Keep the Spirit of Prop. 13, but Restore Fairness : Taxes: We’ve proved that the state can’t pay for everything, including schools. We have to restore power to local voters.

California is in desperate budget straits, with the projected deficit near $13 billion. Gov. Pete Wilson is trying to suspend Proposition 98, which guaranteed a fixed level of funding for our public schools, but he’s looking at the wrong culprit. Wilson and the rest of our politicians need to face the real problem: Proposition 13.

Enacted by California voters in 1978, Proposition 13 slashed local property taxes, limited future taxes to 1% of assessed valuation and prohibited local governments, including school districts, from overriding this limit. Proposition 13 cut property taxes more than 50% and forced the state to pay for a number of tradition ally local functions, such as schools.

Several studies have shown a drastic decline in the quality of state services, including schools and health care, since Proposition 13. Even in good times, the state alone cannot fund high-quality local services; in bad times, things are worse.

In most other states, local governments and school districts have the option of asking voters to raise property taxes. Proposition 13 eliminated this local option.

California’s property tax is also one of the most inequitable. Assessed valuations--the property-tax base--can rise only when property is sold. Those who have not sold property are still paying barely more than 1% of 1976 market values. People who have moved pay much more. As a result, the poor and families with children tend to pay higher property taxes, and businesses, the wealthy and senior citizens tend to pay less.

So the state cannot afford adequate services, localities have no access to independent tax revenue and the property tax is highly unfair in how it distributes the state tax burden. The way out of this fiscal mess is to revise and reform Proposition 13 while maintaining its two key principles: capping property taxes at 1% of market value and requiring voter approval for property-tax increases.

There must be a gradual change from assessed valuation to market value, to make the property tax burden more closely a function of property value and household income. But, if assessed values were increased to market value immediately and the current 1% rate were not changed, property taxes would rise dramatically. Therefore, we should accompany the change to assessed valuation with a tax-rate rollback to a level that would maintain the revenues of the previous year, perhaps with a small inflation factor and the addition of new property.

These changes should be phased in over several years, causing only modest annual shifts in the tax burden. The state could also enact property-tax relief to protect low-income households, including retired people on fixed incomes.

Finally, we should allow local voters to increase local property taxes with a simple majority vote, a proposal included in a bill introduced by state Sen. Gary K. Hart (D-Santa Barbara). If assessed values reflected market values today, the statewide average property tax rate would be perhaps as little as 0.25%. Thus rates could be increased without breaking the 1% Proposition 13 cap.

To make this option fair, the state would need to ensure that poor districts can raise the same per-pupil amount at a given tax rate as richer districts, perhaps by setting a guaranteed base. State court decisions have held that differences in per-pupil spending levels are not acceptable if based on local property wealth. They can be based, however, on communities’ willingness to tax themselves at higher rates.

These simple changes would maintain the spirit of Proposition 13. Property taxes would be capped at 1% of value, but the burden would be spread more fairly. The changes would restore the ability of local governments, including school districts, to finance local services. The state would win, local governments would win and the people--by having better schools and other local services--would win.