Outside the squat, one-story brick building there is a white, neon-lit cross bearing the inevitable "Jesus Saves" message. Inside there are three large dormitory rooms, their walls a dingy, peeling brown, filled with ramshackle beds and furniture too dilapidated for the local Salvation Army.

It is not much, but for a half-dozen former mental patients, the Vally Rescue Mission in downtown Staunton is home. In return for helping with the chores, these former residents of nearb Western State Hospital get a bed, three somewhat square meals and a place to spend the one commodity they all have in abundance -- their time.

Most consider themselves lucky. For on the streets of Staunton can be found less fortunate Western State alumni -- ex-patients, many of them chronically disturbed. Some live isolated existences in the bleak Hotel Beverly, where room rates start at $31 a week. Others are consigned to the largely shabby "adult homes" that have sprung up around the area over the last decade. Still others have no roof at all.

"A lot of them just walk the streets," said mission director Nona Allen. "They'll show up for dinner, then wander off somewhere. Sometimes we'll see them again and sometimes we don't."

The former patients are part of a mass nationwide exodus that cut patient populations in state mental institutions over the last two decades by about 65 percent. Advocates of the cahnge, called "deinstitutionalization," argued that the patients could be much better cared for in communities rather than in often harsh institutional settings far from their homes and families.

But the promise of the movement has faded. Those who were discharged often have found themselves stranded in hostile environments in which mental health services are few and poorly funded, and where follow-up by the hospital they left is virtually nonexistent. At the same time, many hospitals have continued cutting their expenses by empting more wards and dumping troubled patients on unprepared communities.

At Western State, one of Virginia's four massive mental institutions, where the patient population has been cut by almost two-thirds in the last 15 years, many staff members contend they are under constant pressure to send patients, whether ready or not, back home. And when there is no home, patients have been discharged with a bus ticket to a convenient destination or told to find their way to the Rescue Mission. The result has been incidents like these:

During the week of Thanksgiving last November, a volunteer with the hospital's escort service left two discharged patients at an empty house off a dirt road in Prince William County. A social worker supposedly had arranged for and checked out the house, but the volunteer, Isabel Lawhorn, says she was shocked to find it had no heat, electricity, telephone, appliances or furniture.

"It was just an empty old house," she remembers. "Charles [one of the discharged patients] almost broke down in tears when he saw it." But Lawhorn says she and another staff member followed hospital instructions and left the two at the house.

Despite a diagnosis of psychosis by one doctor, another approved the discharge in January 1980 of Francis Salem, a 44-year-old Fairfax County man with a history of alcoholism, according to hospital records. Salem was given a bus ticket to Miami, where he was supported to check into a boarding house. But he never got past Charlotte, N.C., where he spent a night drinking and was found frozen to death the next morning in a church garden, according to Ralph Cox, the funeral director who buried him there.

Two other patients were saved from what might have been a similar fate last February by a social worker who refused to allow their discharge on a Friday evening. "Here it was dark outside and already near 10 degrees and people were pushing to get them out," he recalled. "The only place they could go was the Rescue Mission [a three-mile walk from the hospital]. They could have died before they ever got there."

The social worker insisted that the men remain at the hospital that night. The next morning, his day off, the social worker returned to drive the two men to the mission. Pressure Denied

State Officials deny that their hospitals are being pushed to force patients out. "We would like to get our population down," said Deputy Mental Health Commissioner C. William Brett, "We think we have a lot of people who would be better treated outside of that institutional setting. But there is no overt or covert pressure on any institution director to dump people."

Some Western State officials tell a different story. "The pressure is always on," said Brendan Buschi, the hospital's social work director, who has primary responsibility for helping ex-patients relocate. "Must discharges have no rhyme or reason -- people who need to stay are sent off, people who could go home are kept. That's because we don't deal with treatment needs, just with numbers. When we need three beds, three people go out."

Calvin Marrs, 50, a Rescue Mission regular for the last six years, sits on a bed in his makeshift 8-by-8-foot cubicle, a blue-knit cap on his head and a cigarette bouncing between his thin lips as he talks about the day in 1975 when he was told he had to leave Western State.

"I'd been there 25 years," he recalls, "and for 25 years they'd told me I was sick and then one day they said 'Now you're well.' It was the only life I knew and I wanted to stay."

Marrs, who still takes tranquilizing drugs to control his schizophrenia, had grown up in Arlington but he gave no thought to going back. Like hundreds of other former Western State residents, he lingered in the Staunton area, gradually making his way to the mission. He says no one from the hospital ever bothered to follow up to see what had happened to him, a situation that a state legislative panel says is typical.

"Once clients have left the institutional system, there are no means to determine where they went, what services they received or whether they linked up with appropriate [community] agencies," stated a 1979 report of Virginia's Joint Legislative Audit and Review Commission. It also found that although many discharged patients needed counseling, therapy, income assistance, housing and an assortment of other services, for most the only community service provided was medication.

The Virginia General Assembly folloed up the report last year by passing a law requiring state hospitals to write up "predischarge plans" for patients before leasing them. But hospital staff members say those plans often end up as mere paper exercise. Some patients simply tear them up, while others discover a gaping difference between what the discharge plan promises and what the communities actually have to offer.

"There is often nothing for our patients to do once they return to the community," said Buschi. "We need both work and recreational opportunites and these simply do not exist." No Place to Go

The lack of services has meant that some patients who could leave the hospital are forced to remain. Western State medical director Glenn Yank estimates that about 10 percent of his patients could live "in any moderately supervised environment, but it requires that there be someplace else where they can go. And we have found that there aren't a whole lot of nursing home beds."

Buschi says even those homes with beds are reluctant to cooperate. One reason is the stigma attached to having been a mental patient -- and the stigma attached to Western State itself and Virginia's Department of Mental Health and Mental Retardation.

For whatever reason, we are not generally trusted in the community," said Buschi. "Our department is not considered to be very ethical or very concerned about patient care. People are afraid that we are looking to simply dump our patients."

The bottom line is money and despite years of public emphasis on "community services," Virginia's mental health budget still mostly goes to institutions. Over the two-year period ending July 1, 1982, the department will spend nearly $369 million -- about 80 percent of its total budget -- for its central office and 16 hospitals and mental retardation centers, while just $89 million will go to localities.

"My problem with the state is that while it talks about deinstitutionalization, the money which is needed in local areas to make it work is not forthcoming," said Allan Schor, head of Fairfax County's Northwest Center for Community Mental Health in Reston. "The money they save in cutting back patients from state hospitals seems to find its way into someplace else in the budget and not community services."

Fairfax, by far Virginia's largest and wealthiest local jurisdiction is reputed to have the state's most elaborate network of mental health facilities. rBut Schor says the county is woefully lacking, especially in housing for newly discharged patients who have no place to go. "We've got long, long waiting lists for every bed," he said. "You hear a lot of rhetoric from politicians about meeting the needs of the mentally ill, but when it comes to involving new dollars, they all talk austerity." Many Readmissions

Perhaps the grimmest statistic of all is Western State Hospital's recidivism rate. Nearly 75 percent of the readmissions.

"It's like going to the hospital over and over to have your appendix out," said mission director Allen, who is especially critical of the hospital's substance abuse ward where chronic alcoholics are sent for treatment. "I don't see any success there, just people going in over and over again."

Hospital officials blame at least some of the recidivism on the hostile environment discharged patients find when they go home. "Patients go out to the community, see what is there and choose to return, and they know exactly what to do to get themselves brought back," said medical director Yank.

Marrs says he has returned to Western State twice for brief periods since he was discharged in 1975. He acknowledges that he is in some intangible way permanently linked to the institution, even though he is bitter about what happened to him there.

"They gave me drugs for 18 years but I'm no better off now than I was in 1951 when they put me there," Marrs says. "Hell, I'm worse off. I'm too old for the Army and I've got no home to go to and no people who want me."