Maryland's private homes for troubled children are in the midst of a funding crisis that may force many to close as family-style alternatives to overcrowded state institutions, directors of the homes say. About half of the homes are in Montgomery and Prince George's counties.

A drop in funding from state and federal sources has already taken its toll on the homes, said Edward C. Voss, who recently lost his job as director of the Maryland Association of Residential Facilities for Youth when the group had to cut its own expenses. Of the 78 private homes operating in 1979, a third have collapsed because of financial difficulties, he said. Eight of those were in Montgomery and Prince George's counties, he added.

He and home directors said that federal and state budget cuts threaten to shut down many of the remaining private residential homes, which currently house around 1,000 children up to age 18.

Jesse Williams, deputy director of the state's Juvenile Services Administration, said state referral agencies are sending an increasing number of abused, neglected and delinquent children to state-run institutions in an effort to save money. He called it "the best of a generally unpalatable situation." He said the state considers the larger institutions a less expensive option.

But administrators of the private homes -- and some former residents of the state institutions -- said in interviews that life in the larger institutions is often highly restrictive and impersonal. At one such center in Rockville, a former resident said, teen-agers would have 1 1/2 hours of classes and then "sit around . . . and do nothing." At some state institutions, youngsters are locked in at night and don't have ready access to counselors during those hours, private-home administrators and former residents of the state institutions said.

The private, nonprofit facilities accept most of their referrals from two state agencies: the Juvenile Services Administration, which deals with runaway children, truants and delinquents, and the Social Services Administration, which handles victims of abuse, neglect and domestic turmoil. Each child is referred under a "purchase care agreement" that allocates a certain amount of money to cover the care of the child.

Home administrators maintain that the allowance lags far behind the actual cost per child, however. Jarrett Fishpaw of the Baptist Home for Children in Bethesda said that although he estimates that it costs the home upwards of $25,900 to take care of a child for a year, Social Services pays only $12,036 and the Juvenile Services Administration $11,854.

With a projected budget for this fiscal year of $414,000, the Baptist Home must raise $200,000 on its own from private sources, Fishpaw said.

At the same time, federal programs tapped by the private homes have been curtailed. A year ago, for instance, the Baptist Home lost $3,000 of the annual grant it was getting from the federal school lunch program to buy milk. The home also receives public education supplemental funds, but those were trimmed in each of the last two years, Fishpaw said. The home may have to curtail its recreation programs if the funding cuts continue, he said.

The Baptist Home complex on Greentree Road currently houses 18 teen-agers, who live with two counselors. On the grounds are a playing field, garden, darkroom, theater and woodworking shop. The coordinator of residential care there, John Ennis, said the recreational facilities play an important role: "The more things the children are exposed to, the more apt they are to find a place they can fit into and then develop goals for the future," he observed.

Another private facility in Montgomery County, the Caithness Shelter Home in the Norbeck area, is also clinging to a slim margin of financial solvency. This year, the Juvenile Services Administration cut the money it allotted to Montgomery for "purchase care" by $31,000, reducing the total county budget to $46,000. Quanah Parker, director of Boys' and Girls' Homes of Montgomery County, which runs Caithness and six other facilities, said the budget trim hit particularly hard at Caithness "since it handles 98 percent of JSA's referrals in the county."

Caithness has provided short-term care of 90 days or less for 3,500 youngsters between the ages of 11 and 18 since it opened its doors in 1972, a spokesman said. Residents of the home, which can house 14, have access to counselors around the clock, take five hours of accredited schooling and are expected to do chores and take part in activities.

David Bailey, the program director, said the home stresses one-on-one counseling and helping residents to "develop a good sense of themselves, and to build self-esteem."

The state administers five small homes, with a total capacity of 59, that operate along the lines of the private institutions. Three are group homes operated by the Juvenile Services Administration in Baltimore and two are temporary shelters run by the Social Services Administration in Rockville and Elkton. JSA official Williams described state-run homes and institutions as "overcrowed" and "understaffed."

For that reason, he said, the administration has not been willing to cut back its funding of the state-run programs in favor of the private homes.

Private-home administrator Quanah Parker argues, however, that "community placement provides better services for the child at about half the price."

Parker's deputy director at the Boys' and Girls' Homes of Montgomery County, Steven Bradford, maintained that the crowded state facilities -- where he said there are "children sleeping on the floor" -- may create more problems than they solve. Since "only 5 percent of the kids in private homes have committed serious crimes," truants and runaways redirected from private homes to state institutions increasingly may be housed with serious offenders.

One former resident of state and private institutions, a woman now 20, said that her stay in the Caithness Shelter Home was in marked contrast with the state institutions. A chronic runaway at 14 from her home in Silver Spring, she spent four years in and out of residential facilities.

At "lock-in" institutions, she said, she and the other residents were not allowed outside or, in some cases, to roam between rooms without supervision. At one lock-in, she said, there were only 1 1/2 hours of schooling each day and little else to do.

Counselors at Caithness, however, had left an impression on her that sustained her through some later bad times, the woman said. The counselors had made her "feel wanted, like a real person," she said.

"When I first went there, I was self-destructing with drugs," she recalled. "Then people showed they cared and I found I can live for something. It's a good possibility that if Caithness wasn't there for me, I wouldn't be around now, as in alive."

This year, the woman returned as an intern counselor at Caithness and said she now hopes to go to college to be certified as a counselor.

Though administrators of some small facilities contend residential group homes are an essential option for some troubled children, one supervisor in the Maryland Child Welfare Services observed that, increasingly, such children are sent there "on a temporary basis and then returned to their homes or adopted." However, the group homes may be appropriate "for the older child who is not able to develop ties with new parents or for kids of any age with emotional problems from an unstable family environment," she said.

Sister Elyse Staab, administrator of the St. Ann's Home for Infants in Hyattsville, which cares for children under 8 years of age, shares this opinion.

"Sometimes residential facilities provide more neutral ground, especially when the child is closely attached to the family, even though the parents are abusive, and won't accept substitute parents," she said. "St. Ann's offers more diagnostically, especially for younger kids, many of whose needs are medical and cannot be met in a foster home."

The ratio of full-time staff to children averages 1 to 3, not including a staff psychologist, a family practice doctor who visits daily and a consulting psychiatrist, she said

Incorporated in 1860 by Abraham Lincoln, St. Ann's was housing 80 to 90 children at a time until 1980. Since then, as funding and state referrals have dropped, the number has been cut in half. Two nurseries and a pre-school program at the home recently have been shut down.

Edward Voss, the former director of the private-home association, said that, at a time when funds are being cut, the small institutions are also facing more rigorous licensing requirements by the state that would make it more expensive for them to operate. The Juvenile and Social Services administrations, both empowered to license residential homes, want to require that the homes conform to a set of standards for planning, facilities and educational services.

These minimum standards would be mandatory only for the private homes and not for state-run institutions, Voss said. "Frankly," he observed, "the proposed policies could ensure better care for the kids, but they the state know they can't afford it. We are told that we have to."