Legal Settlement Frees $360 Million for State’s Schools

California schools got $360 million worth of good financial news Friday with the announcement that the Wilson administration and the California Teachers Assn. have agreed on an out-of-court settlement to a 3-year-old lawsuit.

The CTA, the state’s largest teachers union, had objected in the 1993 lawsuit to a decision by Wilson to treat $1.8 billion in education spending as loans that were to have been repaid out of future budgets. A Sacramento Superior Court judge ruled in the CTA’s favor, but the administration appealed the decision.

In August, the two sides reached a tentative accord settling the dispute, which called for the state to agree that the loan procedure was improper and would not be repeated. In return, the CTA agreed that schools could be compelled to repay the money over about eight years.

To help cushion the blow of the repayments, the state promised that education spending will rise at least $900 million during that period.

The settlement, which still must be agreed to by the Legislature and the 3rd Appellate District Court, would remove what public bond rating agencies have considered a potentially large financial liability for the state.

It also would free up $360 million that had been set aside in a “hostage” account, pending settlement of the lawsuit. About $10 million of that amount will be used to expand Wilson’s Healthy Start program, under which schools provide a range of medical and other services to needy children. Another $15 million is to be used to develop a new state academic testing system. The money is to be released in August.

The Los Angeles Unified School District will get about $33 million of the settlement. Part of the money will be used for a 1% salary increase for teachers and other employees.