The state has abandoned a controversial cost-cutting and modernization plan for benefits eligibility offices, a plan that included laying off 228 workers. But officials warned that without the changes, big backlogs for food stamps, cash aid and other applications will continue to grow.

The state could also face federal penalties for failing to process applications in a timely way, Department of Human Services director Lillian Koller said yesterday.

"We're definitely in trouble," she said.

Koller announced that she will drop the plan, which she said was designed to improve efficiency at benefits offices and address backlogs, in the wake of a legislative measure preventing the offices from closing on the Neighbor Islands and requiring hearings before O'ahu closures.

The Legislature overrode the governor's veto of the bill last week.

State Rep. John Mizuno, chairman of the House Human Services Committee and a vocal opponent of the plan, said yesterday that the proposed changes were detrimental to workers and wouldn't have resulted in efficiencies.

Instead, he said, the needy would have had more difficulty getting benefits. And in response to backlogs for benefits, Mizuno said Koller is misrepresenting the facts.

"She created this problem," he said, when DHS laid off benefits workers last year. "She is misguided in her comments."

The changes would have affected offices that process and renew applications for a variety of benefits, including food stamps, welfare and Quest, all of which have seen big increases in clients during the recession.

The plan was expected to save about $8 million a year, and DHS officials said it would have reduced waiting times for first-time applications and renewals by allowing people to apply online and over the phone, by streamlining workloads and by congregating workers in two offices.

Those two main offices were to be in Hilo and Honolulu.

They would have replaced 31 offices sprinkled across the state.

The plan was to go into effect June 30.

Gov. Linda Lingle also weighed in on the DHS changes yesterday, saying she was "disappointed" that lawmakers effectively stopped the plan from going forward. "This was such a win-win," she said of the changes.

Koller said yesterday that backlogs for benefits programs are a "chronic" problem — and one that has gotten worse. Households on Maui, for example, wait four months before they're called for an interview on a food stamp application. The federal government requires that the entire application process take no more than 30 days — or seven in emergency cases.

Statewide, Koller said yesterday, about 80 percent of food stamp applications are processed in a timely manner. The federal government calls for states to process 95 percent of applications within the time limits.

The reorganization plan was based on models in other states, but opponents say those models weren't as successful as DHS said they were and in some cases had resulted in people being shut out from benefits.