After a rocky start, Hawaii made significant progress in meeting its school improvement pledges in the second year of the four-year, $75 million Race to the Top grant, federal officials said Thursday.

The U.S. Department of Education also announced it is considering taking parts of the state’s Race grant off "high-risk" status.

But even as they were lauding Hawaii’s gains, U.S. DOE officials emphasized that big challenges are still ahead for the state as it looks to overhaul its public education system. Among the biggest hurdles: securing a collective bargaining agreement with teachers for a revamped evaluation system.

"Hawaii has shown promising growth in their second year under Race to the Top and we are optimistic about their framework for continuing this progress," U.S. Secretary of Education Arne Duncan said Thursday in a statement. "We will continue to work closely with Hawaii to ensure they are enacting reforms that will improve student achievement and empower teachers to prepare all students for college and careers."

The U.S. DOE pointed to several bright spots in Hawaii’s school reform efforts, including an agreement with the teachers union that lengthens the instructional day in the Zones of School Innovation along the Wai­anae Coast and in the Kau-Pahoa area of Hawaii island, the implementation of new nationally standardized Common Core learning benchmarks for math and reading, and the launch of alternative licensure programs for teachers and principals.

Schools Superintendent Kathryn Mata­yo­shi said she is "pleased that federal officials recognize the continued progress in our schools."

She also noted that the federal government’s review did not include many gains made recently, including a long-awaited agreement with principals on performance evaluations.

The release of the federal progress report on Hawaii’s Race efforts came on the same day that hundreds of teachers gathered at the state Capitol to wave signs, raising awareness about an ongoing labor dispute and their lack of a contract.

Wil Okabe, president of the Hawaii State Teachers Association, said Thursday that teachers are "very angry and very tired," adding, "They’re frustrated about the situation we’re in."

The state imposed a "last, best and final" contract offer for teachers in July 2011, unilaterally implementing wage reductions and higher medical premiums.

The state and HSTA are now in talks for a 2013-15 contract.

Matayoshi said in a news release that "there is still work to be done with the Hawaii State Teachers Association, which remains a challenge."

She added she’s hopeful the state’s latest proposal "holds promise for an agreement."

In its 23-page progress report on Hawaii’s year two Race to the Top efforts, the U.S. DOE said the state has taken "several steps in the right direction" since December 2011, when the state’s $75 million grant was placed on "high risk" status and a stern warning issued that the money could be lost absent significant gains.

Over the past year, the state has been able to bring most of its Race projects into compliance with a revised "scope of work" submitted to the federal government in late 2011.

The state has also picked up on spending its Race funding, an indication that projects are moving along. As of last week Hawaii had spent about $24.5 million of the Race grant. In December 2011 the state had spent about $4 million.

But the progress report notes that "Hawaii continues to face challenges and delays" in implementing its Race to the Top plan, a systemwide effort aimed at boosting student achievement, turning around low-performing schools and improving teacher effectiveness.

The biggest hurdle continues to be implementing a revamped teacher evaluation system that is linked to student academic growth.

While Hawaii is piloting the evaluation system, tying the results of evaluations to teacher salary will require a collective bargaining agreement, something that has so far eluded state negotiators.

HSTA leader Okabe has asked the state to delay the formal launch of the teacher evaluation for a year, which probably will not sit well with the U.S. DOE.

Okabe has also raised concerns about the use of test scores and student surveys in the evaluation system.

The state has pledged to implement the evaluation system statewide next school year and tie it to high-stakes personnel decisions — including tenure, pay and termination — in 2014-15.

Okabe said an additional year of a pilot program would be an "opportunity for us to get it correct."

"We don’t feel it’s ready," he said. "We want to make sure it’s fair."

Hawaii was among 10 winners — nine states and the District of Columbia — of a second round of Race grants in 2010, and onlookers nationally have been skeptical about Hawaii’s ability to follow through on the ambitious promises in its Race to the Top application.

Race to the Top is the Obama administration’s signature education initiative, and the U.S. DOE’s decision to place Hawaii’s grant on "high-risk" status was something of a black eye for the president’s birth state.

But since December 2011 other Race states have also been dinged for a lack of progress on some education initiatives. Though no other grants have been placed on "high-risk" status entirely, some portions of states’ grants have been.