County school board President Reginald Felton insisted this week that the county school system is doing a good job despite a new report saying schools are short-changing special education students.

"The county schools still retain a good reputation for supporting children with special needs, and many parents are happy with our services," said Felton of Silver Spring.

Felton was reacting to a story in Friday's Montgomery Gazette citing a confidential citizens' committee report, which found Montgomery County Public Schools have put most of their energy into cost-cutting and, as a result, have not served the needs of students with disabilities.

"By concentrating on winning litigation and reducing program costs, the county has ... backed into a policy of providing the 'least expensive environment' instead of high quality and appropriate education for children with disabilities," the study said.

The 41-page report, obtained by the Gazette last week, found that the school system is failing to provide the same level of special education services as other "high-performing" districts, spends less per child on programs, suffers from staff shortages and wastes more money on legal fees than other comparable school systems, such as Fairfax County's.

"The subcommittee is deeply troubled by these findings," wrote the 12-member committee, which included parents and school employees. The $112 million special education department serves about 15,000 students, or about 12 percent of the county's 125,700 public school students.

Still the report found some improvements, such as a less confrontational mediation program the county started last year, which is resolving disputes while helping parents avoid costly and burdensome legal battles.

But some parents with disabled children are still weary and upset with the special education program and say the report validates their concerns.

After abandoning his battle against the system to get services for his child, Richard Schifreen of North Potomac said the report is "completely accurate."

Schifreen decided to cut his already heavy losses in legal fees and foot the $24,000 bill himself for annual tuition and therapeutic services his 11-year-old daughter receives at the private Catherine Thomas School in Rockville.

"Parents are desperate," Schifreen said. "They have no other alternatives, no other path but litigation. But we gave up when it got too costly."

Pierre Duga of Kensington prevailed in his legal fight to win services for his child, but said the overly combative and protracted experience left him emotionally drained and disgusted. Duga said the legal conflict ended up costing the school system nearly $100,000 in lawyers' fees because the county schools were ordered by a judge to pay his legal bills and tuition for his 10-year-old son to attend the Ivymount School in Rockville.

"The county spent time and money to litigate to go through this incredible waste of taxpayer money," Duga said. "This policy is making law firms rich ... while the quality of education clearly comes way behind."

Duga said he hopes the budget review committee's report gets the word out that the program needs a major overhaul.

The budget review committee's work comes three years after an internal report found the school system was losing millions of dollars in special education legal cases due to paperwork errors and strained relations with parents. The finding resulted in then special education director Hiawatha Fountain being transferred to the pupil services and community outreach department. Raymond Bryant, a former special education director in Fairfax County, took over for Fountain.

The budget review committee is one of five commissioned to help the superintendent with his fiscal 1999 budget and make other recommendations for change. The report will be presented to the school board Dec. 4. The committees advising the superintendent cover "Entrepreneurship and Revenues," "Class Size and Staffing," "Transportation," "Employee Benefits and Personnel Issues" and "Problems of Children With Special Needs."

Some school officials said they need to fully digest the report before commenting on the findings.

"It would still be premature regarding any response to the committee report prior to completion of a thorough review," said school spokesman Brian Porter. The report was given to school officials last month.

School board member Nancy King of Montgomery Village said, "I am upset to think that a report like this can go out to the public before the board gets to see it."

But school board member Blair Ewing of Silver Spring said he hopes the report spurs the board to action. Ewing already had pushed the board last month to call for a top-to-bottom review of the special education department.

"This might be just the thing that's needed to get the board to focus on these issues," Ewing said.

Vance and his staff a reviewing the report's 39 recommendations that cover ways to reduce legal costs, revamp the school system's use of public and non-public special education services, improve the quality of school system special education programs and repair relations with families.

Overall, however, the committee members complain about a school system mission at odds with the needs of special education children and their parents.

Hewitt Rose, a Bethesda resident and D.C. attorney who served on the committee, said parents are still suing the school system because their children are not getting the services they need.

"The high rate of litigation is a result of inadequate service, that's where the fight is," Rose said.

The school system's special education department appears to have more legal cases than many other districts and accounts for nearly half of Maryland's special education legal burden, the report said.

"Last year alone, one out of every 34 families eligible for MCPS special education services formally filed for mediation or a hearing," the report said.

The county's special education legal cases logged a $3.5 million shortfall last year, 77 percent of which went to outside law firms representing the school system, the report said.

Fairfax County public schools spent $400,000 for all special education legal work, the report said.

Still, the report acknowledges the school system's efforts to promote a friendlier model of conflict resolution.

"If a parent has a problem, it is very difficult to even communicate that there is an issue," the report said. "To solve the problem is yet another hurdle. Problems fester and later explode in litigation."

The following are members of the budget review committee on special needs: Bob Astrove, chairman, Dianne Creed, David Cross, Peg Donnellon, Seth Goldberg, Charles Lundelius, Cathy Minahan, Marsha Ostrer, Joanne Robinson, Hewitt Rose, Lori-Christina Webb and Tracey Weiser.