The Montgomery County Council unanimously approved yesterday the creation of a county-level department of mental health, the first of its kind in Maryland.

The new Department of Addiction, Victim and Mental Health Services will receive $12 million a year from the county and will merge portions of three existing county agencies.

County Executive Charles W. Gilchrist proposed the new department last year, saying the county faced serious problems in delivering services and funds intended for the mentally ill.

"This will be a tremendous step forward in dealing with the 4,000 or so people who are mentally ill in the county," Gilchrist said yesterday. "There have been very serious problems of a lack of coordination of services."

County residents with severe mental illnesses "fall between the cracks" and are "lost in the bureaucracy between the state and county, winding up without the necessary supervision," Gilchrist said.

Programs for the mentally ill now are divided among the Health, Social Services and Family Resources departments, and overlapping services are administered by other departments as well.

"This was not a problem that could be solved simply by throwing money at it," said Charles L. Short, the director of family resources, who was chosen by Gilchrist to develop the plan for the new department. "It required the painful undertaking of a restructuring of how we deliver services."

The new agency of 169 full-time and 27 part-time employes will be staffed primarily with workers of the three existing agencies, said Dorothy Cockrell, the council's deputy staff director. About 18 new employes will be hired.

Under separate legislation, the council also created an advisory board that will make recommendations to the department, the council and the county executive on the delivery of services to the mentally ill, substance abusers and victims of family violence, sexual assault, armed robbery and other crimes.

Approval of the new department came after the release of a $65,000 study by a Texas-based firm, Health Consulting, that criticized the county for administrative disarray in its mental health programs and recommended a separate department, Cockrell said.

The recommendations were in keeping with a national shift in psychiatric theory on the treatment of mental illness, away from institutionalization and toward rehabilitation programs.

Short said the new department would improve the county's rehabilitation programs.

Gilchrist, who is retiring this year, plans to appoint an acting director for the department within several weeks, said Short.

The interim director will serve until the county's next executive officer appoints a permanent director.

The county council also ended an eight-year battle by approving an agreement between Montgomery and Prince George's counties that allows Montgomery to be paid for fire services that it provides on the Prince George's side of Takoma Park.