California's largest teachers union sues state over nearly $6 billion in withheld school funding

California’s largest teachers union sued state officials Tuesday over nearly $6 billion in withheld school funding, alleging that budget actions approved by Gov. Gavin Newsom and the Legislature violated the state’s constitutional education funding guarantee.

The lawsuit filed by the California Teachers Association, which represents 310,000 educators, seeks intervention from the courts to recover the $1.9 billion in education funds withheld by Gov. Gavin Newsom in the 2024-25 school year, as well as $3.9 billion withheld in the revised state budget the Legislature approved in July.

It’s the second time a major education group has sued over Newsom’s attempt to defer school funding due to state budget shortfalls. The California School Boards Association sued in 2024 over his proposal to withhold $8.8 billion in education funds, which was later reduced to $1.9 billion withheld.

Newsom’s move has repeatedly drawn widespread criticism from educators, districts and school leaders across the state, who argued it would further exacerbate teacher shortages and threaten the quality of education in California, as districts across the state struggle with multimillion-dollar budget deficits and thousands of layoffs.

The California School Boards Association said Tuesday its 2024 lawsuit is ongoing and announced plans to file a new lawsuit next week over the $3.9 billion education funds deferred earlier this year.

“Withheld funds result in reduced classroom supports, increased class sizes, fewer counselors, diminished mental health resources and diminished staffing,” said CSBA’s president Debra Schade in a statement Tuesday. “We trust the judiciary will see the unconstitutional nature of the state’s actions and restore the funds that have been improperly taken from California’s public schools.”

The Governor’s Office deferred a request for comment to the Department of Finance. The Department of Finance did not immediately respond to a request for comment.

The new California Teachers Association’s lawsuit names the Director of the California Department of Finance, Joe Stephenshaw and the California State Controller, Malia Cohen as defendants, along with four other unnamed parties. Newsom is not explicitly named as a defendant in the lawsuit.

The California Teachers Association did not respond to a question about why Newsom was not named in the lawsuit.

The education funds at the center of the dispute are sent to schools under Proposition 98, a 1988 ballot measure approved by voters that sets aside roughly 40% of the state’s general fund for K-12 schools and community colleges.

Each year’s Prop 98 funding guarantee is calculated through a complex formula based on a percentage of the state’s general fund revenues or by using the amount schools received the prior year, with some adjustments for attendance and inflation.

Newsom has said the move to defer the 2025-26 funding was necessary to create a cushion for the state in a time of uncertain revenue projections, since the state does not immediately know the finalized amount owed under Prop 98 when it prepares the budget.

The 2024 decision to defer funding stemmed from claims that the state’s income tax revenue collections fell short of projections, so schools received more money than they should have. As a result, Newsom’s administration wanted to lower the baseline funding requirements to account for the lower state revenues.

But the teachers union argued in its lawsuit Tuesday that the withholding of the funds for both years is unconstitutional, and it is asking the courts to safeguard Prop. 98 funds against future attempts to withhold public school funding.

“We are demanding a return of the funds that have been withheld so that our students and communities can be saved from yet another year of devastating educator layoffs and unnecessary cuts,” said David Goldberg, president of the California Teachers Association, in a statement Tuesday. “At a time when the Trump administration is working to erode our democracy, California’s elected leaders should uphold our constitution and the will of the voters.”

In April, Bay Area school leaders formed a first-of-its-kind coalition, in which leaders from San Jose, Fremont, Oakland, Antioch, West Contra Costa, San Ramon Valley, San Francisco and Napa school districts joined with Los Angeles school officials to sign a formal letter to California’s state elected leaders calling on lawmakers to reject the plan and address major funding issues facing public schools across the state.

A month later, a group of school boards, administrators, teachers, classified employees, county superintendents, parents and school business officials also spoke out against the plan and urged the legislature to reject Newsom’s proposal, which they said would reduce school funding by approximately $643 per student statewide.

“We warned that local school districts would threaten layoffs, school closures and kick off the new school year with cuts when our students deserve investments,” Goldberg said Tuesday, pointing out that nearly 1,000 public school educators were laid off last year. “Even just a threat of withholding Prop. 98 dollars led school districts to justify these devastating layoff notices.”

In the Bay Area, several districts have announced layoffs, budget cuts or school closures over the last year in an attempt to repair gaping budget deficits and address financial challenges associated with declining enrollment.

Earlier this year, Oakland Unified School District voted to lay off more than 400 staff to address a $100 million budget deficit, while the West Contra Costa Unified School District approved nearly 200 staff layoffs and the merger of two schools to address its $87 million budget deficit.

East Side Union High School District in San Jose also moved to cut 85 staff positions earlier this year, as the district faces a $25 million budget deficit.

San Jose Unified closed five elementary school campuses earlier this year to address a 20% decline in enrollment since 2017, leaders said.

Newsom’s 2026-27 California state budget included a record $128 billion investment in K-12 public education, as well as an additional $5 billion block grant for districts struggling with declining enrollment.

The California School Boards Association’s chief spokesperson, Troy Flint, said Tuesday that Newsom has been relatively generous in his funding commitments for California schools and students. But he said that not treating Prop 98 as “sacrosanct” could set a dangerous precedent that allows the funding formula to be violated for years to come.

“Prop 98 is not a credit card to be charged at the state’s convenience,” Vernon Billy, the organization’s CEO and executive director, said in a statement Tuesday.