ANTIQUATED, unsanitary, scandal-plagued Montrose School went out of business March 18. The century-old ``reform school'' for delinquent youths is the most recent prison for children in America to be shut down. That a prison could be shut down in 1988 - a time when the public has become almost paralyzed with fear of juvenile crime - is no minor miracle. If anything, there are strong pressures to clamp down harder on juvenile delinquents. Indeed, in the past 10 years, America has moved away from the rehabilitative ideals embodied in a separate justice system for kids.

Borrowing from the more punitive system of adult corrections, states are instituting harsher penalties for some juvenile offenders and locking up more of them in reform or training schools. At least half the states also have laws that make it easier to prosecute children as adults, a trend that each year puts 4,000 juveniles behind bars in state prisons.

The ``get tough'' approach has been led by judges who use lockups as a favorite sentencing option; by prosecutors who claim juvenile offenders are becoming increasingly violent; and by correctional officers who say youths must be removed from society to be rehabilitated.

But other juvenile-justice experts continue to press for youth rehabilitation outside a prison setting - closer to the community where delinquents come from and where they will have to return after their release. And, very slowly, more states are starting to choose community-based alternatives over large correctional institutions like Baltimore's Montrose.

States as diverse as Oregon, Florida, Texas, and Utah are closing or drastically reducing the size of juvenile prisons in favor of other alternatives. This quiet revolution - which began in 1972 when Massachusetts set the juvenile-justice world on its ear by abruptly closing its troubled training schools - is spreading.

For instance, the kids who used to be in the Montrose School are now being supervised in smaller, community-based programs.

To Linda D'Amario Rossi, the Maryland official who dared to challenge the status quo, there was no choice. ``I've worked in jails and prisons, and I know there's another way,'' says Ms. Rossi, the indomitable director of the Juvenile Services Administration.

``Most of these kids need a smaller setting, a more individualized setting. You'd go into their ward [at Montrose] and they'd be pulling at you, touching you, wanting your attention. They were not destructive and violent kids who'd hurt you; they were in need of direction and supervision,'' she says about the Montrose facility. FLYING in the face of this trend to reduce reliance on prisons is California, with the largest, most overcrowded prison system for youthful offenders in the United States. The increase in youth violence there, especially gang activity, has increased public pressure to lock up more delinquents.

``Only a few states have gone hog wild on a punishment kick, but California is one,'' says Barry Krisberg, president of the National Council on Crime and Delinquency (NCCD), based in San Francisco. ``For the past five or six years, it's been going through a frenzy of incarcerating its kids.''

California now holds the dubious distinction of locking up more kids per capita than any other state in the Union. Currently, 9,000 wards between the ages of 13 and 25 are sardined into facilities designed for 5,840. Eight years ago, the number of wards in California Youth Authority (CYA) institutions stood at 4,500 - half what it is now.

Three main factors have driven up the number, according to Dr. Krisberg, a nationally recognized expert on juvenile justice:

Violence. California has one of the highest rates of violent juvenile crime, he says, and judges have little choice but to sentence these young offenders to the CYA.

Length of stay. In 1980, wards stayed an average of 13 months at the CYA. Now, they stay about 19 months. For every month the average stay increases, the CYA needs 400 more beds at an annual cost of $25,000 each. Krisberg says there is no evidence that longer sentences will reduce the juvenile crime rate. In fact, he says, the longer a kid stays locked up the more likely he is to commit new crimes.

Parole violations. In 1980, kids who returned to a CYA institution for violating their conditions of parole were 16 percent of the total inmate population. Now, they are 22 or 23 percent of the total, contributing to the overcrowding problem. The CYA needs to find options for parole violators other than automatically returning them to prison, says NCCD's Krisberg.

Although the CYA system is severely overcrowded, the staff is effectively managing the burgeoning population, CYA authorities say. The ward suicide rate is down, the rate of ward-on-ward assaults is down, and the rate of ward-on-staff assaults is down, according to CYA's own data.

But the overcrowding has become a cause for alarm among some California public-interest groups.

Earlier this month, the Commonweal Research Institute, after eight years of study, issued its final report on the CYA system. In recommending sweeping reforms, Commonweal said that up to 4,000 youths - 50 percent of total wards - could have been diverted from the CYA if community-based options had been available.

In addition, the Youth Law Center, a public-interest law firm representing children, is on the brink of filing suit against the CYA, alleging that the agency's conditions of confinement are bad enough to be considered unconstitutional.

``We feel we can defend any lawsuit,'' says Tony Cimarusti, an associate director of the CYA. ``There's always been a reticence to sue CYA when people have seen what we're doing. What we're doing, there's no fault with it.''

But the CYA so far is not backing down. It is planning to add 3,500 new beds to its system over the next five years, to the tune of at least $290 million.

``We keep hearing from the critics what we're doing wrong,'' says Mr. Cimarusti.

``But what we hear from the public is `Yeah, keep on building.' And they keep passing bond issue after bond issue to build them. People want these young offenders off the streets.'' BUT which way is better: working with young lawbreakers inside an institution, or outside in the community?

There has been a debate among juvenile-justice experts for decades. But now evidence is mounting in favor of community-based alternatives for all but chronic and violent juvenile offenders.

Jerome Miller, the former Massachusetts official who shut down the institutions ``because they were a total failure at helping the kids,'' has never backed away from his radical stand. He and other national experts believe that 15 years' worth of data on ``the Massachusetts model'' have proved him to be right.

In the late 1960s, 40 percent of the adults in Massachusetts state prisons had graduated from the large juvenile training schools. By 1982, about 10 years after the state began developing community-based alternatives for delinquents in its custody, only 19 percent of the adult inmates had been in the youth-corrections system.

``I like to think they're breaking the cycle of youth crime,'' says Dr. Miller, who now heads the National Center on Institutions and Alternatives (NCIA), a research and consulting organization in Alexandria, Va. ``They are keeping more of the kids from graduating to the county jail and the state penitentiary,'' he says.

At Montrose School in Maryland, the NCIA has developed individualized community-based plans for each of the 117 wards who left Montrose between last October and the March 18 closing. At the 10-month mark, 38 (or one-third of them) had been rearrested, a rate that so far is substantially lower than the rate for children in training schools. Of the 38, 22 youths (or 19 percent of the total) were found guilty.

``The reason they [the reformers] tried these things was not because they were a bunch of wild and crazy hippies,'' says Krisberg. ``The reason was because the system was a failure.''

Utah, too, has seen a substantial drop in rearrest rates among its chronic juvenile offenders. Why? Because the state closed its training school in 1983 in favor of a wide range of community-based alternatives.

Those who argue in favor of institutions, however, say that no one knows for sure which community-based programs work and which don't. More important, they add, allowing delinquent youths to stay in the community presents an added risk to public safety. When they're locked up, at least young lawbreakers are made unable to commit any more crimes against the community.

``The people who want to put these kids in group homes in residential areas probably don't live in the areas where this kind of social experimentation would take place,'' says Cal Terhune, director of the CYA. ``The kids we have, well, I'm not sure the community is ready to have them back.''

The problem with large, impersonal institutions for juveniles, however, is that the kids sometimes come out the worse for wear - but they all eventually come out. When they reemerge in the community, they are still young. Many are still angry or scared. And most go back to a family where nothing has changed.

MARQUIS BROOKS lives in a cell in the lockdown unit at the Youth Training School (YTS) at Chino, in southern California. Now 22 years old, he has been incarcerated since he was 16. In 11 days, with six years of violent prison culture under his belt, he's coming out.

He has his high school diploma. He says he's ``good at computer technology,'' thanks to a program within the institution. He has already been accepted into one of California's state universities. But he also has a pile of worries.

Mr. Brooks is going home to a bad neighborhood and to a family ``with a long history of alcohol problems.'' He's also going back to San Jose, where ``there are people who want to kill me because of stuff that happened here in jail.'' Brooks says he'll ``have guns in my life when I'm out of here, for protection. It's scary knowing you got people looking for you.''

Interviewed in a deserted dayroom of the most overcrowded, most secure, most oppressive institution in the vast CYA system, Marquis tells a story of a downward spiral into the entrails of institutional life.

He was committed to CYA back in 1982 for conspiracy to commit murder and assault and battery - the result of his involvement with a street gang. At first, Marquis went to one of the CYA's less-restrictive institutions, and then moved to one of the outdoor ``camps.''

``I was there only nine days before I asked for a transfer,'' he remembers. ``I didn't like all the marching.'' Sent to a different institution for CYA's younger wards, Marquis ``got into fighting and gang-related stuff.'' As his gang involvement escalated and his behavior became increasingly assaultive, he bounced to two other institutions before landing at Chino's YTS, the end of the line.

According to Marquis, CYA staff ``felt my presence around certain people influenced them to act against other people.'' That's about as close as he'll come to admitting he had climbed the prison-gang hierarchy to a position of some influence, from which he could help direct his ``homeboys'' in an entire prison unit.

Fights. Stabbings. Rapes. Intimidation. Race riots. All are part of life in an institution, Marquis says. ``There are racists on all sides. In a race riot, the northern Chicanos will kick it [fight] with us [the blacks]. The southern Chicanos kick it with the whites,'' he says. ``Most of the people here don't even know what they're fighting for.''

The irony is that Marquis says he ``wasn't a heavy gang-involved person'' outside the institutions. He was more interested in sports, but joined a gang primarily to get a discount on the drugs he sold on the streets, he says.

Marquis could have been paroled as early as 1985, and he knows he has no one but himself to blame for still being locked up. ``In here, there are certain rules your peers make you abide by, so I ended up with more time, 'cause I chose to participate in all that.''

Now Marquis has paid the maximum penalty the law allows. On Oct. 10, when he hops a bus for home, he faces less than a 1-in-5 chance of staying clean during the next three years, according to an NCCD study on the California system. With the $150,000 California spent to keep Marquis locked up for six years, could it have done anything different to improve his odds?

America's juvenile-justice system, at least in theory, is a system born of hope. Hope that juvenile delinquents, because of their youthfulness and tractability, can be guided away from a life of crime. Hope that innocence can be restored if children are protected from poverty, discrimination, and neglect. Hope that crime will dwindle if, by intervention, we can cut short the criminal careers of young people.

But these hopes have been almost dashed by the failures of the system, leading some experts to conclude that rehabilitation cannot be effective in large institutions.

``The history of the juvenile-corrections system has been one of abuse and scandal, followed by a cycle of reform and correction, then another of abuse and scandal,'' says Krisberg. A ``big chunk of the research from the past 20 years'' offers convincing evidence that ``if you take kids out of training schools and put them in intensively supervised community-based services, they do as well as or better than kids in training schools. It's more humane, and it costs about the same.''

Others, however, say the verdict is still out on many alternative-sentencing programs. ``Arguments made for community-based programs are largely experimental, although we're seeing some hopeful signs,'' says Peter Greenwood, a juvenile-justice researcher at the RAND Corporation.

But the evidence against locking up more kids in large institutions is overwhelmingly damning, he says. ``If you think rehabilitation doesn't work, you should look at incapacitation. It doesn't exactly hold together, either.''

Officially, 45 percent of former California Youth Authority wards end up back in the juvenile corrections system. But many experts, both outside and inside the agency, say the figure is actually much higher - closer to 80 percent.

An NCCD study stated that 85 percent of former CYA wards are rearrested within three years.

CYA staff, applauded as the most professional youth corrections people in the US, say they do have a positive impact on wards in their care. Indeed, interviews with 21 wards at four institutions reveal that most respond to ``special programs'' within the CYA.

In the special substance-abuse unit at a training school in Paso Robles, a young tough nervously paces in front of 70 wards holding their weekly Alcoholics Anonymous meeting. Finally, red-faced and defiant, he blurts out that he ``did drugs'' a few months earlier. Then he doubles over, his body convulsed with sobs.

The boy's confession, considered a huge stride toward overcoming the addict's propensity to deny the addiction, triggers an in-tense, three-hour group therapy session the next day. In a poignant moment, black, brown, and white youths - clasping hands they would not have deigned to touch a few months earlier - lower their heads and, in unison, recite the Lord's Prayer.

Mondel Pettaway, locked up at 15 for participating in a gang rape, says he has been helped most by a special program on ``victim awareness.''

``I've met with victims of rape and of other crimes, and it really got me to deal with my attitude and my behavior,'' he says. Now 19, he says the program at the CYA's O.H. Close School in Stockton ``has helped to make me a different person from when I walked in here.''

Mike Streng, a 20-year-old ward at the Preston School of Industry outside Sacramento, lives in a unit designated for counseling. ``There's a lot of stuff I need to deal with for myself, mostly my anger, especially toward my family,'' he says. ``Staff here really try to help as much as possible.''

Invariably, however, wards fortunate enough to be in these few programs express their relief at leaving the ``line'' units, where the bulk of the CYA population lives.

``On the main-line lodges, you've got to put on a front and deal with the gangs,'' says Mike, who joined a gang ``for acceptance and protection.

``If you say you're with them, they'll try to test you or get you to fight someone,'' he says. ``I got to like it.

``You feel powerful and you have position. On this unit, I'm not a gang member. But if I were to leave this unit and go back up there,'' he says with a jerk of his thumb out the window, ``I'd be one again.''

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