In October of 2007, the California Transit Association filed a lawsuit against the State of California in an effort to recover more than $1.19 billion that was diverted from state funding for public transportation in order to patch holes in the General Fund as part of the 2007-08 State Budget.  The suit maintained that a series of voter-approved constitutional provisions - from 1990's Proposition 116 through Proposition 1A of 2006 - established the Public Transportation Account as a trust fund and require that PTA revenues must be spent on "mass transportation purposes."

In January of 2008, the Superior Court of California ruled that, while $409 million of the funding shift violated state law, more than $779 million in diversions were within the guidelines specified by the initiatives, a finding that transit officials argue was based on a technical interpretation of Prop 116 that contradicts the clear intention of the voters.

Shortly after the court's ruling, the State Legislature re-instated the $409 million worth of cuts by re-configuring the law on which the court's decision was based, meaning that the entire $1.19 billion rightfully intended for public transportation funding had been raided.

In September, 2008, the Association began the process of contesting the Superior Court decision by filing opening briefs in the Third District Court of Appeal. The appeal process culminated in oral arguments before the appellate court on June 16, 2009.

On June 30, 2009, the Appeals Court ruled that all $1.19 billion of the diversions violated state law. Schwarzenegger Administration officials immediately announced they would appeal the decision to the State Supreme Court, thus delaying implementaion of the appellate court ruling and clearing the way for the diversion of another $1 billion in the budget agreement enacted in July, 2009.

On August 11, 2009, state officials followed through on their vow to file that appeal. But on September 30, 2009, the Supreme Court rejected the state's Petition for Review, thus upholding the appellate court's ruling and bringing the litigation process to a close.

With the courts having had their final say on the matter, public transit officials now look to work with the Admnistration and the Legislature to restore the illegally diverted funding.