CTA SUES ARNOLD OVER SCHOOL CASH O'CONNELL, TEACHERS CLAIM FUNDING LAW WAS BROKEN.

Byline: Harrison Sheppard Sacramento Bureau

SACRAMENTO - Escalating its budget battle with Gov. Arnold Schwarzenegger, the California Teachers Association and state schools Superintendent Jack O'Connell filed suit Tuesday, claiming he broke state law by underfunding education.

The lawsuit, filed in Sacramento County Superior Court, says Schwarzenegger violated Proposition 98, the voter-approved education-funding guarantee, shortchanging schools by $3.1 billion over two years. It asks the court to order the state to restore the money.

``We filed the complaint today out of deep concern over the future of public education in this state and the future of students who have been shortchanged by the governor's failure to follow the law,'' CTA Vice President David Sanchez said.

The Schwarzenegger administration said it had followed the law and the suit is baseless.

H.D. Palmer, spokesman for the governor's Department of Finance, said there was no requirement that the money be restored immediately and that the funds are expected to be built back into budgets for the next several years.

He also said the governor gave education $750 million more than what he believes he was legally required to in the budget for fiscal 2005-06.

``It is the same approach that the Legislature voted to approve on a bipartisan basis when it passed the budget last month,'' Palmer said. ``So we believe the courts will recognize that two branches of state government came to the same conclusion, that this was legal and appropriate.''

O'Connell said his office is providing support for the suit through its in-house legal counsel, but is not spending additional taxpayer funds. The CTA is taking the lead role, and the suit asks to recoup attorneys' fees.

The suit does not name the Legislature as a co-defendant, although the 2005-06 budget was modified and approved by state lawmakers.

A spokesman for Assembly Speaker Fabian Nuez, D-Los Angeles, said he supports the suit and plans to look for new ways to fund education when the Legislature returns to session next week.

The CTA said it focused on the governor because he was the one who struck the 2003 agreement with the Education Coalition to suspend Proposition 98.

The group - which included the CTA and other groups representing school administrators, elected officials and parents - agreed not to oppose the suspension that year in exchange for what they say was Schwarzenegger's promise to restore the money in the future.

The promise is the motivation underlying the suit, but the legal claim is that the budget itself violates the provisions of Proposition 98, which provide for a form of repayment of suspended funds.

While the proposition does not actually provide for a direct repayment in the sense of a loan, a suspension of the proposition creates what is called a ``maintenance factor.''

That factor represents the amount the education budget should have been had it never been suspended. In other words, future budgets are calculated with a higher starting base, as if the suspension never occurred.

The statute allowing the suspension states that the education budget shall be based on the Proposition 98 formula, minus $2 billion. But revenues that year were significantly higher than expected, meaning Proposition 98 funding would have been higher than estimated when the budget was being assembled.

The governor's budget stuck with the original figure.

The Education Coalition argues that the suspension ended up being $3.8 billion, when it should have only been $2 billion.

The coalition says that difference carried over into the 2005-06 budget by an additional $1.3 billion, meaning the two years add up to a $3.1 billion shortfall.

Still, the nonpartisan Legislative Analyst's Office agrees with the administration's approach.

Robert Manwaring, the LAO's K-12 education director, said that while he has not reviewed the lawsuit, he believes the administration and the Legislature followed the law when they passed the last two budgets.

The law that suspended Proposition 98 in 2004 did not specifically force, nor give the authority to, the Legislature to spend a specific amount of money, he said.

``It did appear that the way the language was written, it would not require the Legislature to take action,'' Manwaring said.

And some political analysts said the CTA may have a tough case.

Tim Hodson, executive director of the Center for California Studies at California State University, Sacramento, said courts have historically been reluctant to interfere in what appears to be a political dispute. The teachers will have to make a very clear-cut case that the law was violated and that they aren't just mad about an alleged broken promise, he said.

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com