WESTMINSTER, Calif. (AP) -- The board of a small Orange County school district is refusing to adopt state regulations to prevent discrimination against transsexuals and others who want to define their gender -- a move that could cost the district millions of dollars in state and federal funding.

Three of the five trustees on the board of the Westminster School District say they must remain true to their Christian principles, but their refusal to change could jeopardize up to $40 million for their 17 schools. That's two-thirds of the budget for the district's 10,000 elementary and middle school children.

The three trustees say the law allows young children and staff to immorally redefine their sexual identity.

"Everyone always wants to fix things tomorrow. Well, I'm saying the time is ripe now," said board member Judy Ahrens. "I might take a lot of heat for it today, but the rewards are going to be great in heaven."

Westminster is the only district in the state that has hesitated to update its anti-discrimination policies, said Gary Page, the Education Department official who reviewed Westminster.

The district's code also does not explicitly protect gay students and staff from discrimination, but the board has yet to discuss that part of the state code in depth.

The district will discuss the regulations again at its meeting April 1 and has until April 12 to accept them. After that, it will be exposed to formal complaints from anyone challenging its policy, said Michael Hersher, an attorney for the Education Department.

Ahrens, along with fellow board members Helena Rutkowski and Blossie Marquez-Woodcock, faces criticism from the board's remaining two trustees, school administrators and parents, many of whom say the three are flouting the law to impose their own beliefs.

"We do not see this as a moral issue," said Trish Montgomery, a district spokeswoman, speaking for the superintendent and other administrators. "It is a matter of complying with the law."

The debate over gender definitions began in January when school administrators told the board that its policy for handling discrimination complaints was out of compliance with state regulations.

The policy did not reflect a state regulation that prohibits discrimination on the basis of "perceived" gender.

The California Department of Education confirmed the problem, and advised the board to make the changes at a Feb. 26 emergency meeting.

The three officials refused.

"I can't, with a clear conscience, vote for this trash," Marquez-Woodcock declared earlier this year.

Hersher said California law would permit the department to withhold some or all of the district's state and federal funding if Westminster refuses to comply with state law. Westminster receives $40 million of its $68-million annual budget from state and federal sources. The department could also sue to force the district to adopt the state regulations.

Many parents say they are frustrated by the board members' actions.

"They are going to risk our children's education for their own personal convictions," said parent Patricia Ashcraft, who spoke at a recent board meeting. "They're trying to fight a morality issue, but they're doing it in the wrong arena."

Ashcraft and others say the three should lobby legislators to change the law if they are against it.

Ahrens, Rutkowski and Marquez-Woodcock said they do not plan to change their position but say it's unlikely the state will take money from the district.

Ahrens said she fears that the state law would allow young boys to become "peeping Toms" in girls' bathrooms and encourage cross-dressing.

"The possibilities are endless," she said.

Westminster board President James Reed said that at the April 1 meeting, district lawyers will lay out possible consequences to the district if it does not comply with the law. But he said he wasn't confident his three colleagues could be swayed.

"The frustrating part is that I can't seem to get them to see that this is about the law. I can understand that they have intense emotional concerns about this, but that does not change the fact that we must be in compliance with the law."