In October of 2007, the California Transit Association filed a lawsuit against the State of California in an effort to recover more than $1.25 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 $1.259 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 is expected to culminate in oral arguments being heard by the appellate court in December.