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A Kalihi charter school can keep its doors open despite a budget shortfall of more than $400,000 on the condition that its director and governing board resign, according to a Hawaii Charter School Commission decision made on Wednesday.

The news first broke late last week that Halau Lokahi, a K-12 school that focuses on Hawaiian culture, was on the brink of closure 13 years after it opened because its debt had grown so large that it stopped paying its teachers and had trouble covering its rent.

Halau Lokahi officials pledged to prevent that from happening, saying they had a plan to make good on their $417,000 deficit and run the school more responsibly in the future.

Commissioners on Wednesday, however, said that the school’s financial contingency plans lacked enough detail to convince them that it could be salvaged. The commission seemed poised to pull the plug at the meeting but, after two and a half hours of deliberations behind closed doors, they voted to gut the school’s leadership instead. 

Now, the nine-member volunteer commission will appoint a new governing board for Halau Lokahi, an authority normally reserved for the schools themselves. The school also has to implement a contingency plan that relies on increasing enrollment by one-third and eliminating several staff positions.

Commission director Tom Hutton said it remains to be seen whether the school can pull through with its bold financial plan.

“They have a very big hole to climb out of,” he said, noting, “there’s no way to deliver a message like this that’s not incredibly painful.”

It’s still unclear as to how the school will come up with the money to pay the teachers. 

The school’s longtime director, Laara Allbrett, wasn’t available for an interview after the decision and didn’t respond to a call seeking comment before deadline. Hina Wong-Kale, a prominent kumu hula who teaches at Halau Lokahi, said after the decision that she wasn’t ready to comment; she and some others who attended Wednesday’s meeting in support of the school appeared drawn and silent as they shuffled out.

The school’s original plan to solve the shortage — which commissioners dismissed last week — focused only on clearing outstanding debt from the previous school year, a deficit that officials blamed largely on shrinking enrollment and limited per-pupil funding. A deal to secure a loan also fell through at the last minute, according to Allbrett. 

One of the school’s newest contingency plans relied on funding from the Office of Hawaiian Affairs, but OHA officials on Wednesday emphasized that the money isn’t guaranteed. The agency’s board only received a formal request from the school on Tuesday, and the information provided was insufficient, said OHA Public Policy Advocate Jocelyn Doane. 

Under the new plan, the school will need an additional 50 or so students and at least two fewer full-time employees, down from 17. 

Enrollment fell to an all-time low of 183 students this past year, down from nearly 300 students in the past, meaning that the school took a big cut in funding from the state.

The state allocated slightly more than $6,000 per student to all public schools last year, but unlike regular schools, charters don’t get additional money for facilities.

About a third of Halau Lokahi’s pupils are virtual students who only take classes online. 

Commissioners and central administrators repeatedly asked Halau Lokahi officials on Wednesday why they didn’t address or disclose the problems sooner, particularly because it has had difficulties paying the rent since February. As Commissioner Roger Takabayashi reasoned, “the handwriting was on the wall.”

Allbrett insisted that the school exhausted every means possible — including cutting maintenance and transportation costs and reducing its staff — to stay afloat. She was convinced, she said, that she’d come up with a solution.

“We were very confident that somehow, some way, we would be able to secure the funds we needed to finish the year,” she said.

The school has always run a deficit, paying for the previous year’s liabilities with funding meant for the subsequent year. 

“With autonomy comes responsibility,” said Commissioner Peter Tomozawa, speaking of the flexibility given to charter schools. “This goes against all the things we’ve been working so hard for for all the schools.”

Halau Lokahi is the second charter school in the state to go broke, according to Hutton. The first was the Big Island’s Waters of Life, which essentially shut down in 2009 before reopening as Na Wai Ola later that year. In a notable turnaround, Na Wai Ola was recognized by the Hawaii Department of Education last year as one of the highest-achieving schools in the state.

As part of the Wednesday decision, commission staff are being asked to review Halau Lokahi’s financial records in detail and report those findings to commissioners. The school’s new contract needs to be executed before the end of this month.

Hundreds of people signed a petition urging the state to , while students, teachers and parents the school has played in their lives.

One community member, Kamahana Kealoha, testified on Thursday that the school has provided a positive outlet for many children who might otherwise turn to drugs or crime.

“We’re not shutting the state down,” he said, suggesting that cost of sustaining the school isn’t too big of a burden for the school system. “Kids should not have to suffer because of what cannot be balanced.”