Gov. Linda Lingle is swinging back at Marion Higa, describing the state auditor's criticisms as “;false, misleading and ridiculous.”;

And state Budget Director Georgina Kawamura went as far as to suggest Higa step down.

“;The complexities of the job have passed her by, and it is simply time for her to retire and leave the position to someone better able and better suited to handle the position,”; Kawamura said.

But Higa says the governor is missing the mark and has mischaracterized her remarks to attack her credibility.

In an audit released Thursday, Higa charged that Lingle and Kawamura failed “;to exercise proper oversight of investment decisions and activities.”; She noted that the state invested $1 billion of taxpayers' money in student loan auction securities that were later frozen, worsening the state's financial woes.

“;We're looking at tax refunds delayed, perhaps, bills not being paid on the part of vendors to the state,”; Higa said in a televised news report. “;They're not getting their bills paid until the next fiscal year. This is a cash-crunch situation because you've got a billion dollars frozen.”;

In a meeting with reporters yesterday, Lingle shot back, saying Higa is showing “;her complete lack of understanding of government budgeting.”;

She added, “;Her recent point that they could be used for tax refunds is just ridiculous. Anyone with any knowledge of state finances would have known that. Auction rate securities are not general fund revenue. It is not extra cash laying around. It is money in the airport fund set aside for particular projects.”;

Kawamura called Higa's report “;flawed and patently false.”;

Lingle said the money invested has been slowly unfrozen by the auction markets and that the state has cashed in $15 million so far. But, she added, Higa did not understand that the money came from a special fund used to pay for airport construction and was not in an account that could be tapped for other uses.

“;It is not any money that would ever be available to pay back tax refunds,”; Lingle said. “;To me this just highlights her complete lack of understanding. She is just in over her head in dealing with state budget issues, and this proves it.”;

Higa said yesterday in a written report that Lingle is missing the point of her audit.

“;The administration persists in its position, misdirecting our findings and creating another red herring without any hard evidence for that position,”; said Higa. “;The fact remains: $1 billion of taxpayer money has been virtually frozen for two years and not available for any use. We stand by our report.”;

State Sen. Donna Mercado Kim, Senate Ways and Means Committee chairwoman, said the Legislature plans to hold hearings on Higa's audit, saying the allegations are serious enough for further investigation.

Lingle leaves options open for future political campaign

Don't write off Linda Lingle, the political candidate.

Although Lingle is forbidden from running for a third term, the 56-year old Republican says she is not leaving Hawaii and might run for another office.

In response to a question after a speech at the Pearlridge Rotary Club yesterday, Lingle said she intends to live in Hawaii for the rest of her life.

Explaining that she will not be a candidate for any political office this year, Lingle did not rule out running again later.

“;I don't know beyond 2010, but I will not run in 2010,”; Lingle said. “;I hope to have a big part in Hawaii's future, whatever I choose to do. I expect I will live all my days here.”;

She added, “;I always tell people there are many ways to contribute. Politics is just one of them.”;

Asked by reporters after the speech whether she would run for another office, Lingle said, “;It's possible, it's possible.”;

Asked what office, Lingle said, “;We will see later on.”;

Lingle has been mentioned by Republicans, including GOP adviser Karl Rove, as a strong candidate in the 2012 elections, including a possible U.S. Senate campaign. Hawaii's Sen. Daniel Akaka will be up for re-election then.