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It’s official.

More than one-third of the $1 billion the state invested in failed auction-rate securities belonged to the general fund and could have been used to help solve the budget crisis, according to a new document obtained by Civil Beat.

We reported in May that state auditor Marion Higa had estimated that one-third of the investments came from the general fund.

Higa, who’s at odds with Gov. Linda Lingle‘s office, told Civil Beat she based her numbers on a document produced by Hawaii’s accounting department that showed how much each state fund depreciated when the investments went south.

We put in a freedom of information act request with the Hawaii Department of Accounting and General Services on May 5 for that document, which Higa says is the best way to track where the money came from.

As it turns out Higa’s estimate was conservative: The document indicates that nearly 37 percent, or about $394 million of the invested money belonged to the general fund.

In recent years, the state invested $1 billion in student loan-backed auction-rate securities, which essentially became illiquid when the market crashed in 2008.

A stinging March 2010 report by the state auditor blasted the state’s finance department for sloppy investment methods and for allegedly breaking state law that says investments may not exceed a maturity more than five years from the date of investment. The finance department responded by saying it believed the charges were unfounded. An investigative legislative committee is now tasked with creating its own report.

The accounting department’s document shows that as of June 30, 2008, the general fund itself took a hit of more than $42 million.

Using Higa’s reasoning, it follows that if 37 percent of the investment’s depreciation was attributed to the general fund, then 37 percent of the investments must be attributed to the general fund as well. What this means is that more than $394 million of the $1 billion investments is part of the general fund.

“How come the general fund would be collecting a third of the interest if it did not in fact comprise a third of the fund?” Higa told Civil Beat. “That seems to be so logical.”

The revelation about the write-downs came during a year when the budget was tight. That same month, Lingle to the budget ending in June 2009. She called for another $345.2 million cut for fiscal years 2009 to 2011.

If the state had access to the $394 million in general funds, it could have given the state a surplus instead of a deficit, said Senate President Colleen Hanabusa. The frozen funds damaged the state’s ability to plan for its financial future and to start capital improvement projects.

“When we don’t have a carryover balance, the one thing that it could have meant is that it would have been a carryover balance instead of a deficit,” said Hanabusa. “So that affects how we can project into the future. It affects things like bonding. It affects our ability to float bonds for [capital improvement projects].”

The Senate President said she counts the entire $1 billion investment as money that the state could have used.

“Some of it may have been special fund money, but it’s still the same thing: It’s money we use,” said Hanabusa. “It’s still money we use in the budgeting process. It’s still money that the state relies on to not only balance the budget but also to budget for future use.”

The lingering question, says Hanabusa, is how much the state will lose when it needs to sell the investments to recoup the money. Hanabusa was behind the resolution to convene the committee to investigate how the frozen investment happened and how the state can prevent it from happening again.

“The other more critical issue for us is at what loss will these securities be sold at if we need the money?” said Hanabusa. “We are going to need the money sooner or later.”