Citing "unsatisfactory performance" and concerns about whether future pledges can be met, the federal government has placed Hawaii’s $75 million Race to the Top grant on "high-risk" status, which means the money may be lost if progress isn’t made.

The grant, one of 10 awarded by the U.S. Department of Education in 2010, is aimed at pushing forward sweeping education reforms in Hawaii.

Hawaii is the first Race to the Top winner to be put on "high-risk" status, in what education observers are calling a bold and unusual move by federal officials.

The governor, Hawaii education officials and union leaders called the announcement Wednesday a wake-up call for a state that has struggled to meet ambitious targets under Race to the Top against a backdrop of growing skepticism nationally over whether Hawaii is capable of making good on its promises.

"The department set very aggressive targets and the bottom line is we have not met some of those targets," said Don Horner, chairman of the state Board of Education. "I remain confident that we shall reach our targets."

As of last week, the state had spent about $4 million in Race funds.

In addition to what state education officials have termed a "slow start," an ongoing labor dispute with teachers is causing concern since it has stalled progress on a number of key initiatives, including reaching an agreement on revamped teacher evaluations.

Other initiatives in which progress has been slow include devising performance-based compensation, creating new tenure rules for teachers, and making sure the lowest-performing schools receive some of the best teachers.

In a statement to the Star-Advertiser, Gov. Neil Abercrombie said the implications of the high-risk status are "disturbing." He added, "I am willing to do everything that’s necessary to proceed with Race to the Top. It is clear what actions need to take place and it is time to get this done now."

Abercrombie also said he would ask the Hawaii Labor Relations Board to expedite a prohibited-practices case filed by the teachers union in response to the state’s decision to impose a contract in July. The proceedings have dragged on for months, as the union’s attorney questions witnesses.

The "high-risk" status carries with it new requirements for the state Department of Education, including additional reviews and reports. The DOE will also no longer be able to withdraw grant money prior to spending it, as it has been doing. Rather, it will incur expenses and submit receipts for reimbursement.

Kathryn Matayoshi, DOE superintendent, said the status change will mean "everyone is going to have step up their game." She added, "This … puts us all on notice that the U.S. DOE is serious about performance. This transformation work is very hard. Clearly, there’s more work to be done and they (the U.S. DOE) were focused on that. But we are fully prepared to show our stuff."

Matayoshi said federal education officials "expressed their hope" that Hawaii wouldn’t be on "high-risk" status for long, though they didn’t indicate what the state will have to do to emerge from that status or say what the consequences would be if the state did not show enough progress.

Federal officials will visit Hawaii in January for a comprehensive review.

In a letter to the governor Wednesday, U.S. DOE policy and program implementation Director Ann Whalen outlined the state’s high-risk status, though the state got word of the decision several days earlier.

Whalen said Hawaii has "not demonstrated adequate progress" in implementing the Race grant since it was awarded in August 2010. The U.S. DOE is "concerned about the state’s ability to fulfill its commitments within the grant period," she wrote, adding that during its January on-site review, Hawaii "must provide clear and compelling evidence" that it has made progress.

Hawaii snagged competitive Race to the Top money after pledging to what amounted to a redesign of state’s education system. Under the four-year grant, the state is proposing to turn around its lowest-performing schools, boost student achievement and improve teacher and principal effectiveness.

Hawaii was chosen as one of 10 winners — nine states and the District of Columbia — in a second round of grants last year. Two states won in the first round of Race to the Top, a signature education initiative under the Obama administration that has been used as an incentive for states to effect change.

Nationally, the education community has been watching to see how aggressively the U.S. Department of Education holds Race winners to their targets. Hawaii has been a frequent subject of discussion, with some calling for the state’s Race money to be returned because it has missed several "deliverables."

Kate Walsh, president of the Washington, D.C-based National Council on Teacher Quality, is among those who have been especially critical of Hawaii’s progress.

On Wednesday, Walsh called the U.S. Department of Education’s decision to put Hawaii on "high-risk" status "not standard practice."

"This is what they’re doing to try to tell them they mean business," Walsh said. "Hawaii made commitments and it has to respect its own committents."

Christine Sorensen, dean of the University of Hawaii-Manoa College of Education, said the federal reprimand was "definitely not good news." She added, "Hawaii has been struggling with meeting the timeframes."

At this point, she said, all the state can do is try to illustrate the work it has been doing.

State Sen. Jill Tokuda, chairwoman of the Senate Education Committee, said Hawaii is "not nearly in the place where we want to be" on Race grant reforms.

Making Hawaii a high-risk grantee "puts us all on notice," she said, adding, "This is our warning that people are watching and we’ve got to do better."

Liz Sager, president of Hawaii State PTSA, said kids will be the ones to suffer if the grant is taken away.

"That’s just one more sign of failure for our students," she said. "It’s a really disheartening way to be perceived."

Matayoshi and others said the "high-risk" status comes as the state is celebrating some big gains, including the completion of a reorganization of the department’s leadership.

"The slow start has really been something of a problem," she said. "But we’ve actually been doing … a ton of work."

She also pointed out the Hawaii State Teachers Association is in informal discussions with the state over Race to the Top initiatives that affect teacher labor agreements.

Negotiations with HSTA, however, have not resumed.

HSTA President Wil Okabe said the union will continue to work with the department on initiatives in the grant, and pointed out that he reached out the DOE to start discussions. "We want to resolve the situation," he said.

It’s unclear, though, how long it could take to reach supplemental union agreements on a host of key initiatives, including revamped teacher evaluations in certain regions, teacher tenure rules and a performance-based compensation system.

It’s also unknown whether such an agreement can be reached while HSTA’s labor dispute is ongoing. HSTA sought relief through the Hawaii Labor Relations Board during the summer, after the state imposed its "last, best and final" contract offer, which included pay cuts, furloughs and higher health care costs.

Horner, of the BOE, said he is "optimistic that we will be able to reach a supplemental agreement in regards to teacher evaluations" in the short-term.