State Lottery-Sponsored Scholarships Struggling in Arkansas, New Mexico
Posted By Carrie Wiley on March 2, 2015 at 11:00 am
Today, there’s more demand than ever for young people to pursue a college education – as well as a more affordable way to achieve that education. In fact, the National Center for Education Statistics (NCES) estimates that 85% of full-time students at 4-year institutions receive some kind of financial aid. That includes everything from federal financial aid to college grants to state-sponsored scholarships.
Many state-sponsored scholarships, however, are funded by lottery revenue – and in some states, lottery programs are suffering from declining sales. Arkansas and New Mexico have recently been in the news for this issue, but others are also showing signs of problems – and this may have a lasting impact on state scholarship programs.
Lottery revenues decreasing
Declining lottery sales have been attributed to a number of things: the lasting effects of the Great Recession, cash-only purchasing requirements, and a general boredom with that type of gambling. And it’s an issue all around the country. Maryland Powerball sales dropped off 41% between 2013 and 2014, and Missouri lottery profits were $21 million lower in 2014 than they were in the year prior.
Lower profits mean less funding for lottery-sponsored scholarships, which exist in eight states, including Arkansas, Florida, Georgia, Kentucky, New Mexico, South Carolina, Texas, and West Virginia. However, over half of the 45 states that operate lotteries dedicate the bulk of their proceeds to education, meaning that declining lottery revenues could have a larger impact on overall education funding.
These declining sales, coupled with ever-rising tuition costs, have made it increasingly difficult to provide enough funding for state scholarship programs.
Arkansas to cancel program?
Shane Broadway, Director of Arkansas Department of Higher Education, recently painted a bleak picture for the future of Arkansas’ scholarship program. Broadway anticipates that funds for the program will run out by spring 2016. The program has already had to borrow from a $20 million reserve of ADHE funds to cover shortages, and new lottery proceeds will need to first be used to repay the reserve.
Losing this program would have a significant financial impact on Arkansas students. Since its launch in 2010, the scholarship fund has awarded nearly $500 million to more than 130,000 students.
New Mexico trying quick-fixes
New Mexico is another state quickly running out of scholarship funds. Governor Susana Martinez recently asked for $6.5 million in order to continue helping current students through the next few semesters. Another proposal would allow for lottery tickets to be purchased using credit cards, potentially boosting sales. However, that proposal would also eliminate the requirement that 30% of revenues be dedicated to the scholarship fund.
As a short-term fix, New Mexico has allocated taxes from liquor sales to go towards the scholarship fund, which will keep the program solvent temporarily. Funding for the state’s scholarship program has been an issue for nearly ten years.
Issues across the country
Arkansas and New Mexico aren’t alone in their issues with lottery-funded scholarships. Most states with such scholarships have had to make adjustments to award amounts and eligibility requirements in order to manage demand in recent years. In 2011, Georgia reduced its award from full tuition and fees to up to 90% of tuition and fees. Florida has increased eligibility criteria, reduced scholarship amounts, and reduced the award limit from five to four years. West Virginia also did away with full-tuition scholarships, reducing the amount given to $4,750 or full tuition and fees, whichever is less.
Critics have expressed concern that stricter eligibility requirements may favor wealthier families. For example, the Georgia Budget and Policy Institute found that even though lower-income counties purchased the most lottery tickets, fewer students in those counties benefited from the state-sponsored HOPE Scholarship.
Other studies have found that even though lottery-funded scholarships lead to an immediate bump in education expenditure, states that don’t have lottery-sponsored programs tend to spend more on education in the long run.
The bottom line? The fate of state lottery scholarships remains to be seen, but students may want to start putting their eggs in another basket – think federal aid, grants, and private scholarships – just in case.