A new state administration report on the costs of implementing No Child Left Behind has concluded that despite inadequate federal funding, the Department of Education can improve things with more efficient internal management and by spending the federal dollars more quickly.

While the report notes that an additional $30 million to $50 million is needed annually to fully implement the demands of the federal law aimed at boosting the scores of Hawai'i's public school students, the state Office of Budget and Finance report also concludes the DOE is spending only about half the federal money it gets each year to implement NCLB.

In the new report requested by the 2005 Legislature, the state budget office referred primarily to two studies commissioned by the DOE over the past two years to look at the adequacy of funding for the demands required by the federal government.

Both studies concluded the DOE is heavily underfunded for what it's being asked to do, with the Adequacy Funding Study by Grant Thornton LLP saying the DOE needs an additional $278 million annually from the state to meet both federal and state standards in providing an adequate education to Hawai'i's 182,000 public school students.

Federal funding under No Child Left Behind amounts to $83.6 million this year, up from $75.9 million last year.

In response to the report's criticism of the DOE, Robert McClelland, director of the department's Planning and Evaluation office, said shifting resources internally would make little difference.

"The department is always on the lookout for doing things better," said McClelland, "but just by doing things quicker or more efficiently doesn't solve the problem. It really doesn't address the issue of being a partially funded mandate and the fact we don't have enough money.

"And Hawai'i is not the only state saying this. You can look all across the country."

McClelland also noted that the three-month difference in when the state and federal fiscal years begin and end may partially account for what appears to be a lag in spending federal money. He also said in some instances bills for services come in in the following fiscal year, so money is being held back for that reason.

Part of the underfunding occurs because No Child Left Behind only provides funds for those schools in which 35 percent or more of the students are disadvantaged, meaning they come from families living in poverty. In Hawai'i, 112 schools fall into that category.

But the federal mandate requires that all schools reach higher goals for every student.

"Then we have to find money somewhere else to help the rest of those kids if the department is going to apply standards equally," said Robert Campbell, director of the DOE program support and development office.

"That's why it's so hard to gauge the money issue. There are a lot of schools with slightly less than 35 percent of students who are disadvantaged, and you can use money to help with teacher training in those schools, but not for the students."

The new report makes a series of strong statements, including noting that by 2007-08 almost every one of Hawai'i's public schools will be failing under the stringent qualifications of NCLB, with sanctions becoming more and more serious — and costly.

"As schools move from 'needing improvement' to 'restructured,' the cost rises accordingly," said the report.

Those costs go from about $6,000 per school for Year 1 of sanctions to $29,400 per school for Year 2 to almost $94,000 per school for those preparing for restructuring.

According to the latest numbers for 2005, 13 schools are planning for restructuring and 41 are being restructured.

Also according to the latest numbers, 97 schools met Annual Yearly Progress last year while 185 schools did not. Of the total 282 schools, 146 are in good standing while 136 are under some level of sanctions requiring improvement.

Currently 28 percent of a school's student population must meet or exceed proficiency in math and 44 percent of a school's student population must meet or exceed proficiency in reading. By 2013-14, 100 percent of students must reach proficiency.

Hawai'i is currently one of a handful of states that have applied for an exemption to the NCLB standards to allow the state to assess its students on a growth model. That means each school would be judged on how far it has improved from its starting point rather than asking each school to meet a strict across-the-board level, no matter where it begins.

The state will know by June if its application is accepted.

Reach Beverly Creamer at bcreamer@honoluluadvertiser.com.