COLUMN LEFT/ TOM HANNIGAN : Protect the Vulnerable, Limit Revenue : If Proposition 13 is struck down, some basic rules would make the transition less painful.

If you are a property owner or renter in California, the U.S. Supreme Court may soon hand down a ruling that could seriously affect your financial future.

The court will listen Tuesday to oral arguments in a case launching a fundamental constitutional attack on California’s famous tax-cutting initiative, Proposition 13. The outcome could shake the foundations of the state’s local property tax system.

In this case, Nordlinger vs. Hahn, a relatively recent Los Angeles homebuyer is challenging the validity of a key feature of Proposition 13. Under current law, owners pay property taxes based on the value of the property when it was purchased, with minimal annual increases thereafter, despite increases in market value. Only when the property is sold does its tax value again equal market value.

Because of this feature, Nordlinger argues, owners of identical properties receiving identical public services can be paying vastly different property tax bills. New buyers, young families and start-up businesses are disadvantaged, it is argued, compared to families and businesses that bought years ago. This, the plaintiff asserts, is a basic violation of the equal protection clause of the U.S. Constitution. A decision is expected by June.

If the nation’s highest court agrees with Nordlinger’s challenge, California would be required to fundamentally rewrite its property tax laws, equalizing burdens. Without proper preparation, a political firestorm could erupt throughout the state.

The Legislature is not a party to this lawsuit. Legislators have no influence on how the nine justices will rule. We don’t have any better ability to predict the outcome than those who have been monitoring the case since its inception.

However, the Legislature is concerned about the outcome. If parts of Proposition 13 are invalidated, the impact on homeowners, renters, businesses and local governments will be painful. And the Legislature would be responsible for carrying out the court’s order in a way that best protects the taxpayers, the economy and public services. It’s just prudent to be prepared.

Another reason to begin planning now is that Californians are worried about this lawsuit, and rightfully so. They fear excessive tax burdens, unpredictable increases in annual tax bills and the unfettered growth of government.

This is why the Legislature should adopt four clear guiding principles to govern implementation of an adverse court decision, should it occur. I recognize that there will be wide differences in the Legislature, but I hope that these guiding principles, which I have proposed as legislation, can assist us in finding common ground:

-- Revenue neutrality. Any change in the tax system required by a court decision should be revenue-neutral. That is, the Legislature should ensure that the overall level of state and local tax collections in California is neither increased nor decreased as a result of the ruling.

-- Elderly and low-income protections. Homeowners with fixed and low or moderate incomes should be protected from property tax threats to their financial security and ability to stay in their homes.

-- Revenue growth limits. The growth in property tax burdens over time should be limited to prevent the kinds of sudden, large increases that occurred before Proposition 13 because of the state’s volatile real estate market.

-- Gradual transition. Any change in the tax system should be implemented gradually, to minimize disruptions and to provide property owners, businesses and local governments with sufficient time to adapt.

It’s important to understand that the court would not be wiping Proposition 13 entirely off the books. It would not be ordering general tax increases, or removing the 1% limit on the property tax rate. The ruling would not affect the requirement for two-thirds votes by the Legislature to raise state taxes, or the requirement for two-thirds voter approval for local special taxes. And it would not change the Gann spending limit.

No change to Proposition 13 is going to be made in California without full and exhaustive advice from all affected parties--homeowners, renters, businesses, government agencies, and others. We must set the stage for thorough public participation in the design of a replacement system.

Perhaps the Supreme Court will find Proposition 13 constitutionally valid. We will then be free to deal with many other pressing problems facing California this year. But if the court finds otherwise, we must be ready to respond.