Maryland Gov. William Donald Schaefer is requiring the Legal Aid Bureau and other organizations that provide legal services for the poor to agree not to file lawsuits against the state in order to receive state funds.

Legal experts said Schaefer's action is the first by any state to make funding of legal services for the poor contingent on an agreement that state agencies not be sued.

The state Board of Public Works offered to extend its annual contract with the Legal Aid Bureau Inc.last week only if the Baltimore-based nonprofit agency agrees not to bring lawsuits against state agencies.

Legal Aid, one of three groups that receives state funds to represent the poor and handicapped, handles the bulk of cases involving persons in mental institutions and children in juvenile facilities such as foster homes.

Lawyers who represent the poor said such a restriction could cripple their ability to represent their clients vigorously in cases ranging from obtaining welfare benefits to foster care to emergency shelter.

"What you are saying to poor people is you are second-class citizens," said Hulett H. Askew, director of the civil division of the National Legal Aid and Defender Association.

"Their reasoning is it {legal representation} is foreclosed to you, not because you don't have the right, but because of the source of your funds."

In the early 1980s, the Reagan administration sought to prohibit the Legal Services Corp. from filing class action suits against federal, state and local governments.

At a news conference yesterday, Schaefer defended the right of the poor, the mentally retarded and the handicapped to have access to legal representation, but said the state should not be in a position of paying lawyers to bring lengthy and expensive lawsuits against itself.

"Now, I have seen some very ambitious young {lawyers} . . . who don't want to talk. Their attitude is, we sue. There is no negotiation. We sue. And I'm tired of every time somebody looks around they file suit against you," Schaefer said.

Charles H. Dorsey Jr., executive director of the Legal Aid Bureau, said he has attempted to set up a meeting with Schaefer to discuss the contract, which would take effect July 1 if Legal Aid officials sign it.

"Frankly, if I don't know if I'd be able to sign a contract with such a stipulation and meet the requirements that are placed on us and meet the requirements of professional rules of conduct," Dorsey said.

He said suits on behalf of his clients are usually the last resort after extensive negotiations.

"In past administrations, the governors have understood that the Legal Aid Bureau does not file frivilous suits," Dorsey said. "The governors knew we attempt to negotiate our difficulties and problems and only when we reached that point of disagreement that we file suit."

The new policy was unveiled without fanfare last week at a meeting of the three-member Board of Public Works, the influential body that approves state contracts. On a 2-to-1 vote, the board approved the Legal Aid Bureau's $259,591 contract with the Department of Health and Mental Hygiene to provide legal representation for the mentally handicapped. Included in the contract was the stipulation that Legal Aid not bring lawsuits against the state.

Board members Schaefer and Comptroller Louis L. Goldstein voted for the restriction, while Treasurer Lucille Maurer opposed it.

Schaefer spokesman Bob Douglas said yesterday the policy is still evolving, but added that the governor will seek similar restrictions in other contracts scheduled to come up for renewal next week.

The Legal Aid Bureau has two contracts with the state totaling $1.74 million. The Maryland Disabilities Law Center Inc. also has two contracts with the state totaling $869,753. Both contracts are set to expire on Tuesday. The University of Maryland Legal Clinic also has contracts with several state agencies.

"It is inappropriate for the state to pay for someone to sue the state," Douglas said. "If there is a difference of opinion or a problem there should be discussion first. If the problem cannot be worked out and if legal redress is the only recourse available, then an individual or group should assert their legal rights."

Douglas said Schaefer is considering a "safety valve" in which the governor and the attorney general would review cases in which "the state allegedly is not doing what it is suppose to be doing" and would decide whether a suit should be brought against the state. He said people who want to press ahead with legal action outside that review policy have access to legal representation paid for by other sources, including the federal government, private and local money.

Dennis Sweeney, deputy attorney general, said Attorney General J. Joseph Curran Jr. will review the governor's proposal to make sure it does not violate the state's own mandates to provide legal representation for the poor.

Critics of Schaefer's plan said that without the ability to sue, legal aid services would be limited in their ability to represent their clients.

"The Legal Aid Bureau and others perform a very valuable service in representing clients who might not otherwise be represented," Maurer said. "I would like them to have the opportunity to represent their clients. The plan would certainly take an important tool out of their legal tool kit. If they didn't get assistance from the state, they might have difficulty performing the level of services they have been providing."