State Board of Education members last night drilled Linda Lingle's senior policy adviser over the governor's plan to use federal stimulus money intended for education to balance the state's budget, calling it "dishonest" and a "drain" and even suggesting it may not follow federal law.

"Really, what we've become is a pass-through," board member Donna Ikeda told Linda Smith. "You're taking with one hand and hoping you'll get from the feds with the other hand.

"Yet everything we're reading ... tells us that this is, one, not the intent of the law, (and) two, you can get in trouble if the governor does this because it does not meet the intent of the law."

Smith presented Lingle's plan for state fiscal stabilization funds at a special meeting of the BOE. The meeting came about a week after a dust-up between Schools Superintendent Pat Hamamoto and the Lingle administration over the governor's plan to reduce the current school year's budget by $90 million and replace it with federal stabilization funds.

Smith told board members that the governor's plan meets federal guidelines, especially sections that require the state to keep education funding above 2006 levels. Education was funded at $1.8 billion in 2006, which is lower than the current $2.4 billion budget of the Department of Education, she said.

"There is nothing that leads us to believe that the approach that we're proposing for Hawai'i isn't in keeping with what is permissible under the law," Smith 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.

Smith confirmed that the governor intends to give the $157 million in stabilization funds meant for education — $90.9 million in the current fiscal year and $22.3 million in fiscal year 2010 — to education. But, the governor will restrict the state's contribution to the education budget by the same amount.

"We would be looking to utilize the stabilization funds ... to minimize the fiscal impacts of the shrinking revenues on this largest portion of the state budget, the portion that goes to education," Smith said.

PLUGGING DEFICIT

While a large portion of the stimulus money appears to be going to plug the state's deficit, Smith also told board members that about $35 million meant for government services would go toward a joint education plan between UH and the DOE.

Board members, however, called it an unfair trade-off and questioned whether the governor was following the guidelines for the money.

Board members pointed toward newly released federal rules for the stabilization funds that say that states will have to show clear progress in specific areas of educational achievement, including distribution of highly effective and qualified teachers and the development of rigorous assessments that improve teaching and learning.

Board member Kim Coco Iwamoto pointed to recent comments by U.S. Education Secretary Arne Duncan warning state governments that this money is primarily being made available to boost education budgets — and misuse of the funds will jeopardize states from receiving more money later.

Iwamoto said the governor intends to "drain" education to "make it look like we're going to use that money to restore education."

Iwamoto said she fears the governor's plan will not fit with the intention of the federal law.

"We're going to cross our fingers that you don't screw up on this?" Iwamoto said.

Smith told board members she believes the governor's plan fits with the letter of the law and that the money will be used as intended.

"We would like to think that being able to bring the Department of Education's budget back up to where it should be for '09 and where it should be for '10 and '11, is meeting exactly what the Secretary of Education asked for," Smith said.

'BEING DISHONEST'

Clearly upset with Smith's presentation, Ikeda gazed across the room at Hamamoto and asked her not to sign the governor's application.

"I would recommend that unless we can in all honesty say we're going to use this money in the proper way for the purposes that it was intended. ... I would recommend Pat, you not sign it," Ikeda said. "I, for one, would not want to be called on the carpet for being dishonest."

Earlier in the afternoon, education officials told board members that they were concerned that the governor's plan could jeopardize the state's ability to meet specific education reforms required by the federal government in return for the stimulus funds.

"In the end of two years, it's very clear, both in the guidance and all the verbal conversations, that the federal government expects to see two things: Are students better off in the end because of the use of these funds? And are the reforms that they want to see happen in place?" said Robert Campbell, the director of DOE's federal compliance office.

"This is clearly a lot of money and it is also clear that the money is intended to drive education reform," he said.

Ikeda said Lingle is thinking short term.

"Politically, it'll be a new ball game because the governor will be gone (in two years)," Ikeda said. "It's someone else's problem at that point. Ultimately, the department and the kids and the state will be the one holding the bag. That's the concern to me."