Gov. Linda Lingle's plan to use new federal education money to plug a big hole in the statewide budget appears to be a legitimate use of economic stimulus funds, U.S. education officials say.

As officials in Washington, D.C., start handing out the largest one-time investment in education in U.S. history, governors across the country are eyeing it as a way to make up for revenue shortfalls in other areas. Facing a $90 million deficit from now to June 30, Lingle wants to slice the education budget by that amount and restore it with federal funds, rather than cut across all departments.

That proposal sparked an outcry from the school board and other local officials, who said that doing so will shortchange schools instead of building them up. They point out that the $100 billion for education in the American Recovery and Reinvestment Act is supposed to save teachers' jobs as well as jump-start education reform.

“;At a minimum the Recovery Act will help keep teachers teaching and students learning in schools across America,”; Education Secretary Arne Duncan said. “;But if all we do is perpetuate the status quo, we will miss this historic opportunity.”; That is why, he said, states must commit to reforms as a condition of accepting the money.

Nonetheless, Lingle's plan appears to meet the letter of the law. John McGrath, a spokesman for the U.S. Department of Education, told the Star-Bulletin this week that states may make up for revenue shortfalls with federal “;stabilization”; money, as long as their education budgets remain at least as big as they were in fiscal year 2006.

“;If after taking the $90 million out, the education budget was still at or above the fiscal 2006 level, then it would be permitted,”; McGrath said. That is certainly the case in Hawaii, which is spending $2.4 billion on education this fiscal year, up from $1.8 billion in 2006, largely because of pay raises for teachers and staff.

Lingle's senior policy adviser, Linda Smith, said U.S. education officials also verbally OK'd the plan in a conference call last week, following emotional exchanges between Hawaii educators and the Governor's Office.

“;They specifically indicated to us that if you have an appropriation and you had to revise or restrict it because you have lower state revenues, then you can use these state stabilization funds to restore back to your appropriated level,”; she said. “;It does not have to go on top of that.”;

Still, Garrett Toguchi, chairman of the Board of Education, said yesterday that Lingle should get a written opinion from the Office of Management and Budget, noting that the director of that department had rejected a proposal by South Carolina's governor to use stabilization money to pay off state debt.

“;If, after the governor implements her plan, it is determined by OMB that it's not a proper use of the money, it could possibly jeopardize all the other money we could get for education,”; Toguchi said. “;We've spoken with our congressional delegation, and they are all concerned about her intended use of the money.”;

The proposed budget shuffle comes as a blow to Hawaii's Department of Education, which had intended to use an anticipated $113 million in stabilization funds on required reforms over the next two years.

Instead, most of the money will go to “;backfill already obligated expenses,”; said Robert Campbell, director of federal compliance and project management for the Department of Education.

“;It's like getting your tax refund but then realizing, 'Oops, I forgot the mortgage,'”; he said. “;There is no flexibility to try and build the things that it is evident we have to do.”;

While the department is already working toward the goals outlined in the Recovery Act, educators say it will take an infusion of funds to make substantial progress.

“;We're going down the right road, but we need the money to continue,”; said Roger Takabayashi, president of the Hawaii State Teachers Association. “;We can't shortchange our kids.”;

The governor wants to use the remaining $22 million in stabilization money essentially to maintain the status quo in the next fiscal year, cutting state education spending by that amount and replacing it with federal funds.

Smith said the administration is not targeting education, but simply trying to use new federal money to make up for local shortfalls, as it has done with Medicaid funding. The governor also is committed to channeling another $35 million from the Recovery Act to higher and lower education, money that could have been used “;on anything, from roads to running prisons,”; Smith said.

Hoping for money

Hawaii's public schools hope to receive $113 million in stabilization funds from the American Recovery and Reinvestment Act. Educators want to use it to make progress on educational reforms outlined in the law, including:

» Measuring teacher effectiveness and ensuring that all schools have good teachers.

» Using rigorous standards and assessments to prepare students for careers.

» Tracking individual students' progress, from preschool to college.

» Turning around low-performing schools.