Tuesday, September 18, 2012

UPDATE: Halter objects to reduction in lottery scholarships

Posted By on Tue, Sep 18, 2012 at 2:52 PM

BILL HALTER: Dont mess with a good thing.
  • BILL HALTER: Don't mess with a good thing.
Former Lt. Gov. Bill Halter, who drove the effort to institute a state lottery for college scholarships. was at the legislature's lottery oversight committee today and I gather he's out front to oppose efforts by some legislators, notably Sen. Johnny Key of Mountain Home, to jigger with the scholarship formula.

Halter is right, whether you love the lottery or, like me, don't.

Key has proposed a graduated lottery scholarship — $2,000 first year, with an additional thousand each succeeding years as students progress toward graduation, so that college seniors receive $5,000. Currently, the lottery scholarship caps out at $18,000 per student, over four years. The proposed changes cap the scholarship at $14,000 over four years.

This will do two things: 1) favor higher income students who are better able to attend in the first place to the detriment of poorer students who now qualify for $4,500 at four-year colleges 2) equalize first-year spending among two-year and four-year students and thus push more students into cheaper two-year institutions (think that fine ASU branch in Mountain Home.)

These are my points, not Halter's. Though lottery revenues have ticked downward lately while college costs continue to climb, Halter makes a couple of unassailable points: 1) Net revenue has been near the $100 million projected annually; 2) the scholarship amounts had to be trimmed back from an initial $5,000 at four-year schools not because of revenue shortages but because of greater than expected demand. In other words, the scholarships seem to have succeeded in increasing the college-going rate and, it's hoped, the completion rate.

"You don't follow up a success by reducing the financial incentives that got us there in the first place," Halter told me.

More coming on this topic from Cheree Franco, who was on hand for the meeting. Halter is still not talking about politics. He's widely expected to seek the Democratic nomination for governor in 2014, a position for which Attorney General Dustin McDaniel is already running.

UPDATE: According to the Bureau of Legislative Research, as early as next fiscal year, funds for the lottery scholarship may not be able to cover all qualifying Arkansas students.

As of last Saturday, 13,560 Arkansas students will receive lottery scholarships for the current semester — a number that will most likely grow, since students have until October 1 to qualify. This year's freshman class alone will receive a projected $50 million payout in 2012-2013. But due to scholarship "dropout rates" (students leaving school or failing to re-qualify for scholarships), that same class is projected to only receive $31 million next year. Even so, at the current rate of funding, scholarship expenditures are expected to dip into the $20 million emergency reserve at some point in this fiscal year. And even with that reserve, there is a projected deficit by next year, and the $80 million cushion that's bolstered the fund thus far, garnered from getting the lottery up and running sooner than expected, is quickly being depleted.

The proposed change — increasing scholarships on par with individual students' earned college credits, was presented by the Bureau of Legislative Research as incentivizing students to graduate. As pointed out by Senator Mary Ann Salmon and other legislators, Arkansas has a high rate of college enrollment and a low rate of college graduation. But Senator Joyce Elliot said that "we've assumed this might be a better approach regarding retention. We don't know this for sure," and mentioned her concerns that Arkansas not repeat "the mistakes of other state lottery scholarships, such as Georgia's, by supporting the education of the most advantaged students" — those best situated to take the initial scholarship cut. Rep. Barry Hyde pointed out that $2,000 is half of what freshmen are currently offered and a "wholesale renovation of the program" based on, essentially, a year of data, "is awfully short." Other possible solutions include revising eligibility requirements and possibly reintroducing a minimum ACT score of 19, which some legislators worry will disadvantage minority and low-income students.

Senator Jonathan Dismang seemed to support tiered funding as a potential solution, pointing out that with other state budget shortfalls, the general revenue for lottery scholarships is unlikely to be increased. "We shouldn't wait till the last minute," he said.

There was also some discussion about increasing the $12 million in funds earmarked for non-traditional students, who are defined as any student who doesn't enter college directly from high school. Non-traditional students have higher lottery scholarship retention rates than traditional students.

December is the benchmark for the legislative committee to make a recommendation regarding these matters to the General Assembly.

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