Overhaul of Prop. 13 Bailout Weighed : Budget: Governor and lawmakers may scrap current plan to take money from cities and counties and use it for education.

Gov. Pete Wilson and legislative leaders may propose repealing the plan that the state used to bail out public education and local governments after the passage of Proposition 13 and replacing it with a financing scheme that would take money from cities and counties and give it to schools.

To help the cities and counties cope with the loss of funds, the state might also relieve them of some state-mandated duties and give them more power to raise taxes on their own.

The result would soften the blow of budget cuts for schools, which otherwise stand to lose as much as $2.3 billion next year from the amount Wilson proposed in January. But the transfer also could force local residents to pay higher taxes and fees for fewer services from city and county governments.

Senate Leader David A. Roberti (D-Van Nuys) said the move is under consideration as part of Wilson’s closed-door negotiations with Democratic and Republican leaders of the Assembly and Senate as they search for common ground to erase the state’s budget shortfall before the July 1 start of the next fiscal year.

The state will spend about $44 billion from its general fund in the current fiscal year but expects to bring in about $42 billion next year. At the same time, the state must repay a $3.8-billion deficit and serve an anticipated 175,000 new welfare recipients, 300,000 additional Medi-Cal patients, 5,300 more university students, 5,000 additional state prisoners and about 200,000 more public school students.

As a first step, Wilson and the legislative leaders are seeking about $4.1 billion in cuts, or 15.5% from almost every state program other than support for education from kindergarten through community colleges, which is being reviewed separately.

Eventually, the leadership group expects to soften the blow to health, welfare and other programs by eliminating some special fund programs--the Energy Commission and Water Commission are among the possible targets--and to help schools by taking money from local government, according to Roberti and Democratic Assembly Speaker Willie Brown.

Before voters approved Proposition 13 in 1978, California schools got more of their funding from the local property tax than from the state’s general fund. But when Proposition 13 slashed property taxes, the state shifted some of what was left of the property tax revenues from schools to local governments and used a big surplus in its general fund to help the schools replace what they had lost.

Later, the bailout was made permanent and schools get about 20% of their money from the property tax and about 60% from the state general fund. The remainder comes from the lottery, federal funds and revenues raised locally, including parcel taxes and developer fees.

City and county governments and special districts, meanwhile, are getting more than $2.5 billion in property tax revenues that formerly would have gone to schools.

“In a benign way, we have laundered state general funds through the school districts in order to protect cities, counties, special districts and redevelopment agencies from the full effects of Proposition 13,” said Peter Detwiler, consultant to the Senate Local Government Committee.

Earlier this year, Wilson proposed shifting about $350 million in property tax revenues to the schools from special districts that deliver sewer, water and other services, forcing them to raise fees to cover the loss. Now the governor and legislative leaders are talking about extending the idea to city and county governments as well, with the idea of shifting as much as $1 billion from those agencies to the schools.

“I think there’s a lot of sentiment for that,” Roberti said after Thursday’s leadership meeting. “I think it’s good government. Good politics and good government. People who appropriate money should have to raise it too.”

The key question politically is whether Republicans in the Legislature will agree to give local governments the taxing power they say they would need to avoid drastic service cuts.

Karen Coker, a lobbyist for the California State Assn. of Counties, said counties might be able to live with the shift if they are given true flexibility to run their programs and the ability to raise countywide taxes without going to the voters. A utility users tax would be one possibility.

“Our position has not been to say, ‘Don’t cut us,’ ” Coker said. “Our position is, ‘Give us the flexibility to manage whatever is left of our programs.’ ”

The League of California Cities, which represents municipal governments in Sacramento, could not be reached for comment Thursday.