Hawai'i has received nearly half of $1.4 billion expected in federal stimulus money, and while Gov. Linda Lingle and state lawmakers have used the money to help with the state's budget deficit, its effect on the state's economy may not be fully felt until next year.

The money was provided by Congress and President Obama mainly for health care for the poor, public education, transportation projects and social services. But Hawai'i, like many states, also plans to use the money to help offset declining state revenues in a recession.

The two-year budget passed by lawmakers last session relies on nearly $1 billion in stimulus money. The federal money is also flowing to county governments, the military and federal agencies that do work in Hawai'i. The state also hopes to qualify for competitive grants in the stimulus package for broadband Internet expansion, health information technology, renewable energy, public school improvement, and harbors modernization.

"I leave this place 'up,' " said U.S. Sen. Daniel K. Inouye, D-Hawai'i, after a hearing of his U.S. Senate Appropriations Committee yesterday at the state Capitol. "I feel good. I feel assured that we're going to come out of this with flying colors."

Lingle, a Republican who did not lobby for the federal stimulus package, told Inouye that the federal money has benefited the Islands and dovetails with her administration's own economic recovery plan.

The governor said the state has been awarded $666.5 million in stimulus money so far and has committed $223.9 million to various projects.

The largest amount of the stimulus money — $360 million — is earmarked for Medicaid, the federal health insurance program for the poor and disabled, and will allow the state to offset state spending on the program. Another $279.6 million is for public education, $246 million is for transportation projects, and $149.6 million is for social services and law enforcement.

"We share the senator's and the community's desire to get these funds out promptly, to start creating jobs and to have a positive impact on the lives of the families here in Hawai'i," Lingle said.

The state, even if it takes full advantage of the federal stimulus money, is still projecting a budget deficit. Lingle has estimated the gap at $786 million through June 2011. That figure may increase on Thursday, when the state Council on Revenues meets to update the state's revenue forecast.

IMPACT PEAKS IN 2010

Although there have been questions about whether the Lingle administration moved quickly enough to apply for federal stimulus money, the tone of yesterday's hearing was mostly optimistic. Inouye called the hearing to get a local progress report on the $787 billion American Recovery and Reinvestment Act, which Obama signed into law in February.

Inouye said the impact of the stimulus money should peak in the Islands by the middle of 2010. The stimulus package is meant as a short-term infusion of federal money to help stabilize states during the recession. The federal money expires in 2011, so if the economy does not improve, states that rely too heavily on the stimulus could be facing even larger budget shortfalls.

Some of the state and federal officials who testified yesterday told Inouye that some of the criteria and deadlines to qualify for the federal money — including for broadband — were cumbersome and unrealistic. But Island officials appeared pleased the federal money was available.

Lingle said some of the federal guidelines on use of the federal money have changed several times, forcing the state to revise bid and procurement documents. The governor said the state has an older financial management system that makes it difficult to track stimulus spending with the kind of detail expected by the federal government. She also said the state has had trouble monitoring all the stimulus spending because not all of the federal money moves through the governor's office.

TRACKING SPENDING

State Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said lawmakers have created a task force of state and federal officials that will also keep track of the stimulus money. The federal government has set up a Web site — Recovery.gov — so people can follow the use of stimulus money nationally.

"We believe that it is only with that we will be able to answer that critical question that everyone has for us, which is, 'What happened to the (stimulus) monies?' " Hanabusa said of the task force.

U.S. Sen. Daniel Akaka, D-Hawai'i, used the hearing to ask Lingle to release state money that could help Hawai'i attract an additional $15 million in Medicaid dollars for hospitals that care for the poor.

Lingle vetoed a bill that would have provided the state money but her veto was overridden by lawmakers.

"These funds provide essential assistance to hospitals that care for the uninsured and Medicaid beneficiaries," Akaka said.

Lingle told Akaka she would consider his request but could not promise to release the state money because of the budget deficit.

"It's sort of like for a family that's facing some sale and it says: 'Buy one, get one free,' " she told Akaka. "But if you don't have the money to buy the one, it doesn't matter that you're going to get one free. And that's really the situation that we find ourselves in at this time."

Honolulu Mayor Mufi Hannemann — speaking for Maui Mayor Charmaine Tavares, Big Island Mayor Billy Kenoi and Kaua'i Mayor Bernard Carvalho Jr., all of whom attended the hearing — said the stimulus money will be used by counties for job training, homeless assistance, help for nonprofits and police.

State schools Superintendent Pat Hamamoto told Inouye the stimulus money would help the state Department of Education offset, but not fully replace, spending that has been restricted by Lingle because of the deficit.