The state of California has filed a lawsuit against the U.S. Department of Education and the federal government after officials threatened to withhold approximately $4.9 billion in annual education funding over the state’s protections for transgender students.
California Attorney General Rob Bonta lodged the complaint in the U.S. District Court for the Northern District of California, arguing that federal authorities have misapplied the Family Educational Rights and Privacy Act (FERPA).
On the same day the lawsuit was filed, U.S. District Judge Noël Wise granted a temporary restraining order, preventing the federal government from cutting off funds while the legal battle unfolds.
The Law at the Centre of the Dispute
The case revolves around Assembly Bill 1955, signed into law in 2024. The legislation prohibits schools from requiring staff to disclose a student’s gender identity to parents without the student’s consent — effectively banning so-called “forced outing” policies.
The federal government launched an investigation into whether California’s law violates FERPA, a federal statute governing parental access to student education records.
According to the lawsuit, federal officials have demanded several “corrective actions,” including written assurances that school districts may implement parental notification policies. Authorities warned that failure to comply could result in the loss of all federal education funding.
California’s Legal Argument
In its complaint, California contends that FERPA does not require schools to proactively disclose a student’s gender identity or pronouns to parents unless a valid records request is made.
The state further argues that federal officials have failed to identify any specific instance in which California has violated FERPA.
The lawsuit seeks:
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A declaration that the federal government’s demanded corrective actions are unlawful
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A preliminary and permanent injunction preventing the withholding of funds
For now, Judge Wise’s temporary restraining order ensures that federal education dollars will continue flowing to California schools until the court rules on the merits of the case.
Broader Implications
The legal fight is part of a growing national clash between states and the Trump administration over transgender student rights and parental notification policies.
With nearly $5 billion in funding at stake, the case could set an important precedent for how federal education laws are interpreted in relation to LGBTQ+ student protections.
The temporary restraining order remains in effect while the court considers the case.
