The CSBA sued after the Legislature squeezed funding for school districts by revising what programs fall under Proposition 98.
Governor goes beyond minimum required under Proposition 98 to absorb $3.1 billion in districts' pension payments and address teacher shortage.
The state will absorb $700 million of school districts' additional payments to CalSTRS for the final two years of the higher payments required to restore the pension fund's financial health.
The current reserve cap limits the amount of money school districts can set aside for future needs.
The groups disagreed over a proposed compromise.
The bill sets a higher limit and exempts small districts from the current cap.