LITTLE ROCK — Despite a surge in ticket sales spurred by last week’s record $587 million Powerball jackpot, the state’s lottery scholarship program still needs changes to avoid running out of money, lottery officials were told Monday.
Shane Broadway, interim director of the state Department of Higher Education, said that a couple of weeks ago the lottery’s ticket sales for the year to date were more than $4 million behind the previous year’s sales, but Powerball changed that.
“We pretty well are back to where we were a year ago in one day with the jackpot growing last week,” Broadway told the commission during a meeting at Arkansas Tech University that was accessible to the media by telephone.
Even so, Broadway warned that if the lottery generates about $90 million a year in net proceeds for scholarships, and if the scholarships continue to be awarded at the present rate and in the present amounts, the scholarship program is only a few years away from running out of money.
“The students who are going to graduate from high school this coming spring, by the fall and certainly by the spring of their sophomore years (late 2014 or early 2015), you get to the point even at $1oo million in net proceeds where you have to tap into the reserve and you don’t have the ability to pay it back. You never catch back up,” he said.
Broadway made similar warnings in testimony last month before the legislative oversight committee on the lottery. The committee is studying a proposal by Sen. Johnny Key, R-Mountain Home, that would award scholarships in different amounts for different grade levels.
Students currently receive $4,500 per year to attend a four-year school and $2,250 per year to attend a two-year school. Under Key’s proposal, freshmen would receive $2,000, sophomores $3,000, juniors $4,000 and seniors $5,000.
Broadway told the commission that if scholarship amounts were reduced to $3,300 per year for four-year schools and $1,650 per year for two-year schools, the next group of freshmen could be funded for four years at that level with $90 million a year in scholarship proceeds, although the Department of Higher Education would have to borrow from the reserve.
“If now because of last week it increases the amount in terms of what net proceeds may be for this year, then instead of going from $4,500 and $2,250 to $3,300 (and $1,650) it could possibly mean you don’t have to come down as far,” he said.
Lawmakers also could seek to save money by changing the eligibility requirements for the scholarship, Broadway said.
Broadway said the department usually begins the financial aid process for the next school year on Jan. 1, but since the Legislature is likely to make changes to the program during the session that begins Jan. 14, applications will include “a very big asterisk” advising applicants that eligibility requirements and scholarship amounts may change.
Commissioner Bruce Engstrom of North Little Rock asked, “If you drop (the first-year award) down to $2,000, will a lot of people not apply because they just can’t afford to go to college?”
Broadway said that is a question on everyone’s mind.
“My intuition would say yes, it does,” Engstrom said.
“My intuition would say yes as well,” Broadway said, adding that he did not have any research on how far scholarship amounts could be lowered without discouraging students from applying.
Also Monday, the commission voted to authorize Lottery Director Bishop Woosley to write to members of the state’s congressional delegation and urge them not to support a bill that would legalize Internet gambling, including the sale of lottery tickets.
“This could have some negative impact on us, regardless of whether we ever did iGaming or not,” Woosley said.
The legislative oversight committee on the lottery has already written to the delegation in opposition to the bill.