After Governor Paterson decided to withhold 10% of payments to schools and municipalities—a move he deemed necessary to keep the state from going "insolvent"—a teachers union and other school officials have sued, accusing him of violating the State Constitution. New York State United Teachers vice president Alan Lubin told the NY Times, "This is a terrible day in New York’s history. ;For this coalition to stand back and watch the governor take the money that was allocated by the State Legislature for schools, for programs, for children, and pull it back, is really a terrible thing to have witnessed."

However, Paterson, who has blamed the State Legislature for not dealing with the $3.2 billion budget deficit (a deal only covers about $2.9 billion) argued, "I am being sued for trying to keep New York State’s finances solvent. This is a desperate attempt by special interests to put their needs ahead of the people of the State of New York. This lawsuit does nothing to help us solve a severe cash crisis that threatens our ability to pay our obligations at the end of the month."

According to the Daily News, Lubin's solution to raising money includes "raising taxes, borrowing more money, buying prescription drugs and supplies in bulk and raiding other state funds," which Paterson said was selfish, "They're saying, 'We're not special interests, we're extra special. We're supposed to get all the money and everybody else can just divide up the crumbs.' It's clear to me they don't care about anybody but themselves."