The California Federation of Teachers, a statewide labor union representing over 120,000 educational employees, announced Tuesday it had joined a lawsuit filed by the California Teacher’s Association earlier this month 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.

“When billions in guaranteed education funding are withheld and diverted away from schools, immediate consequences are felt in classrooms throughout the state,” CFT President Jeff Freitas said in a statement Tuesday. “The withholding of billions of promised funds results in larger class sizes, reduced services for students, and layoffs of educators and classified employees. Our students deserve a state that invests in their future rather than balancing the budget on their backs.”

The announcement follows a separate lawsuit filed by the California School Boards Association last week over the deferred funding. The association, which represents nearly every school district and county office of education in California, previously sued state leaders in 2024 over Newsom’s proposal to withhold $8.8 billion in education funds, which was later reduced.

The education funds at the center of the dispute are distributed 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.

“Proposition 98 is not a credit card or piggy bank that can be raided gratuitously by the state,” said the association’s CEO and Executive Director Vernon Billy in a statement. “Our objective is to secure the funding required by the constitution and provide school districts and county offices of education with greater certainty about the resources available to serve students.”

The legal filings follow months of advocacy by teachers, district leaders and educational advocates against the deferred funding, including a first-of-its-kind Bay Area coalition through which leaders from districts across the Bay Area called on state officials to reject Newsom’s plan.

Both lawsuits name Joe Stephenshaw, director of the California Department of Finance, and California State Controller Malia Cohen as defendants. Newsom is not explicitly named as a defendant in the lawsuit. The California Teachers Association explained that its lawsuit specifically names Stephenshaw and Cohen because they are in charge of distributing Prop 98 funding.

Newsom has said the move to defer 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 move creates “settle-up” funds, which the Department of Finance has said are intended to mitigate the risk of potentially appropriating more funds to schools than are ultimately available — which happened in the 2024-25 fiscal year, when the state said income tax revenue collections fell short of projections, so schools received more money than they should have.

But the deferred funding has repeatedly drawn widespread criticism from educators, districts and school leaders across the state, who argue delayed funding further exacerbates teacher shortages and threatens the quality of education in California, as districts struggle with multimillion-dollar budget deficits and thousands of layoffs.

Advocates have also argued that because each year’s Prop 98 funding guarantee is calculated through a complex formula that also accounts for the amount schools received the prior year, any attempt to withhold or defer funding could lower future years’ funding requirements.

The Department of Finance has disputed educators’ claims that the settle-up maneuver is a reason for school layoffs, instead pointing out that it is unwise for school districts to base long-term expenses, like salaries, on a fluctuating funding source.

The education groups argue in their lawsuits 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.

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