Gov. Neil Abercrombie said he and Hawaii State Teachers Association President Wil Okabe signed the “most progressive contract in the country” this morning at the Capitol.

The union and state have been in a heated labor dispute for years, but they say all that is over now that teachers have a new four-year deal complete with better benefits, 3 percent annual raises and a performance-based evaluation system.

Abercrombie said a “partnership in transforming education” has been forged with HSTA.

Citing Shakespeare, the governor said it’s true that “all’s well that ends well.” But he said he sees this as the beginning of transforming the state’s beleaguered public education system.

Okabe said the contract sends a strong message to the rest of the country that Hawaii will be a leader, particularly with the new teacher evaluation system based on multiple measures of effectiveness.

Board of Education member Jim Williams, a critical player in the contract negotiations, said it’s been a difficult past four years — as difficult as any he’s experienced since the 1970s.

Education Superintendent Katherine Matayoshi said the contract exemplifies a shared belief that when you invest in teachers, the public education system benefits as a whole.

The governor didn’t take any questions at the press conference Thursday. He said he and Matayoshi had to take a call with U.S. Education Secretary Arne Duncan. 

The feds have been hot on Hawaii’s case, putting them at “high risk” of losing what’s left of a $75 million Race to the Top grant. The state was given this status in part because of the absence of a contract. 

Teachers have been working since July 2011 under the governor’s “last, best, final offer,” which included 5 percent pay cuts and higher medical premiums.

The end of the labor dispute was announced last night when teachers overwhelmingly voted in favor of the contract settlement offer. 

State Senate and House leaders received official notice of the contract ratification Thursday morning. 

The four-year deal is expected to cost $332 million, according to the state negotiating team.

Lawmakers will be factoring this new money into the next biennium budget, which is expected to be finalized early next week. The total cost in general funds for the next two years is $103.85 million, plus $12.18 million for health benefits.

Finance Director Kalbert Young says the total cost for the four-year agreement could range from $330 million to $370 million.

— Nathan Eagle