The California Teachers Association filed a lawsuit on Sept. 15 against the state of California over its decision to withhold billions in constitutionally guaranteed funding for public schools in the 2024-25 and 2025-26 school years.
Specifically, the lawsuit, filed in California's Superior Court, focuses on whether California legislative leaders could withhold nearly $6 billion in "minimum guarantee" funding determined by Proposition 98, which was passed in 1988 and amended the state's constitution, requiring California to provide a guaranteed minimum level of funding for public schools and community college districts each year.
During the last two fiscal years, as California leadership faced budget deficits, state legislators approved a partial
deferral of the Proposition 98 payment and withheld $1.9 billion in 2025 and $3.9 billion in 2026 to meet the state's budgetary costs, instead of providing schools with the full amount.
The state eventually approved paying the $1.9 billion it owed to schools in July's budget, but the lawsuit highlights speculation on when the state will pay, as it has not given districts a specific timeframe for paying the $3.9 billion.
Newsom has previously said the state will pay school districts back after it collects the state's projected revenue in early 2027. However, it's unclear what will happen if the state's projected revenue comes in lower than expected, especially as the state's AI industry appears to be slowing down and mass layoffs become more common.
"Both times, the State admitted that it was underfunding the Proposition 98 minimum guarantee by those amounts during the fiscal year, and the State deemed the shortfalls to be amounts it would “settle up” at some unspecified point in the future (but, critically, not in that fiscal year)," the lawsuit reads.
The lawsuit argues that by withholding Proposition 98 funds, state legislators violated the state Constitution by failing to honor "the constitutional obligation owed to schools and the children they serve."
"The voters approved Proposition 98 to remove the public schools from the inherent uncertainties of budget politics and enshrine in the Constitution an obligation that a minimum guaranteed amount of funding “shall first be set apart” for the schools," the lawsuit reads. "The decision to intentionally underfund the minimum guarantee corrodes Proposition 98’s core promise, in direct violation of the state Constitution."
David Goldberg, President of the California Teachers Association, said during a press conference on Sept. 15 that the state's decision to withhold funds is ultimately "eroding Prop 98" by allowing these funds to become a piggy bank the state can pull from when it needs cash.
Additionally, he argued that even though the state eventually repaid the $1.9 billion it withheld in 2025, the decision still hurt local districts by forcing schools to threaten layoffs in response to lower annual budgets, ultimately resulting in about 1,000 teacher layoffs.
"That translates to real-world harm: the $1.9 billion withheld in 2024-25 works out to $350 less spent per student that year, and the $3.9 billion withheld in 2025-26 works out to $638 less available per student in every California public school classroom," the lawsuit reads.
Earlier this year, the California Teachers Association shared its estimates via its Prop. 98 funding loss calculator on how much school districts could lose in funding due to the withholding of Prop. 98 funds. Notably, high-population school districts like Los Angeles Unified could lose $221,433,805 in funding, according to the organization's calculator estimates.
"Our economy is booming, we hear every day. Yet we just crushed the careers of public school teachers and disrupted communities up and down the state," Goldberg said. "Even the threat of withholding Prop. 98 dollars led school districts to justify these devastating layoff notices. And this is totally unacceptable."
Ultimately, the lawsuit is requesting that the judge require the state to pay back the $3.9 billion in unpaid Prop. 98 funds it withheld and prohibit the state from withholding Prop. 98 funds again in the future.
Noe Padilla is a Northern California Reporter for USA Today. Contact him at npadilla@usatodayco.com, follow him on X @1NoePadilla or on Bluesky @noepadilla.bsky.social. Sign up for the TODAY Californian newsletter or follow us on Facebook at TODAY Californian.
This article originally appeared on USA TODAY: California Teacher Associates sues the state over $3.9B it owes
