The County School Board on Thursday night voted 8-1 to sue the city of Chattanooga, saying it has balked at paying $11 million in liquor tax funds.
School Board Attorney Scott Bennett plans to file suit in Chancery Court.
The board also passed a $345.3 million budget.
To make it balance, the board had to dip into the rainy day fund (fund balance) to get $1.95 million.
Instead of $4 million for maintenance of school buildings, there will be $3 million available.
The school system is having to pick up $600,000 in expenses for middle school curriculum counselors that had been funded by the Lyndhurst Foundation.
The schools also faced significant costs at the new STEM School at Chattanooga State.
The lawsuit against the city was not on the agenda, but attorney Bennett briefed the board at an extended executive session just prior to the meeting.
Officials said they have tried to meet with Mayor Andy Berke on the issue, but have not gotten any assurances of payment.
School officials said after the alleged debt was first discussed, the city began charging the schools a stormwater fee on its many schools and administration buildings spread throughout the city.
A number of school systems across the state are saying they should have been getting a share of the liquor tax all along and are owed millions of dollars.
School board members were told that a recent opinion from the state attorney general's office sides with the school systems, saying the amount is a valid debt that cannot be forgiven.
Board member Jeffrey Wilson said he hated to see one local government suing another.
Click here to read the opinion by the attorney general.