Lottery 'principles' | Arkansas Blog

Wednesday, December 17, 2008

Lottery 'principles'

Posted By on Wed, Dec 17, 2008 at 1:28 PM

Lt. Gov. Bill Halter has released a list of "principles" to guide creation of the state lottery.

The legislature? Principles? Kidding aside, the list looks pretty good. Simple rules. Universal availability, including for older students. Strong ethics and accountability (though I can't currently imagine what appropriate exceptions might be necessary for FOI coverage).

Check it out.

Lieutenant Governor Proposes Set of Principles
For Achievement-Based Scholarship Lottery

LITTLE ROCK (December 17, 2008) -- Lieutenant Governor Bill Halter today released a set of principles to serve as a framework for scholarship lottery legislation that will deliver maximum benefits for Arkansas students and families.   Halter called for achievement-based HOPE scholarships that are universal, simple and fair.
“Our mission can be summarized in one sentence:  Every Arkansan who works hard and plays by the rules should have the opportunity for a higher education,” Halter said. “With this mission in mind, the criteria for a HOPE scholarship should be simple, universal and fair,” Halter said.  “Ideally, every Arkansan who does not currently have a college degree, and who achieves academically, would be eligible for a HOPE scholarship.  Traditional students attending four-year institutions, traditional students attending two-year institutions, and non-traditional students returning to school or going to college for the first time should all benefit. “For generations, Arkansas has been at or near the bottom nationally among the 50 states in two key and closely linked categories:  Higher education and personal income. The scholarship lottery will provide new hope and new opportunities for current and future generations of Arkansans to receive the highest quality college education right here in their home state, then put that knowledge to work to achieve their God-given potential.” With respect to the lottery operation, Halter stated:
“We’re talking about building a $400-million-a-year business from the ground up in 12 months.   Applying sound business principles is a must.   The management of the state-run lottery will best be housed in an independent but government-owned corporation staffed by experienced professionals who can operate with the flexibility demanded by a rapidly changing business environment.  While wholly accountable to the public, this Arkansas Lottery Corporation should be free of day-to-day politics.”
Arkansas voters approved the Scholarship Lottery Amendment on November 4 by a nearly 2-to-1 margin.   The constitutional amendment calls for the Arkansas General Assembly to establish a state-run lottery with all net proceeds going to Arkansas citizens enrolled in any certified two-year or four-year college or university in Arkansas.
“Based on the start-up experiences of other states, if we move with appropriate speed, Arkansas could be up and running with our state’s lottery late in 2009 (January 2010 at the latest).   Importantly, scholarship assistance to Arkansas students could begin to flow even earlier than this by utilizing a portion of the unexpended surplus of existing scholarship programs and other one-time funds.   The first HOPE scholarships based on scholarship lottery criteria could be awarded as early as next fall for the 2009-2010 academic year.”
Halter said the principles reflect the best practices of 42 other state lotteries and many conversations with Arkansas legislators, while also addressing the particular challenges that Arkansans face. “The voters put their faith in the state legislature and their trust in good government.  The next step is crafting a scholarship lottery that will work best for Arkansas.” House Majority Leader Steve Harrelson of Texarkana said:  “I congratulate Lieutenant Governor Halter for his leadership on this issue.  These principles provide a precise and compelling guide for myself and other legislators as we work toward enacting legislation.  I am excited about these ideas and look forward to working with Lieutenant Governor Halter on this issue.” State Senator Jimmy Jeffress of Crossett, incoming chairman of the Senate Education Committee, said:  “I am in complete agreement with all these principles.  I am particularly thrilled about the principle regarding non-traditional students.  There are a host of Arkansans who can’t afford to go back to college and these scholarships could be their shot.”
 “These are all great principles and I support every single one of them,” State Representative Billy Gaskill of Paragould said.  “I really feel like we can use them to give many Arkansas residents a second chance to get their college education.” State Senator Jim Luker of Wynne said: “I appreciate the leadership and initiative provided by the Lieutenant Governor on this issue.  The Arkansas voters have said they want the Hope scholarships available and it’s up to us to make sure we set it up the right way.  I look forward to working with Lieutenant Governor Halter and other legislators as we move forward.” State Representative Otis Davis of Earle said:  “We absolutely should use the best practices from all the other states that have gone through this before and these principles laid out by Lieutenant Governor Halter are the best way to implement those best practices.” “Speaking from experience with two children in college, it is very challenging to make the ends meet and it ought not to be so difficult,” State Senator Steve Bryles of Blytheville said.  “Having a fully funded scholarship program covering everyone meeting clear and reasonable criteria is desperately needed in Arkansas.  I appreciate Lieutenant Governor Halter taking the lead to make this reality and I look forward to working with him and other members of the legislature as it is implemented.”
 

General Principles for Scholarship Lottery Legislation

PRINCIPLE 1: HOPE SCHOLARSHIPS SHOULD BE EARNED WITH ACADEMIC ACHIEVEMENT

• A scholarship is an award to be earned, not a giveaway to be expected.   Graduating high school seniors who achieve a certain minimum grade point average (GPA) should be automatically eligible for a HOPE scholarship if they enroll at a certified 2-year or 4-year college or university in Arkansas.   The threshold minimum GPA should be set at a level that demonstrates that the student can do the work and complete the college curriculum, but should not be set so high that only a small portion of our students receive scholarship assistance.   The threshold GPA level will also need to depend on the level of funds generated by the lottery.   Recipients should keep their scholarships throughout their undergraduate studies provided they maintain a certain minimum GPA.
• Scholarship recipients who slip below the GPA standard in college should be allowed to earn back their award if they show measurable progress.   Similarly, an earn-in process should be established for students previously ineligible for a HOPE scholarship if their college grades meet the minimum GPA after a certain number of credit hours. 
• HOPE scholarship awards should be deposited directly into a scholarship recipient’s financial aid account at his or her college to ensure that the money follows the student.

PRINCIPLE 2:  UNIVERSALITY -- SCHOLARSHIP OPPORTUNITIES OPEN FOR ALL ARKANSANS REGARDLESS OF RACE, GENDER, AGE, INCOME OR CHOSEN FIELD OF STUDY

• The cost of college tuition in Arkansas, and across the country, is far outpacing the increase in family income.   Virtually every Arkansas family is hard-pressed to afford higher education for their children.   More Arkansas students are taking out larger student loans, resulting in greater debt burdens after graduation.   On average, undergraduate college students in Arkansas borrowed nearly $5,000 in 2007 to help cover their higher education costs .    In 2004, the average student graduating from a four-year college in Arkansas owed $17,383 on graduation day.    Nationally, nearly a quarter of public four-year college graduates and more than a third of private four-year college graduates had taken on too much debt to manage on a starting teacher’s salary.    These debt levels lead college graduates to delay buying a home or a car, and postpone marriage or having children .
• In Arkansas, this “cost crunch” is having a more disastrous effect.   Students simply can’t afford to stay in college.    A recent Southern Regional Education Board report documented the challenge before us:  The 18 percent of adults in Arkansas with a bachelor's degree was a lower percentage than both the 16-state regional average of 25% and the national average of 27%.

PRINCIPLE 3: KEEP IT SIMPLE

• Eligibility criteria for a HOPE scholarship should be simple enough for students, parents, grandparents, teachers and counselors to read and understand in 30 seconds or less.
• Arkansas has a $53 million surplus in unspent college scholarship and grant funding, despite offering 21 distinct scholarship programs.   This unfortunate fact results from a system that is too cumbersome, complicated and uncoordinated.   High school counselors, college administrators and state higher education officials find it difficult, if not impossible, to recite the eligibility criteria for any two of the 21 scholarship programs.    No wonder parents and students are confused; no wonder money goes unspent; no wonder frustration rises.   Compare this experience to that of applicants for the HOPE Scholarship in Georgia where students who graduate from a Georgia high school, attend a Georgia college and achieve a 3.0 GPA receive a full tuition scholarship. 
• Parents and students should have reasonable access to descriptions of all college financial aid products offered by the state of Arkansas as well as all federal aid programs that are administered by the Arkansas Department of Higher Education.   A single state-managed Web page should list all financial aid products and include clearly stated eligibility rules for each.  Ideally, a single online application would be available for most if not all state-funded and state-managed scholarships.

PRINCIPLE 4:  PROVIDE SCHOLARSHIPS TO NON-TRADITIONAL STUDENTS

• HOPE scholarships and grants should expand access to higher education for adults who may have missed their first opportunity for college.   Again, sobering statistics dramatize the need in Arkansas:  A U.S. Census Bureau report for 2006 showed that 284,358 Arkansans over the age of 25 had some college education but had not completed a degree .   A state task force charged with developing a plan for increasing the number of Arkansans with bachelor’s degrees made this key point in a report released in August: “Enrollment of the non-traditional student will be a primary determinant of Arkansas’s future economic success.”
• Thousands of Arkansans haven’t had the opportunity to either start or complete a college education.   Life happens.   Maybe they had to work full time right after high school; maybe they went into the military; maybe they got married.   Now they want to go back to college, upgrade their skills, get a degree and increase their earning potential.   All Arkansans benefit when these non-traditional students succeed.   We should help.

 

PRINCIPLE 5:  MAINTAIN ALL EXISTING SCHOLARSHIP EFFORTS SO THAT LOTTERY-GENERATED FUNDS ARE ALL NET NEW RESOURCES

• The Constitutional Amendment approved by Arkansas voters clearly stated the lottery proceeds should supplement, not supplant, existing non-lottery educational resources administered by the state of Arkansas.   The Amendment was specifically drafted to address the bad experiences of other states, where new lottery funding wound up merely replacing other previously existing education funding.   The more than 640,000 Arkansas voters who marked their ballots for a Scholarship Lottery did so with the clear understanding that they were expanding higher education opportunities for Arkansas citizens.   Arkansans have a right to expect that previous funding levels and efforts for scholarships and higher education will be maintained.   Similarly, state-funded higher education institutions should be expected to maintain their level of institutionally provided scholarships and grants to students.   HOPE scholarships should not displace existing federal, state, institutional or privately funded financial aid programs currently available to Arkansas students.   Simply stated, this is new money.

PRINCIPLE 6:  RETHINK AND RESTRUCTURE

• Currently, Arkansas provides more than $47 million in state funding for scholarships.   Proceeds from the Scholarship Lottery are projected to increase this total to $147 million, more than tripling current state resources.   This dramatic increase in new financial aid offers opportunities to rethink, restructure and integrate existing scholarship programs.   Merely tripling the allocations of some of the existing scholarship programs, nearly all of which have unspent surpluses, is the wrong path to take.   A new program requires new thinking.

PRINCIPLE 7:  LEARN FROM THE BEST PRACTICES OF OTHER STATES

• Perhaps the biggest benefit of Arkansas being the 43rd state to approve a state-owned lottery is that we can learn from the experience of other states.   We can see what has and hasn’t worked.   Increasingly, states have opted for a state-owned corporation to manage their lotteries as the best way to blend businesslike efficiency with government ownership.
• A state-owned Arkansas Lottery Corporation governed by an independent board of directors could manage day-to-day operations of the Scholarship Lottery without the taint of politics.   An efficient, non-political structure is necessary to achieve maximum scholarship funding levels.
• The Arkansas Lottery Corporation board of directors should hire an experienced Lottery Director with a proven record of success.   The board should have rule-making authority in determining the types of lottery games allowed, ticket prices, prize amounts and distribution, and methods for selection of winners.
• The Scholarship Lottery should maintain competitive flexibility in allocating gross lottery sales revenue across prizes, operating expenses and net proceeds for deposit in the Scholarship Trust Fund.

PRINCIPLE 8:  ETHICS AND ACCOUNTABILITY

• Arkansans should be assured that their lottery is run with the highest integrity.   While by no means comprehensive, the following practices can help assure Arkansans that their interests and not special interests are being served:
q The Arkansas Lottery Corporation should submit quarterly and annual reports for public review.
q Business operations should be subject to the Arkansas Freedom of Information Act, with appropriate exceptions.
q All lottery sales revenue should be deposited in a Scholarship Lottery Trust Fund held separate from the state Treasury.
q The Arkansas Lottery Corporation should be self-funded and self-sustaining, with allowances for start-up debt and terms of repayment.
q A two-year ban on lottery-related lobbying should be established for former Arkansas Lottery Corporation employees and board members.
q No gifts (not even a cup of coffee) should be allowed from any lottery vendor to any Arkansas Lottery Corporation employee or board member.
q No one under age 18 should legally purchase a lottery ticket, subject to appropriate penalties.
q No Arkansas Lottery Corporation employees or family members should legally purchase a lottery ticket or win a lottery prize resulting from the purchase of a lottery ticket in Arkansas.
q Criminal background checks should be required of all licensed lottery retailers and lottery vendors.
q Lottery prize winnings of anyone who owes child support or taxes should be garnished.
q Lottery retailers should participate in the Amber Alert program for missing children.
q Lottery retailers should post point-of-sale information about Problem and Compulsive Gambling Resources, including toll-free telephone hotline numbers and Internet addresses.
q The effectiveness of the Scholarship Lottery should be evaluated biennially, in part by reporting how many scholarships were awarded, how many recipients retained their awards and how many recipients remained on track to complete, or succeeded in completing, their college degrees.

PRINCIPLE 9:  A SENSE OF URGENCY

• Based on the start-up experiences of other states, if we move with appropriate speed, Arkansas should be able to be up and running with our state’s lottery late in 2009 (January, 2010 at the latest).   Importantly, scholarship assistance to Arkansas students could begin to flow even earlier than this by utilizing a portion of the unexpended surplus of existing scholarship programs and other one-time funds.   The first scholarships based on Scholarship Lottery criteria outlined above could be awarded as early as next fall for the 2009-2010 academic year.
• Clearly, an appropriate amount of deliberation is justified to effectively structure and implement this landmark development.  However, delays are not costless.   The Scholarship Lottery is projected to generate $100 million annually in net proceeds for higher education.  For every day that the lottery is not up and operating, over $270,000 in scholarships for Arkansas students are permanently lost.   For every month of delay, over $8 million in scholarships for Arkansas students are permanently lost.  To put these numbers in context, the entire annual allocation for Arkansas Workforce Improvement Grants is less than $4 million and the entire annual allocation for Arkansas Governor’s Scholars is less than $10 million.
• For well over a year, Arkansas voters heard virtually every argument for not going forward with a Scholarship Lottery and they have rejected these arguments decisively and unambiguously by an almost 2:1 margin.   The Constitutional Amendment was approved in every part of the state and by every demographic group of voters.   Simultaneously, the pressures on families of the costs of higher education have escalated with the recent softening of the economy and the plunge in stock and real estate values.   Our students and their families need this help now. 
• Timing is critical.   A college degree has never been more important, nor has it been more expensive:  We have a historic opportunity to make a life-changing difference for our children and our children’s children.
• Inching ahead isn’t enough.   Marginal gains aren’t sufficient.   Arkansas must do something dramatic for current and future generations if we are to move forward as a state.

SUMMARY
The principles outlined above have worked well for the most successful of the 42 other states that run lotteries, especially in terms of revenues generated for public programs.  States like Georgia, where more than 1 million students have attended Georgia colleges and universities on HOPE Scholarships over the past 15 years.  States like South Carolina, which has funded more than 500,000 scholarships to two-year and four-year schools in the past six years.  States like Tennessee, which has raised more than $1 billion for lottery-funded college scholarships since lottery sales began there in 2004.  Arkansas can write its own success story with a Scholarship Lottery that is responsive to both market conditions and our own unique needs.

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