One of the great benefits of working at an online news service is the ability to update a story to capture more perspective.

So when Rep. Marcus Oshiro, chair of the House Finance Committee, returned my call after a busy day yesterday, I decided to publish a story offering his insights on how the state’s controversial $1 billion frozen in failed investments affected this year’s budget. He also teased to a legislative committee that will investigate how the investments came to be.

Yesterday, we reported that a document from the Hawaii Department of Accounting and General Services shows that more than $394 million of the student-loan-backed auction-rate securities belonged to the general fund.

The $394 million was just a slice of $1 billion of state money frozen in failed student-loan-backed auction-rate securities, long-term investments that were supposedly high-yield and easy-to-access through auctions that took place every seven to 30 days. The state had invested the money with Citigroup, but when the stock market crashed, the auctions failed and the money became stuck in funds that will not mature for as long as 2041.

A stinging March 2010 report by the state auditor blasted the state’s finance department for sloppy investment methods and for allegedly breaking state law that says investments may not exceed a maturity more than five years from the date of investment. The finance department responded by saying it believed the charges were unfounded. An investigative committee is now tasked with creating its own report.

The portion of the investments that belonged to the general fund was a sum that could have been used toward several state crises during tight recession years, says Oshiro.

“Obviously, if we had the money available — roughly $400 million — it would have given us other options,” said Oshiro. “Perhaps we would not have had to raise the taxes and fees. Perhaps we would not have had to cut down the programs and services that we had to.”

Oshiro is a member of the joint-legislative committee that will investigate how the funds became frozen in the auction-rate securities and how that can be avoided in the future.

“Budget and finance screwed up and made these investments,” said Oshiro. “But through the investigative process maybe they, too, were victims of a scam, and they were taken advantage of by those who sold these auction-rate securities.”

Even now, Oshiro says he has “grave” concerns about how the decisions were made at odds with the state’s investment policies and how a “gigantic” portion of the investments were made in 2008, just before the stock market crash.

“I find it quite shocking that, for you, you had to go put in a Freedom of Information Act request to obtain what I would consider public document,” said Oshiro. “It suggests that something is definitely awry or went awry, and I think investigative reporting serves a purpose.”

The investigative committee is still waiting for the Hawaii Senate to finish appointing its members, aside from Sen. Donna Mercado Kim and Sen. Sam Slom. Once that is decided, the committee has until 20 days before the 2011 legislative session begins — about the end of the year — to produce a report.

Some have questioned whether the committee has enough time to produce a thorough report, but Oshiro says he is confident they do.

“The way the investigative committee is constructed and the time we have, we should be able to complete it,” he said.