The California Teachers Association is suing the state, charging Gov. Gavin Newsom and the Legislature with illegally withholding $3.9 billion in funding for 2026-27 for TK-12 schools and community colleges.
The state’s “shell game” violated Proposition 98, the voter-approved formula that determines the portion of state revenue that goes to education, CTA President David Goldberg said at a Tuesday press conference.
The California School Boards Association plans a similar lawsuit challenging the withholding in the coming days, Troy Flint, head of CSBA’s communications, said Tuesday.
“Eroding Prop 98 would violate our constitution and also create great harm,” Goldberg said. “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. Rather than raise revenue or cut spending, Gov. Newsom and the Legislature moved forward anyway,” he said.
Goldberg said this was the second consecutive year that the state failed to fully fund the Prop. 98 guarantee. In the 2025-26 budget, the state held back $1.9 billion from revenues collected the year before, although the Legislature has repaid that money.
The state Department of Finance has argued that the state relies on volatile sources of revenue tied to capital gains and income tax receipts from the top 1% of earners. This could make the state especially vulnerable, amid uncertainty over future earnings and public stock offerings of AI-related companies.
In 2022-23, the Legislature overestimated Prop. 98 revenues by about $8 billion, but Newsom did not cut funding for schools; the Legislature borrowed that money from future revenues for other areas of the budget covering Medi-Cal, childcare, university funding and other services.
Although the Legislature set revenue estimates for the 2026-27 budget based on revenue estimates for the fiscal year ending June 30, 2026, the final 2025-26 numbers won’t be known for six months to a year. That’s why Newsom said it’s appropriate to be fiscally cautious.
But Goldberg said withholding $3.9 billion — about 3% of the Prop. 98 guarantee for 2026-27 — created challenges for schools, including layoffs of 1,000 teachers. State law requires funding based on the June 30 end of the fiscal year, and that obligation should not be violated.
And, he added, it’s unclear when and how the $3.9 billion will be repaid.
Regardless, he said, Prop. 98 was intended to be a floor, not a funding ceiling, for funding schools.
The state should be increasing funding, regardless of what the final revenue figure turns out to be, he said, adding, “It’s impossible to overfund Prop 98.”
This story was originally published by EdSource.