The fate of the next generation of District schoolchildren rests on immediate moves to attract better teachers by waiving the city's residency requirement, boosting salaries and testing teachers' basic skills, a coalition of parents, lawyers and educators said yesterday.

A major study commissioned by the Washington Lawyers' Committee for Civil Rights concludes that the city cannot successfully compete with other cities and surrounding suburbs for good teachers.

"Education in the District now is at a teeter-totter," said Carter Collins, a U.S. Department of Education official, public school parent and an author of the report. "It's not going backwards, but it's certainly not going forward to the extent that is necessary and critical."

While enrollment in District public schools has stabilized at about 86,000, an unusually large number of retirements and efforts to make classes smaller will force the system to hire about 300 teachers a year through 1990. Those numbers raise the fear that "the system can become so overwhelmed by unsatisfactory teaching that it is impossible to correct it or even make improvements," the report says.

D.C. Superintendent Floretta D. McKenzie, who did not return calls yesterday, said last spring that she was considering seeking a waiver of the residency rule for teachers. Any change would have to be made by the D.C. Council, which has set hearings on the issue for next month. The school board is to discuss a recommendation to the council next week.

To lure good teachers to the District, the coalition recommends that the city and school board:Erase the 1980 rule that teachers, like all other city employes, live in the District. In a survey of new District teachers, 58 percent of respondents said the residency rule will be a major factor in their decision to stay in their jobs. And 73 percent said they found it difficult to find affordable housing in the District.

Hector Montenegro left his job as assistant principal at highly regarded Wilson High School in Tenleytown in Northwest Washington this summer for a position at Lake Braddock High School in Fairfax County. "My family is growing and the residency requirement made it too costly to stay here," he said. "And Fairfax made a very attractive offer: $5,000 more with better working conditions."

Defenders of the residence requirement cite a 1985 survey by the D.C. Office of Personnel that found that 32 of 47 major U.S. cities required some workers to live where they work. But the Lawyers' Committee recontacted those same cities and found that only five of them have residency rules that apply to teachers. Raise teacher salaries to or above the levels of nearby suburban school districts. The District pays starting teachers $19,116, while Montgomery and Fairfax counties offer $22,000. The top teacher salary in the District is $39,517, well under the $46,194 in Alexandria and $50,000 in Fairfax. D.C. salaries are scheduled to rise after Oct. 1, although the amount of the increase has not been determined.

The gaps have widened in the last three years, as suburban districts have increased salaries by 9 to 10 percent while the District's raises were 3 to 4 percent. Eighty-five percent of the new teachers surveyed said offers of higher pay elsewhere will be a significant factor in whether they stay in D.C.

Odell Jack, dean of the education school at Bowie State College, said minority graduates there "are not opting to teach in the District and the salient reasons are the residency requirement and the salary level. Most of my students opt to work in Prince George's, Fairfax or Montgomery counties."

Require applicants to pass a test of basic skills and knowledge of their subject area. At least 44 states require or are about to require teacher testing; applicants in Virginia and Maryland must pass the National Teacher Examinations. But since the early 1970s, the District has hired teachers based solely on their college record, references and a short interview.

"If candidates are unable to read, write, spell, calculate and speak standard English adequately, the system does not have a comprehensive and accurate method of determining this fact until after the teacher is in the classroom," the report says.

The recommendations were endorsed by several District school principals, teachers, and a panel of 18 prominent educators and business figures.

Board President R. David Hall (Ward 2) said the board wants to raise teacher salaries this year and has already asked the superintendent to develop teacher tests. He said he would not seek a change in the residence rule unless he sees proof that it is hampering recruiting efforts.

Board member Wanda Washburn (Ward 3) said, "If we're going to demand that {teachers} live here, maybe we should give them a housing allowance."

Principals say they are frustrated when new teachers leave the District, many during their first few months on the job, because they cannot find affordable apartments.

"When I've been out recruiting, the last thing I say is there is a residency requirement and immediately the student turns off," said Emily Crandall, principal of Janney Elementary School, also in Tenleytown.

The coalition also urged building repairs, more and newer textbooks and modernized science laboratories and equipment.