The ruling by Judge Janet Bond Arterton in U.S. District Court in New Haven means the lawsuit could end with a court order requiring the state to fund housing immediately for an undetermined number on the waiting list.

A report prepared in May 2000 estimated the total cost of housing everyone on the waiting list at $165 million per year. But David C. Shaw of Bloomfield, the lead lawyer for the plaintiffs, indicated the cost could be significantly less because only some of those on the waiting list have immediate housing needs. Others have been put on because of the possibility of future housing needs, he added.

The federal government would fund 50 percent or more of the cost of implementing a court order, said Andrew Alan Feinstein, one of the lawyers for the plaintiffs.

Many of the people on the waiting list live with parents, who eventually will be unable to meet their needs, Feinstein said.

He said some of the 1,700 people on the Department of Mental Retardation waiting list "desperately need a place of their own." Some have been on the list for 10 or 15 years, he added.

But not everyone on the list needs to be in a group home, Feinstein said. He said many people on the list are capable of living in more conventional housing with certain support services, such as vocational help, day services, or someone who simply checks on them regularly and provides help when needed.

The suit was filed in October 2001 on behalf of The ARC/Connecticut, formerly known as the Connecticut Association for Retarded Citizens, and 26 people on the waiting list. The defendants are Peter H. O'Meara and Patricia A. Wilson-Coker, respectively the state commissioners of mental retardation and social services.

The lawsuit centers around the legal significance of Connecticut's so-called "home and community based waiver" of the requirements of the Medicaid program and whether that waiver requires the state to pay for housing and other services for all eligible retarded people.

Ordinary Medicaid rules allow federal reimbursement only for the expenses of institutional services. But various waivers of that requirement have been created to allow states to provide less expensive and more suitable ways of dealing with various disabling conditions.

The ARC/Connecticut and other plaintiffs in the lawsuit contend that Congress intended the waiver program to be "an entitlement program for individuals with disabilities," Shaw said in a statement.

Feinstein said Connecticut has used the program instead as a reimbursement mechanism for the cost of services it already provides, but not for services for all who need them.

He said the so-called "discovery" phase of the lawsuit is expected to take about a year. If, as anticipated, the facts of the case aren't in dispute, both sides will file motions for summary judgment, and Arterton will make a decision as to what the law requires, he said. Her decision will be subject to appeal.

During his reconfirmation hearing Tuesday, O'Meara said that in recent years lawmakers and the agency have reduced funds earmarked to diminish the waiting list, from $10 million to $15 million some years ago, to only $250,000 at present.

In the budget for the next fiscal year, which will be presented by Gov. John G. Rowland this month, state funding for waiting-list reduction would be eliminated, O'Meara said.

But O'Meara told legislators that he recently met with Rowland's budget chief, Marc S. Ryan, and discussed a proposal to address the escalating numbers on the waiting list.

While O'Meara gave no details, he did say, "Secretary Ryan agreed to accept" the proposal.

The waiting list has grown, from 1,434 at the time of the May 2000 report, to the current figure of about 1,700. The list has been growing steadily since the early 1980s.

"We've made some progress blunting its growth" over the years, O'Meara told legislators, but "we've never been able to eliminate it."

Currently, there are 38 mentally retarded people on the list who need emergency housing, he said. Another 400 have "priority one" status.

"This has been an ongoing issue for years and should be addressed," state Sen. Mary Ann Handley, D-Manchester, said today. "Especially as both the population of folks with mental retardation and their parents begin to age, it becomes a very troublesome issue."

Handley, who co-chairs the legislature's Human Services Committee, said the Department of Mental Retardation is only responding to individual crises in placing people in group homes now - as when an elderly parent becomes ill and unable to care for the adult child.

"Certainly, I think we all admire the parents of adults and late adolescent folks dealing with mental retardation," she added. "They do the best job possible, and we're clearly not giving them the help they need in this heroic job."