The University of Hawaii John A. Burns School of Medicine was a casualty of this year’s legislative session as it lost up to $4 million in funding, or 4 percent of its annual budget.

Lawmakers decided not to extend a portion of the medical school’s allotment of money from the tobacco settlement.

The school had used on average between $3 million and $4 million annually for operations from the tobacco settlement. That funding will expire on June 30.

Although the House and Senate were considering extending funding for four years in Senate Bill 239, lawmakers failed to take action before a procedural deadline on Friday.

The school is now considering reducing the number of local students it enrolls and increasing the number of out-of-state students to help make up for the loss. Tuition for local students is about $27,000 per year. Tuition for out-of-state students is about double that.

the SCHOOL has 90 percent local students. Out-of-state students are less likely to remain in Hawaii to practice medicine after graduation, according to Tina Shelton, school spokeswoman.

The school also may increase in-state tuition to $58,000 per year in 2012, further affecting local students.

Dean Jerris Hedges said with the school losing $3 million to $4 million per year, "we must be aggressive to make modifications."

"We want to sustain a high-quality medical school experience and programs that bring research to the state," he said. "And that means we are going to have to help develop new revenue streams and make adjustments."

The funds were also to be used to increase the number of medical students, establish a residency program on Hawaii island and operate tobacco cessation efforts.

"Unfortunately, we cannot move forward with the residency without the support," Hedges said.

The tobacco settlement pays the state between $40 million and $60 million a year. The money is the result of an agreement between 46 states and large tobacco companies to recover costs paid by taxpayers for tobacco-related ailments.

In a separate allotment from the tobacco settlement, the medical school receives more than $10 million a year to pay its debt service related to the construction of the school. It will continue to get that money.

Tobacco money was used to finance construction of the medical school’s $150 million Kakaako campus in 2005 and subsequently to fund operations.

Sen. Josh Green, chairman of the Committee on Health, was disappointed that the medical school took a hit during the session, but said he hopes lawmakers will restore the funding next year.

"(The medical school) is a fundamental structure in Hawaii and has to be supported," Green said. "It should be OK until the calendar year 2012, but I believe we do need to come back and make them whole going forward."