Education officials fear that the projected drop in state tax revenues could have a "dramatic impact" on the public school system, both in the current school year that ends in just over a week and the upcoming school year.

Gov. Linda Lingle today is expected to discuss how she intends to close a projected $185 million budget gap by the end of this month. And with the state Department of Education accounting for more than 40 percent of the state's budget, education officials say it's likely the public school system will be targeted.

"When you're talking about a potential shortfall of the magnitude that the (state) is projecting, it's hard for schools not to be part of the cuts, unfortunately," said James Brese, chief financial officer for the DOE.

Russell Pang, spokesman for the governor, on Friday said no decision had been made on cuts to the public school budget.

"It ($185 million) has to come from somewhere. And that's not to say it's all coming from the DOE. ... We're not exactly sure," Pang said.

So far in the current fiscal year, which ends June 30, the state Department of Education has cut or restricted its spending by some $40 million, including cuts to non-school hour programs, the A-Plus after-school program and vacant positions across the public school system. Superintendent Patricia Hamamoto has instituted spending restrictions on interisland travel, overtime and workshop attendance.

FEW OPTIONS

The governor must close the current budget shortfall by June 30, but education officials point out that the current school year ends June 9. The state Board of Education had previously discussed various options for cutting the state DOE's budget, including trimming the school year by four to six days or increasing class sizes by one or two students.

"There aren't too many options left for us right now. The school year is practically over," said Garrett Toguchi, chairman of the state Board of Education.

Education officials are suggesting the governor tap the state's Rainy Day fund or the Hurricane Relief fund to minimize impact on the public schools. The governor also has furloughs of state workers as a possible option, they say.

"We've cut so much already, it's going to be extremely difficult to find the additional funds with it being so late in the game," Brese said.

Education officials also say the newest forecast by the Council of Revenues doesn't bode well for the 2009-2010 biennium budget that was passed by the state Legislature.

State lawmakers used the council's previous forecast from March to draft the state's two-year budget. They built a cushion into that budget but the newest tax revenue forecast exceeds the cushion.

Under the budget passed by the state Legislature, the DOE is preparing for $166 million in cuts over the next two years, Toguchi said. If additional cuts have to be made, expect them to "dramatically impact" school operations, he said.

'EVERYTHING ON TABLE'

BOE members may have to again explore the possibility of cutting the school year or increasing class sizes, he said.

Back in November, Hamamoto presented the board with a plan to close schools for four to six days a year to save up to $25 million.

The board also considered a plan to increase the average class size by one student to 27. The plan would require the state to hire fewer teachers and could amount to a savings of $10 million.

"It's fair to say that everything is on the table," Toguchi said. "Increasing class sizes by one to two students can save $10 (million) to $20 million. But I don't think that'll be enough," he said.

Other cost-saving options include fewer supplies, new textbooks and computers, fewer opportunities for tutoring for students and fewer professional development options for educators, Toguchi said.

STIMULUS FUNDS

One undetermined variable is the federal stimulus money meant for education that the governor has yet to apply for.

The state should receive an estimated $192 million in state fiscal stabilization funds from the economic stimulus package approved by Congress and President Obama. Most of this federal money — $157 million — is meant to help kindergarten-through-12th-grade public schools and the University of Hawai'i.

The governor originally said she intends to allocate $90.9 million in the current fiscal year and $22.3 million in fiscal year 2010 from the stimulus money to education. That money would leave the DOE with no net gain because the governor planned to cut state funding to the department by the same amount.

Pang said the governor has not yet submitted the state's application for federal State Fiscal Stabilization Funds. He said the governor was waiting for the Council on Revenues, the agency charged with forecasting state income, to make its May projection before finalizing the stimulus application. The council projected the $185 million shortfall Thursday. The federal deadline for state stimulus fund applications is July 1.

"Part of the application requires we include expenditures for (fiscal year 2009). We couldn't realistically do that knowing the Council of Revenues would come in and do what they did," Pang said.

Pang could not say whether the governor's plan for stabilization funds has changed in light of the most recent tax revenue projections.