A major legal battle has emerged over California’s education finances as the state's largest teachers union filed a lawsuit alleging that billions of dollars in constitutionally guaranteed funding have been improperly withheld from public classrooms. The legal challenge, submitted to the Sacramento County Superior Court, asserts that state leaders failed to meet basic legal funding obligations while attempting to navigate broader statewide budgetary shortfalls.
The complaint formally names Joe Stephenshaw, the director of the California Department of Finance, alongside other unnamed state officials. While Gov. Gavin Newsom is not directly listed by name in the paperwork, the union’s legal arguments make clear that the administration’s executive and legislative budget maneuvers are the primary targets of the dispute.
According to the California Teachers Association, state officials intentionally deprived public educational institutions of critical financial resources over consecutive fiscal cycles. The union contends that lawmakers and the administration reduced school funding by $1.9 billion during the 2024–25 fiscal year, followed by an even steeper reduction of $3.9 billion in the 2025–26 fiscal plan.
Although the state subsequently reimbursed the $1.9 billion deficit from the 2024–25 budget year, the union notes that officials have made no formal commitment to repay the $3.9 billion withheld for 2025–26. This ongoing shortfall comes out of an overall annual state education budget totaling $119.9 billion.
The union emphasized that the missing $3.9 billion has an immediate and direct impact on local school districts across the state. In practical terms, the educators' group calculates that the withheld money equates to a loss of approximately $638 for every individual public school student currently enrolled in California.
The lawsuit highlights the severe operational consequences of these budgetary withholdings on campus staffing. Over the course of the past year, nearly 1,000 public school employees were subjected to layoffs as local educational agencies grappled with restricted resources and lingering financial uncertainty.
CTA President David Goldberg publicly condemned the spending decisions, pointing out the stark contradiction between the state's broader economic standing and the staffing reductions experienced by local school districts. He asserted that while the overall economy continues to boom, public school teachers have faced disrupted careers and communities have suffered widespread instability.
Goldberg underscored that the union is actively demanding the full return of all withheld educational dollars to protect local school communities. He noted that recovering these funds is essential to preventing yet another round of damaging staff layoffs and unnecessary spending reductions in upcoming academic terms.
The organization bringing the lawsuit represents more than 310,000 members across California. Its expansive membership includes classroom educators, academic counselors, school librarians, and a variety of other vital certificated and non-certificated public school professionals.
The core legal argument presented in the court filing relies heavily on Proposition 98, a landmark constitutional amendment approved by 51% of California voters in November 1988. Prop. 98 established strict formulas mandating that a specific, guaranteed percentage of the state's overall general fund budget must be allocated directly to K-12 public schools and community colleges.
While the state constitution permits the Legislature to temporarily suspend Prop. 98 spending minimums during economic distress through a two-thirds supermajority vote, it strictly mandates that any withheld funding must be reimbursed to public schools in subsequent years. The union argues that the state has circumvented these clear constitutional safeguards regarding the 2025–26 allocation.
In the formal legal petition, union attorney Benjamin Gevercer expressed serious doubt regarding whether the state would ever honor its financial obligations. Gevercer argued that without judicial intervention, it remains highly questionable when, or if, the owed $3.9 billion will ever be returned to California’s public school system.
The lawsuit asks the Sacramento County Superior Court to issue a binding order declaring the state’s current budget actions a direct violation of Proposition 98. Furthermore, the petition requests that the court mandate complete, lawful funding allocations for public schools in both the present fiscal year and all future state budget cycles.
Beyond the courtroom, union leadership is also looking toward political solutions to secure stable, long-term educational revenue. Goldberg has actively urged California voters to approve Proposition 3 on the upcoming November statewide ballot as an additional safeguard for public educational resources.
Proposition 3 would make permanent an existing state tax levy on high-income earners that was previously approved by voters in 2012 and reaffirmed in 2016. That tax measure, which generates approximately $15 billion annually for California public schools and community colleges, is currently scheduled to expire in 2031 without voter intervention.
Following the filing of the lawsuit, the Newsom administration did not immediately provide a response to requests for comment regarding the litigation. Meanwhile, the office of California State Superintendent of Public Instruction Tony Thurmond declined to comment on the union's legal challenge against the state finance director.
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