New federal guidelines released by the federal government yesterday regarding education stimulus money failed to resolve a week-long dispute between Gov. Linda Lingle and the state Department of Education.

Educators and Lingle's administration both came away from the same conversation with the U.S. Department of Education convinced that their positions on the use of federal stabilization funds was correct.

Meanwhile, Education Week, an education trade journal, reported that a number of governors — like Lingle — are eyeing the money to plug holes in their state's budgets.

U.S. Education Secretary Arne Duncan warned state governments that this money is primarily being made available to boost education budgets. Misuse of the funds will jeopardize states from receiving the second set of money later this year, he said.

"If states are doing things that are not in the best interests of children, they are just very simply going to disqualify themselves and take themselves out of the running for billions of dollars," Duncan told Education Week.

Following the release of the new federal guidelines, state DOE officials warned that the governor's plan for state stabilization funds could jeopardize the state's ability to garner additional stimulus dollars later this year.

That's because they say the guidelines specifically require states to show improved achievement in four areas:

• Teacher effectiveness and quality.

• Rigorous assessments that improve teaching and learning.

• Improvement of low-performing schools.

• Improved data tracking systems to monitor student progress.

They believe the governor's plan, which would reduce the current school year's budget by $90 million and use the federal funds to replace it, would leave them with no additional federal money and less state money next year to meet those new requirements. The DOE is facing at least $40 million in budget cuts in 2010 and 2011 under Gov. Linda Lingle's budget plans.

"What is very clear is (federal government officials) are looking for a commitment to use the funds in those four essential areas of reform," said Robert Campbell, the director of DOE's federal compliance office.

"The department is going to be challenged, quite frankly. It's a significant challenge to basically have a new set of performance expectations and then with less funds and less flexibility be able to meet those expectations," Campbell said.

The state expects to receive $192 million in state fiscal stabilization funds, with $157 million of that meant for kindergarten-through-12th grade public schools and the University of Hawai'i. About $35 million of it is meant for government services to be determined by the governor.

But Lingle wants to use the $157 million to close the state deficit, including $90 million meant for schools. She then wants to divide the $35 million up in a joint education plan for DOE and the University of Hawai'i.

The governor's office says Lingle's plan clearly meets the application guidelines, especially sections that require the state to keep education funding above 2006 levels.

"There is a whole section that reaffirms that the baseline is the level of state support in fiscal 2006. ... We know that in fiscal year 2009, 2010 and 2011 are higher than the baseline. So we meet the basic 'maintenance of effort' assurance," said Linda Smith, the governor's senior policy adviser.

Smith said the governor will work with the DOE to create a plan to meet those new assurances.

She said the governor intends to use the $35 million meant for government services to go toward a joint plan between UH and DOE.

"We're going to be working with them to refine the plan so that we can move together as a state," Smith said.

The governor has also requested that state lawmakers restore $30 million in cuts to the DOE in fiscal year 2010 and 2011. Smith also pointed out the DOE will receive some $80 million Title I and special education funds from the feds.

But education officials say the $80 million they receive for Title I and special education must be used for those specific things. That money can't be used to meet the four new federal assurances, Campbell said.

Secretary Duncan suggested that states that don't use the initial round of stimulus money for its intended purpose may lose out on the second round of money expected to be released toward the end of the year.

"If we see states doing things that don't make sense and aren't in the spirit of what this (stimulus aid) is about, they would put themselves in jeopardy of receiving the second set of money," he told Education Week.