A lawsuit is brewing in California over a state budget package that takes $2.05 billion from redevelopment agencies in the next two years.

The agencies have been a significant source of funding for affordable housing.

The California Redevelopment Association (CRA) is planning to fight the action taken by the state as part of a budget-balancing move to fill a $26.3 billion deficit.

Under the plan, the state would take $1.7 billion in fiscal 2009-10 and another $350 million in fiscal 2010-11 from redevelopment agencies and put the money into the state’s Supplemental Educational Revenue Augmentation Fund (ERAF) to be distributed to schools to cut the state’s Proposition 98 obligation to education, said CRA officials.

The association expects that many agencies will have to use their housing funds to make the ERAF payments, putting affordable housing projects at risk.