The District's Department of Mental Health will lay off as many as 235 employees in January, in an effort to streamline services and reduce costs at the nascent agency, officials said yesterday.

The reduction in force, which could represent as much as 12 percent of the department's 1,935-member staff, is part of an ongoing plan to overhaul the way the city serves its mentally ill, said Mental Health Director Martha B. Knisley.

"We're looking to create a sound mental health structure," Knisley said. "This has been underway for two years. We're going through a wide-ranging, sweeping review."

She said the reductions will take place "across all of our operational components, management and non-management. We examined all 1,900 jobs and asked, 'Is this job critical and necessary?' "

Last month, the D.C. Council closed a $323 million deficit by passing eleventh-hour legislation that raised some taxes and slashed the budgets of major agencies.

Knisley said her department's budget was reduced from $227 million to $217 million, but she stressed that the reduction in force is not directly related to that budget crunch.

Council member Jim Graham (D-Ward 1), who serves on the council's Committee on Human Services, said he was not aware of the pending layoffs. He said he is concerned that the city's budget problems will mean that "this is the type of thing we can expect more of rather than less."

Already, other agencies are finding ways to curtail expenses. The Department of Motor Vehicles announced that it will reduce operations at customer service centers from six days a week to five. Beginning Dec. 2, the C Street location will be open from Tuesday through Saturday, and the others from Monday through Friday, said DMV spokeswoman Regina Williams.

Last week, the Department of Consumer and Regulatory Affairs laid off its public information officer effective in December, sources said.

The city's Department of Mental Health was born 1 1/2 years ago out of a court settlement intended to end one of the nation's longest-running lawsuits on mental health care, filed in 1974, that charged the city was doing little more than warehousing its mentally ill at St. Elizabeths Hospital. A series of monitoring efforts ended with the court-ordered takeover of the system by a receiver in 1997.

In May, Mayor Anthony A. Williams (D) officially took control of the department and its services for 8,000 city residents.

As part of the transition from receivership, the department agreed to a plan that called for a reorganization, splitting its regulatory and oversight functions from its role as a provider of direct care.

"In order to implement the plan, we have been restructuring continuously since the department was created," Knisley said. "One of the features of the restructuring is a focus on how we can become more efficient and streamline operations, so we can serve more people and improve the quality of care."

Peter J. Nickles, the lead attorney whose class-action suit has represented thousands of city mental health clients since 1974, said yesterday that he had received assurances from the District that the layoffs would not adversely affect services.

"If they do, we'll be back in court in a minute," said Nickles, who is to appear with mental health officials in U.S. District Court today before Judge Norma Holloway Johnson for a regularly scheduled update on how the department is progressing.

Knisley said the layoffs were announced to the employees this week so that they would have time to find new jobs in city government or elsewhere.

"We wanted to make sure we got the most information out as quickly as we can so they can plan for the short term and long term," Knisley said.

Knisley noted that the department, while laying off employees, is still expanding some services, particularly in the child mental health area and treatment for the effects of terrorism. Much of the expansion is being funded by federal grants, she said.