FOR YEARS THE reputation of Forest Haven, the District's home for the mentally retarded, has been an ironic twist on its name. The situation there was so dire that in June, U.S. District Court Judge John H. Pratt, in settling a suit against the institution, ordered city officials to make some major changes right away. Forest Haven, however, was only the most notable example of the indifference and incompetence that have characterized the city government's response to the needs of mentally retarded people. Fortunately, the City Council recently has approved a bill that should improve substantially city-sponsored services to mentally retarded citizens not only at Forest Haven, but also in other public and private programs.

The bill follows a well-established national trend in favoring small, community-based facilities and programs rather than large institutions for the mentally retarded, and in providing safeguards to protect the constitutional rights of mentally retarded people. It sets specific procedures under which the mentally retarded can voluntarily commit themselves or be committed to, transferred between, or released from residential or non-residential programs. It stipulates that these decisions for each individual must be approved by Superior Court officials. And it creates an independent volunteer group of "advocates," who, at the direction of the court, will assist mentally retarded people and their families.

Most important proposed law requires that city officials undertake, for the first time, a full survey of the needs of mentally retarded people in the District, and identify all public and private programs in the city which serve the mentally retarded. The survey, to be completed within a year, is to form the basis for future city programs concerning the mentally retarded.

Just as Judge Pratt's decree was a response to a specific situation, so the proposed city law is a judicious response to the larger task of devising an effective overall program. With any luck it should help the District's mentally retarded citizens reach their potential - and make further judicial decrees against city programs unnecessary.