A day after Gov. Linda Lingle and state schools superintendent Pat Hamamoto clashed over a plan to use federal stimulus funds intended for education to help close the state's budget deficit, state budget director Georgina Kawamura accused the schools chief of unnecessarily causing panic and Hamamoto remained unconvinced that schools will not end up being shortchanged.

Kawamura insisted the school system will not lose money under the governor's plan and that the Lingle administration is following federal guidelines on how to spend the stimulus.

But the Obama administration has already rejected one other state's attempt to use the federal stimulus money creatively and, with so much at stake, two members of Hawai'i's congressional delegation urged caution.

U.S. Rep. Neil Abercrombie said Hawai'i's application for federal education money will have to match the intention of the stimulus package, which clearly says the money must be used to improve student achievement.

"Receiving $192 million in state fiscal stabilization funds is not automatic. To be approved, Hawai'i's application must meet strict guidelines, with the intentions for the use of the funds well documented," the congressman said.

"The clear intent of Congress is for state fiscal stabilization funds to be used for education. The idea of moving badly needed state education funds into the general fund, hoping to replace them with federal funds, runs counter to that purpose."

U.S. Rep. Mazie Hirono, who serves on the House Education and Labor Committee, also said the federal money is meant to help education.

"I know the governor and the Legislature have difficult decisions to make to close the budget deficit," she said. "At the same time, because the recovery act directed substantial sums to Hawai'i for education, I hope that every effort is made to ensure that money from the state stabilization fund will be invested in education."

'IRRESPONSIBLE' ACTIONS

Kawamura, the state budget director, accused Hamamoto yesterday of being irresponsible for warning that public schools could close early this year if the Lingle administration uses federal stimulus money for the state's budget deficit.

Kawamura said Hamamoto acted unprofessionally by speaking publicly before discussing contingency plans with the administration. Lingle has proposed using federal stimulus money meant for public education to help close the deficit. The governor would swap the federal money for state money at the state Department of Education.

Hamamoto said Wednesday that if the federal money does not arrive by the first week of May, the department could be forced to close schools 24 days early. But Kawamura said the administration would likely float the department money to prevent such a scenario from happening.

Kawamura, who is normally unflappable and restrained, was obviously perturbed yesterday.

"They wanted to create panic and anxiety in our public," she said of Hamamoto and the department. "They wanted to show how irresponsible they are in managing budgets."

Hamamoto responded that reporting the potential consequences of Lingle's plan to the state Board of Education was not meant to create panic.

The superintendent had originally intended to present the school board with a plan to use federal stimulus money to restore some $86.6 million in pending and potential state budget cuts in the two-year budget cycle.

However, the governor had scheduled a news conference — to be held 30 minutes before the board's meeting — where she was to unveil a plan to restrict public school funds in anticipation of the federal stimulus money.

"It's my responsibility to advise the board whenever there will be a disruption to the budget and the possible operational consequences," Hamamoto said.

Hamamoto also challenged the Lingle administration to put assurances that the department would not suffer in writing.

"I want to see it in writing. All their assurances, let me see it in writing," Hamamoto said.

DIFFERENT VIEWS

Beyond the concern over when the federal money will arrive, however, is a much larger public-policy disagreement between the governor and the department over how the federal education money in the economic stimulus package should be spent.

The state is expecting $192 million in state fiscal stabilization funds — $157 million meant for kindergarten-through-12th grade public schools and the University of Hawai'i and $35 million for government services such as public safety.

Lingle wants to use the $157 million to help close the deficit — including $90 million for the fiscal year that ends in June — and then divide the $35 million in a joint education plan for schools and UH.

The governor's latest budget proposal would also ask lawmakers to restore $30 million in cuts to the department in fiscal year 2010 and 2011 and $35 million in cuts to UH that are contained in the state House draft of the budget. Kawamura said the House draft would drop state spending on education to levels that might jeopardize the state's eligibility for the federal education money.

Hamamoto, members of the school board, and several state lawmakers believe that the federal education money should instead be used over the two-year budget cycle to offset state cuts to education.

The superintendent said the governor's plan is risky because it may not meet the criteria of the U.S. Department of Education. If the governor's plan gets rejected, the state could potentially lose out on federal funds.

"I feel like the old woman who lived in a shoe," Hamamoto said. "She had so many children and didn't know what to do."

A similar, though less contentious, difference of opinion exists between some social-service providers and the Lingle administration over the use of $320 million in new federal Medicaid money in the stimulus package. The governor wants to use most of that federal money for the deficit, but said Wednesday she would take some to help struggling public hospitals pay vendors and for adult mental-health services.

POLICY GOALS

Kawamura said Hamamoto and the department believed they were going to receive extra money from the stimulus package but, because of the deficit, the administration has to use that money toward the shortfall.

"I've been through budget discussions, like I said, 17 years I've been a budget professional. And there is always a give-and-take, because the departments always want more. And, in this particular case, we don't have more," Kawamura said.

"We have less than expected. We have $2 billion less and we can't continue to spend. We can't continue business-as-usual as we move forward."

Kawamura said the Lingle administration has talked to federal officials about the governor's plan and she believes they are following the guidelines that have been released so far.

She said, however, that she has nothing in writing from the federal government checking off on the governor's plan.

The U.S. Department of Education has set four policy goals for states: spend the money quickly to save jobs; improve student achievement; ensure transparency and accountability; and invest the one-time funds thoughtfully to avoid a "funding cliff" when the money runs out.

Under the student achievement policy goal, the federal government expects states to increase college and career preparation, establish a data collection system to track student progress, improve teacher effectiveness and the equitable distribution of quality teachers at schools, and provide intensive support and intervention at the lowest-performing schools.

OTHER STATE DENIED

The Obama administration has rejected two requests by South Carolina Gov. Mark Sanford to use the federal education money to reduce that state's debt. Sanford, a Republican who has said he would refuse federal stimulus money because he opposes a federal bailout of states, asked whether the federal education money could be used to pay down debts for school bonds, unemployment compensation, and state worker retirement benefits.

Peter Orszag, the director of the federal Office of Management and Budget, wrote Sanford on March 20 and said the federal education money is to "help address state and local budget shortfalls in order to minimize or avoid reductions in education and other essential services."

Orszag said Sanford proposed using the federal education money for " 'paying down (your) state's sizable debt.' However, the act does not authorize the Department of Education to award stabilization fund monies to a state for that purpose."