The state's teachers union and school administrators filed a lawsuit Wednesday in Albany to mount the first legal challenge to Governor David Paterson’s controversial decision to withhold school aid.

As they filed the suit at the State Supreme Court, attorneys for the state's teachers union and school administrators said the governor does not have the constitutional authority to withhold ten percent of upcoming payments to schools and local governments, and that such actions need to be approved by the state Legislature.

The attorneys also argued the hundreds of millions of dollars in cuts, which roughly total 1.5 percent of schools’ annual aid, would harm students and teachers since they come right in the middle of the school year.

“We want him to give us a reliable system for public education funding. We cannot run our school systems based on chaos and doubt,” said Timothy Kremer of the New York State School Boards Association.

A court hearing is scheduled for next month.

Paterson said he is within legal bounds and the move is necessary because the state simply lacks the money to pay.

“I think the public knows that we are running out of money because I don’t know the public knows that we are out of money," said Paterson. "Because every time I try to say it, some shrill person who doesn’t know about finance or deliberately deceives the public gets up and says, 'Oh no, he’s just [misstating] the revenue because of his political situation.' Obviously I'm telling the truth.”

The governor says the cuts are actually delayed payments, totalling about $750 million.

The Bloomberg administration did not join the suit, but said it is still trying to assess the impact.