Interesting. I thought you found some new way to get CR to insert default values that I didn't know about.
The formula is trying to overwrite the value of the database field and you can't do this. You just have to make the formula return the proper value and then put the formula on the report where you previously had the database field located. Then the report displays the formula value rather than the database field.
if {tbl1.te} = "Select" then