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Hawaii’s “high risk” status stays, but the state can spend its remaining cash more freely again.

That’s what the had to say Friday in its highly anticipated announcement about the grant based on a federal team’s recent review of the state’s progress in implementing promised .

“If we put it on a pass-fail system, it’s a pass,” House Education Chair Roy Takumi said. “If we put it on a grade system it’s a C or a C-minus, but we’re not flunking.”

Hawaii lawmakers are reading between the lines a bit, but said it seems the two biggest problems are an ongoing teacher contract dispute and the fact that there is no law requiring that an evaluation system be tied to student growth.

With most of Hawaii’s $75 million Race to the Top grant remaining, the legislators said there is plenty of motivation and ample time to resolve these issues before the federal education team returns in five to six months to re-evaluate the state’s progress.

Ann Whalen, U.S. DOE director of policy and program administration, said in a Friday to Gov. Neil Abercrombie that fiscal sanctions imposed last year will be lifted June 1 because the state has met myriad requirements and budget conditions.

But she said it was too early to ease off the “high risk” designation that the feds placed on Hawaii in December.

“There is evidence that Hawaii has taken recent actions in the right direction to address a number of concerns that placed its Race to the Top grant on high-risk and reimbursement status,” Whalen wrote. “However, due to the preliminary nature of most of these activities and the lack of necessary sustaining conditions for reform, the Department has determined that Hawaii has not yet demonstrated that it has made the substantial progress across its Race to the Top plan necessary to remove high-risk status.”

Takumi said the key words are “lack of sustaining conditions for reform.” He said he believes this refers to the state’s lack of a collective bargaining agreement and its failure to pass a law implementing a performance-based evaluation system.

Senate Education Chair agreed.

“When I read this letter, to me it says you’ve made considerable gains but you’re not out of the woods yet. We’re watching you,” she said. “And if you’d like to have your high-risk status removed, you need to have sustaining conditions of reform.”

Tokuda said that’s why she and Takumi wanted to see legislation pass to implement the performance evaluation system.

“It’s a good policy statement,” she said. “If it passed, would that have addressed the feds’ concerns? I’m not sure, but it would’ve shown sustainability.”

Hawaii Education Superintendent declined to speculate on how to interpret the U.S. DOE’s words, but said that issue will be the subject of future progress meetings with federal officials.

“We’ll dig deeper into that,” she said.

The rallied its 13,000 union members to defeat the bill last session that would have established an evaluation system tied to student growth.

The Board of Education passed policies the day the legislation died in committee that aim to accomplish the same goal, but the state DOE has yet to fully implement them. However, the department is adding more than 60 additional schools to the pilot evaluation program it started this year and will fine-tune it based on feedback from teachers and principals.

Hawaii is the only state to receive Race to the Top money that does not have this type of performance evaluation system in law, Takumi said.

“Even though the board passed it, which is better than nothing, there’s a reason all the other states put it into law,” he said. “It’s indicative of the willingness on the part of the state to see it through.”

The ongoing labor dispute may be coming to a head soon. The HSTA Board of Directors decided Tuesday to put the contract that teachers turned down in January up for a re-vote after a series of information sessions this month.

“We are encouraged that the Obama Administration has given Hawaii five more months to make the changes needed to stay in the Race to the Top,” HSTA President Wil Okabe said. “HSTA’s decision to ask teachers to reconsider their rejection of the January agreement with the state includes review of provisions in the agreement that address Race to the Top requirements for improved school performance that were never adequately explained to teachers.”

The January agreement includes the controversial performance evaluation system. Teachers cited their lack of understanding its implications as a reason for voting against the contract.

HSTA will do a better job explaining the provisions in the contract this time around, Okabe said.

“Our decision to take the agreement with the state back out to our members clearly shows to the federal government that Hawaii’s teachers are going the extra mile,” he said.

Gov. has said the January agreement is no longer legally binding. He said ongoing negotiations have focused on the union’s February proposal and the state’s March settlement offer.

In a Friday, the governor said he is keeping U.S. Education Secretary Arne Duncan “personally informed” of Hawaii’s Race to the Top progress.

“That includes the recent action by the State of Hawaii Board of Education to finalize statewide educational policies establishing the framework for performance management of principals and teacher evaluations,” Abercrombie said. “We believe that this focus on our children and student performance are key elements in establishing success.”

Hawaii’s four-member congressional delegation released a Friday in support of the state’s grant effort.

“We must now demonstrate that the progress made and the reform path forward are sustainable and permanent,” U.S. Sen. Daniel Inouye said, adding that he looks forward to talking personally with Duncan next week. “While not yet removing the high risk status, the removal of the reimbursement hurdle will allow Hawaii to meet its challenges at a much quicker pace.”

Matayoshi said in an interview the department has accelerated its rate of spending over the past six months. School officials were unable to confirm Friday exactly how much of the grant is left because the numbers are “really dynamic,” but estimated it was just under $70 million.

The superintendent said she’s pleased federal education officials have recognized the progress the state is making.

“The U.S. DOE has acknowledged Hawaii has taken steps in the right direction, and we will continue to move forward on all of our deliverables,” Matayoshi said in a statement. “A transformational change is taking place in Hawaii’s public schools. This change is focused on creating a better learning environment to boost student achievement.”

DISCUSSION: What do you think about the strides Hawaii is making in its Race to the Top reforms?