Officials knew all along that Hawai'i stood only a slim chance of being among the first round of finalists in the competition for a huge pool of federal education money, but word yesterday that the state didn't make the cut still came as a blow to a public school system that could use some good news.

Hawai'i had been eligible for as much as $75 million in the first round of the Race to the Top program, which will distribute $4.35 billion to a handful of states this year.

The state will now have to wait until June to resubmit an improved application for the second round of competitive grants. A third round also is possible next year.

State officials were not told yesterday why Hawai'i was not included among the 16 states and jurisdictions chosen as finalists.

But it was clear that the chosen few were better able to articulate, through their applications for funds, how they plan to adopt and implement innovative reforms being pushed under President Obama's education agenda.

Meanwhile, Hawai'i's public schools have undergone $468 million in budget cuts, and officials have been singled out for criticism by U.S. Secretary of Education Arne Duncan for the teacher furlough days that will cost students more than three weeks of instructional days this year as well as next year.

"We knew it was a long shot. We were approaching the first round as a starting point for Round 2," said Kathryn Matayoshi, interim superintendent of schools. "I think looking overall at our fiscal picture, and also the furloughs, that was a bit of a drag. I think that it won't be a listed reason, but I think it was a factor in the overall impression of the state."

The grants reward states that have adopted and plan to continue to implement changes to the way public education is delivered, specifically changes that boost student achievement. While Hawai'i has already receiv ed about $111 million in federal stimulus dollars meant to stabilize education budgets riddled by cuts, the additional Race to the Top money would be targeted specifically for education reform.

Forty-one states and jurisdictions submitted applications for the grant money, but federal officials have said all along that only a handful of states would walk away from the competition as winners.

States are being scrutinized on everything from equitable distribution of teachers between affluent and poor schools, whether they use student data to improve student performance and boost achievement at the lowest-performing schools, and whether laws prohibit the use of testing data in teacher evaluations.

A HIGH BAR

Linda Smith, Gov. Linda Lingle's senior policy adviser, said the state is waiting for federal reviewers to submit comments on Hawai'i's 4-inch-thick, 900-page Race to the Top application so it can be improved in time for the second round.

Smith said there are a few areas where the state's application might be weak, including performance-based evaluation and compensation for teachers and principals, and caps on the creation of and equitable funding for charter schools.

Act 51, also known as the Reinventing Education Act of 2004, called for the creation of an evaluation system for principals based on the performance of students and schools. But Smith said the lag in the implementation of that provision may have hurt Hawai'i's chances.

"The Department of Education at the federal level is looking for states to have a concrete, detailed proposal of how they are going to implement that criteria in the Race to the Top," Smith said.

Smith said the state's cap on the creation of new charter schools also may have been a factor.

"There is a specific requirement that we cannot have a legal prohibition on the number of charter schools that can be formed," Smith said. "There is some legislation that would lift that, but that isn't off the books yet."

Of the 16 finalist states, only a select few will actually receive money. The U.S. DOE said it expects no more than half of the money to be awarded in the first phase of the competition.

Duncan said he is setting a high bar in the first phase and that most states will not get additional federal money.

"But this isn't just about the money," he said. "It's about collaboration among all stakeholders, building a shared agenda, and challenging ourselves to improve the way our students learn."

THE SELECT FEW

It was clear that the finalists in the competition represented the select few that were well on their way to implementing Obama's education reforms.

For instance, Florida has the beginnings of a "longitudinal data system," which Obama and Duncan envision being used to monitor student achievement over time. Those data also could be used in performance-based contracts for teachers and principals.

Florida has collected student information from kindergarten through high school since the 1980s, and in 2001 began adding preschool and graduate data into one "warehouse," Jeff Sellers, an acting deputy commissioner in the state's Education Department, said in an interview with Bloomberg News Service.

Florida applied for more than $1.14 billion from the Race to the Top fund. The state would use the money partly to develop early warning systems to flag failing students and to evaluate teachers, Sellers said.

In a U.S. House hearing yesterday, Duncan singled out Louisiana for its efforts to use student-tracking systems to evaluate the effectiveness of both teachers and the education colleges that train them. The state applied for $314 million.

Matayoshi said Hawai'i is also on its way to creating a longitudinal data system, pieces of which already are in place because of the state's single statewide school district.

"Our application includes provisions for linking student achievement to evaluation of teachers. What we need to figure out is how to make it stronger," Matayoshi said. "The reviewers' comments are the key piece, because they will give us the insight into what was missing."

The $75 million Hawai'i was eligible for is minute in comparison with its overall $1.4 billion annual budget. Regardless of whether the state ultimately is able to get its hands on Race to the Top grant money, Matayoshi said, the DOE is pushing forward with key reforms.

The hallmark of the state's Race to the Top application was the formation of Zones of School Innovation in the lowest-performing 5 percent of schools. Most of those schools are on the Leeward Coast of O'ahu.

School administrators in such zones would be given broader jurisdiction over curriculum, length of the school day and year, and school resources. Many of those schools could be restaffed with highly qualified teachers who are enticed to work on those campuses through incentives. Teachers could be rewarded for improved student achievement.

Additionally, Matayoshi said, the DOE will continue to work with the Hawaii State Teachers Association on the issue of teacher evaluations and performance-based compensation.

"We're still moving forward. We still believe it is the right thing to do," she said.