses, group homes and apartments, and working in so-called "sheltered workshops."

In Pennsylvania for example, the survey found that "community resistance and lack of planning, lack of day programs, vocational programs and jobs for retarded adults is slowing down expandion of the program, and at the present time, retarded children and adults are still being committed to inadequate programs which cannot meet their needs."

In Wisconsin, though, the survey found that, in general, retarded persons preferred living in communities over institutional life, formed new friendships, engaged in varied recreational activities, held jobs and "showed considerable progress toward functional independence."

Conversely, it is not uncommon for retarded persons to regress mentally emotionally and physically after being committed to mass institutions. Layers in the class action suit against Forest Haven have cited several documented cases of such regression, including persons who lost their ability to cope with daily minimal needs, like walking, going to the toilet and feeding themselves. This claim is based, in part, on the isolation of Forest Haven residents, 25 miles from Washington in a semirural setting.

Perry said this information, gathered in depositions by Forest Haven staff members, was "out of date. He said that since October 1976, when increased funds were alloted, there had been no such regression. "Rather." he said. "a number of children have been making marked progress."

Whatever their age, 6 or 60, residents of Forest Haven are commonly referred to as "children. Those who would see the institution closed down insist that as long as they remain at Forest Haven, they will all remain "children."