Around season 2 when spongebob was getting a bit more popular, Stephen Hillenburg decided to make specials.
The first special, The Spongebob Christmas, got positive reviews. Nickelodeon was very impressed and wanted to see more. Steve was a bit iffy about the idea since he was still kind of new to animation, so we ended up having Party Pooper Pants, the Sponge Who Could Fly, and UGH. Nickelodeon demanded more, but Steve was getting tired of making specials, so he was going to end it off with The SpongeBob SquarePants Movie. Which we all know was going to end the series, however the film was a HUGE box office success especially towards KIDS. So Nickelodeon signed a contract adding only CHILDISH cartoon shows. Steve was still tired of working so he offered it to Paul Tibbitt.
Most of the older writers were FIRED by Nickelodeon and wanted to work on other projects like Chowder, Adventure Time, Regular Show, Phineas & Ferb, Gravity Falls, and Fish Hooks.
This caused speculation to thinking Steve quit the show, however, he actually still helps out a bit and even requests ideas. Paul Tibbitt actually stated Steve LIKES the newer episodes and he is in charge of approving them. Steve, Derrek Drymon, Dan Swampy, and C.H. Greenblat however still make the spongebob comics. The comics are actually different from the TV show, including episode references, and pop culture jokes.
Steve's most recent work with spongebob is the new 4D ride/CGi short film, SpongeBob SquarePants 4D: The Great Jelly Rescue. In 2012, SpongeBob SquarePants' ratings dropped 29%. Viacom tried many things to fix this, including suing YouTube, and getting rid of all Nickelodeon shows on Netflix.
Steve was concerned and decided that maybe he could try to IMPROVE the show with a 2nd film. Though Nickelodeon's contract may have upset many fans, the contract isn't related to the new sequel The SpongeBob Movie: Sponge Out of Water.
Many older writers, and storyboard artist of the show have retuned for the film.