Both “had” and “have” are correct. They have different meanings. “Had” (the funds were earmarked for education at one time but they aren’t any more) “Have” (the funds were earmarked for education) “Have” suggests something perhaps a little improper in the process, I.e. the funds should still be used for education. “Had” gives the history of where the funds come from. Uses, is using, will use. Doesn’t make a difference.

This is a good question. I tempted to say that your friend is correct. It should use present simple with present perfect, or past simple with past perfect. More context is needed to know for sure. Present simple with present perfect: "The project uses funds that have been earmarked for education." The project is presently active and ongoing. The were earmarked for education in the past but exactly when is irrelevant, so it is appropriate to use present perfect (have been earmarked). Past simple with past perfect: "The project used funds that had been earmarked for eductation." The project is finished, in the past. One action (earmark) occurred before another action in the past (use), so past perfect is appropriate. I say more context is needed for a few reasons. Is the project completed or currently active? Is the project currently active but there was another related event (in the preceding sentence perhaps) that occurred in the past but after the funds were earmarked? I could see an argument that present simple and past perfect might be used in the same sentence. For example: "Many people criticized the current project at the board meeting because the project uses funds that had been earmarked for education." In this example, the project is currently active. "Criticize" occurred in the past, "earmark" before that.