The nation's largest teachers union and school districts in three states sued the Bush administration Wednesday over the No Child Left Behind (search) law, aiming to free schools from complying with any part not paid for by the federal government.

The lawsuit, filed in the U.S. District Court for eastern Michigan, is the first major challenge to President Bush's signature education policy. The outcome would apply directly to the districts in the case, but it could affect how the law is enforced in schools across the country.

Leading the fight is the National Education Association (search), a union of 2.7 million members and a political adversary of the administration. The union mobilized its forces for Democrat John Kerry in the 2004 presidential race, and its objections to Bush's law prompted former Education Secretary Rod Paige to call the NEA a "terrorist organization."

The other plaintiffs are nine school districts in Michigan, Vermont and Bush's home state of Texas, plus 10 NEA chapters in those states and Connecticut, Illinois, Indiana, New Hampshire, Ohio, Pennsylvania and Utah. The NEA is paying for the lawsuit.

Bush is facing battles on other fronts, too. The Republican-led Utah Legislature voted Tuesday to put its educational goals ahead of the federal law despite the possible loss of $76 million, Connecticut is planning its own lawsuit, and other states are balking over money.

The law is widely considered the most significant federal education act in decades. It puts particular emphasis on ensuring that schools give attention to minorities and poor children who have long fallen behind on achievement.

Dennis Pollard, an attorney representing schools in Pontiac, Mich., said the lawsuit was strictly about funding. "There is no intent to frustrate the purpose of No Child Left Behind," he said.

The lawsuit is built upon one paragraph in the law that says no state or school district can be forced to spend its money on expenses the federal government has not covered.

"What it means is just what it says -- that you don't have to do anything this law requires unless you receive federal funds to do it," said NEA general counsel Bob Chanin.

"We want the Department of Education (search) to simply do what Congress told it to do. There's a promise in that law, it's unambiguous, and it's not being complied with."

The lawsuit accuses the government of shortchanging schools by at least $27 billion, the difference between the amount Congress authorized and what it has spent.

Education Secretary Margaret Spellings (search), as chief enforcer of the law, is the defendant. She is accused of violating the law and the spending clause of the U.S. Constitution.

Education Department spokeswoman Susan Aspey called the suit regrettable, saying the NEA should join in helping children "instead of spending its time and members' money in courtrooms."

At the White House, spokeswoman Dana Perino said Bush has overseen "historic levels of funding" and a commitment to holding schools to high standards. States are making strong achievement gains under the law, she said.

The main education programs included in Bush's law existed before he took office, but they are now considered part of No Child Left Behind. During his presidency, spending on those programs has increased 40 percent, from $17.4 billion in 2001 to $24.4 billion this year.

Yet the suit, citing a series of cost studies, outlines billions of dollars in extra expenses to meet the law's mandates. They include the costs of adding testing, getting children up to grade level in reading and math, and ensuring teachers are highly qualified.

The plaintiffs want a judge to order that states and schools don't have to spend their own money to pay for the law's expenses -- and order that the Education Department cannot yank federal money from a state or school that refuses to comply based on those grounds.

"It is the cruelest illusion to give the children a promise that we never intended to keep," said Bill Mathis, superintendent of the Rutland Northeast Supervisory Union in Vermont, one district in the suit.

Plaintiffs include the Pontiac School District in Michigan, the Laredo Independent School District in Laredo, Texas; the Rutland Northeast Supervisory Union in Brandon, Vt.; and six of the school districts that are part of Rutland Northeast in south central Vermont.

Bush defended the law Wednesday at a White House ceremony honoring the teacher of the year. "I love the spirit of the No Child Left Behind Act," the president said. "I suspect the teachers love the spirit of challenging the soft bigotry of low expectations."