WESTMINSTER, Calif. (AP) – School trustee Judy Ahrens knows her stand against a state law that protects the rights of transgender students might jeopardize more than half of her small district’s annual budget.

But as far as Ahrens is concerned, the Department of Education’s mandate that the Westminster School District update its anti-discrimination policy is a threat to students’ values and education.

“I’m really sad that the moral compass isn’t out there,” Ahrens said. “I’m really disappointed that economics is trying to outweigh morality and protecting our kids in this district.”

The 1999 state law gives students who define their gender in a way that differs from their biological sex the right to pursue discrimination complaints.

Westminster is the only district in California refusing to revise its policy to conform with that state education code.

Ahrens believes it’s immoral to define gender beyond biological terms and that accepting the policy would promote homosexuality and transsexuality. Fellow trustees Blossie Marquez-Woodcock and Helena Rutkowski voted with her on the five-member board.

Jim Reed, board president, said those trustees should try to change the state law rather than simply refusing to revise the district’s policy.

“To be in violation of the law, to be risking so much to our students, our teachers, our administration, our district as a whole, for this particular stance in this arena, I feel that it’s foolhardy to do that,” Reed said.

The board will meet again to consider the change. Trustee Jo-Ann Purcell hopes at least one of the holdout board members will switch their vote and allow the change.

“It’s unbelievable that they would take a stance against something that nobody else interprets the way they do,” Purcell said.

The dispute could have serious ramifications for the district, which is located about 35 miles southeast of Los Angeles and serves 10,000 elementary and middle school students. More than $40 million of its $68 million budget comes from state and federal sources.

That money could be cut off if the district isn’t in compliance with state law by April 12.

Already, Bank of America has withheld approval of a $16 million line of credit to pay for facilities improvements because the district’s funding source is at risk, said district spokeswoman Trish Montgomery.

Ahrens said the suggestion that the district could lose its funding is “blackmail” by the state, which she claims is pushing local officials to accept an agenda of openly tolerating homosexuality.

“I’m calling their bluff,” she said.

Ahrens worries that changing the district’s definition of gender will promote cross-dressing, or that “mischievous” young boys could decide to declare themselves female in order to get into the girls bathroom.

Montgomery said rules governing bathrooms are set on the basis of a student’s biological sex, not gender.

State Sen. Sheila Kuehl, D-Santa Monica, wrote the legislation that aligns the state’s education code with its hate crime statutes. She said Ahrens’ concerns were ridiculous.

“If they have a transgender student, they can simply do what virtually every other district who’s faced this has done, and make certain that they’re accommodated in a way that doesn’t make other people uncomfortable or makes them uncomfortable,” Kuehl said.

Aside from the financial impact to the district, children who are beginning to understand that their gender identity differs from their biological sex could be harmed if not protected by discrimination rules, said Roslyn Manley, a member of the county Human Relations Commission’s Transgender Task Force.

Transgender students are often subject to teasing and harassment at the elementary school level, which can escalate into violence when they grow older, Manley said. She noted the case of Eddie “Gwen” Araujo, a San Francisco Bay area transgender teenager who prosecutors say was killed in 2002 when angry acquaintances found out Araujo was biologically male.

The issue has upset residents in Orange County, where conservative school boards have in recent years moved to ban a high school’s gay-straight alliance club and tried to sue Mexico to recoup the cost of educating immigrant children.

Some parents have started gathering signatures in a recall campaign against the three members blocking the policy change.

“People are shocked,” said Lisa Mathews, who has two children in a Westminster elementary school and is working with the recall group. “It’s like they seem to feel that they are above the law, like their position on the school board affords them immunity from state laws.”

Ahrens almost broke down in tears during an interview, saying the pressure of repeated arguments with constituents and media interviews has left her drained. But she also said she’s heard from supporters around the country who believe she’s doing the right thing.

“Morality is not for sale, at any price,” she said. “I represent family-oriented parents here. Family values should be important.”