Changes ahead for lottery scholarship program


LITTLE ROCK — Arkansas’ lottery scholarship program is expected to go through some changes during the upcoming legislative session, though lawmakers differ on what those changes should be.

One likely outcome is that scholarship amounts will be lowered. The first lottery-funded scholarships, awarded in the 2010-11 school year, were $5,000 per year to attend a four-year school and $2,500 per year to attend a two-year school. By the time the Legislature convened in January 2011, however, it had become clear that the program was not sustainable at that level, so lawmakers reduced the scholarship amounts by 10 percent.

Now the state Department of Higher Education is urging lawmakers to make more adjustments to the program. ADHE officials say that if lottery revenues continue at the current level, the cost to maintain scholarship awards at the current level would exceed revenues and exhaust a $20 million reserve within three years.

The legislative oversight committee on the lottery voted Tuesday to recommend lowering the scholarships amounts to $3,300 for four-year schools and $1,650 for two-year schools. But that is not the only idea being discussed.

“I’d be really surprised if we do not change eligibility requirements so that these scholarship amounts (can) remain at a level that’s meaningful for the students,” said Sen. Jonathan Dismang, R-Searcy, a member of the lottery oversight panel.

Currently, to qualify for an Academic Challenge Scholarship a student must graduate from high school with at least a 2.5 grade-point average or score a 19 on the ACT. Dismang said he would like to see the Legislature change the requirement so that students must have both a 2.5 GPA and a 19 ACT score, not one or the other.

Rep. Ann Clemmer, R-Benton, said the Legislature could create a formula in which both GPA and ACT score are taken into account, so a low score on one would require a higher score on the other to achieve eligibility.

“A 2.5 alone does not mean you’re prepared for college,” she said.

Only about half of lottery scholarships are retained, according to higher education officials. A move to raise eligibility requirements likely would be met with some opposition. Some say that would defeat the lottery’s goal of making college accessible to students who otherwise would not go.

“I would just ask we proceed with caution with changing any eligibility that would make it more difficult for my constituents to get lottery scholarships,” Sen. Stephanie Flowers, D-Pine Bluff, said during a legislative hearing on lottery scholarships last month.

Flowers noted at the time that her district includes part of Jefferson County, which is one of the top counties in the state in lottery ticket sales but is not one of the top counties in scholarship awards.

Sen. Johnny Key, R-Mountain Home, co-chairman of the legislative oversight committee on the lottery, has floated the idea of a tiered system in which scholarships would increase each year for four years, to give students an incentive to stay in school. Critics say that offering relatively small scholarships for freshmen would offer too little aid to students whose only barriers to starting college are financial.

Clemmer is considering filing a measure similar to a proposed constitutional amendment she filed in 2011 that would have required at least 35 percent of lottery proceeds to go to scholarships.

All lottery revenue after prizes and expenses now goes to scholarships. Net proceeds have averaged about 20 percent of total revenue.

“The voters didn’t vote just for a lottery, they voted for a lottery scholarship. And when only 20 percent of the money is going to scholarships, I don’t know that that’s what the voters intended,” Clemmer said.

Critics of that idea say a percentage requirement for scholarship funding would mean smaller prizes and limited ability to promote lottery games, ultimately putting a damper on ticket sales.

“I don’t know that it’s as simple as locking into a certain percentage,” said Rep. Matthew Shepherd, R-El Dorado, a member of the lottery oversight panel.

Rep. Nate Bell, R-Mena, is working on a bill to require students who fail to obtain a degree to repay their scholarship money, with some exceptions.

Dismang said of Bell’s proposal, “I understand what he’s trying to do, but I don’t believe that that’s really the direction that we need to be going. We need to be tackling it on the front end through the eligibility requirements.”

Key said during a hearing last week that “it’s disappointing” to be in a position of needing to lower scholarships for the second time.

Arkansas approved a constitutional amendment authorizing a state lottery in 2008. At the time, former Lt. Gov. Halter, who led the push for the lottery, predicted the lottery would raise $100 million a year for scholarships.

The lottery has not quite met that goal. Lottery officials say it currently is on track to raise $90 million this fiscal year for scholarships, down from $97 million the previous year.

Meanwhile, demand for the scholarships has exceeded expectations. More than 90,000 students have received scholarships in the program’s first three years.

“I do think the lottery was oversold. I think we over-promised what would be available to students,” Dismang said.

“It’s the revenue amount, the number of students applying … I don’t think that all those factors were adequately discussed, especially when we were initially setting out the scholarship amounts. It was new to Arkansas, and in a way that’s understandable. But we do have to create the proper amount of expectation,” he said.