LITTLE ROCK — A legislative panel voted Tuesday to recommend lowering the amounts of lottery-funded college scholarships for new recipients to $3,300 per year to attend a four-year school and $1,650 per year to attend a two-year school.
Students currently receive $4,500 to attend a four-year school and $2,250 to attend a two-year school. The legislative oversight committee on the lottery recommended reducing the amounts in order to prevent the lottery scholarship program from running out of funds in about three years.
The change, if approved by the full Legislature, would take effect in the 2013-14 school year and would not affect students already in the lottery scholarship program. The Legislature convenes for a new session in January.
The committee approved a motion by Rep. Barry Hyde, D-North Little Rock, to make the recommendation. Hyde said changes are needed in the program mainly because of a high level of student participation.
Lottery revenue also is slightly down this year. Officials say the lottery is on track to raise $90 million for scholarships in current fiscal year, down from $97 million last year.
The committee acted after the state Department of Higher Education recommended even lower scholarship amounts — $3,000 for a four-year school and $1,500 for a two-year school.
Shane Broadway, interim director of ADHE, testified that according the department’s projections, setting the scholarships at $3,000 and $1,500 would ensure that the program would have enough funds, if lottery proceeds hold steady, to meet the obligations of the next class of students from freshman through senior year.
Broadway warned that if scholarships are set at $3,300 and $1,650, by February 2015 the cost to maintain the scholarships is estimated to exceed the scholarship program’s balance and ADHE’s $20 million reserve of lottery funds.
But legislative analyst Heather Tackett testified that according to projections by the state Bureau of Legislative Research, the state could set scholarships at $3,300 and $1,650 without exhausting the reserve, though at times it would have to dip into it.
“Sure, we’ll dip into the red at some point or another, but I don’t foresee that all of the $20 million in reserve will be utilized,” she said.
Broadway stood by his recommendation, saying the Legislature could increase the scholarship amounts later if it determines it can afford to do so.
“With what we know at this moment in time, we would suggest going on the conservative side of it until we may know a little more information, but that’s certainly the committee’s call,” he said.
Hyde said he understood ADHE’s concerns, but he said the Legislature could adopt special language to allow the lottery to obtain short-term loans from the state treasury to help with cash-flow.
Broadway told reporters later he was not sure such loans would be legal.
“I don’t think there’s a way the lottery can borrow from the Revenue Stabilization Trust Fund,” he said.
The lottery launched in September 2009. Initially, lottery-funded scholarships were set at $5,000 for four-year schools and $2,500 for two-year schools. The Legislature reduced the amounts last year to $4,500 and $2,250, respectively.
“I personally think it’s disappointing that we are at a point where we started at $5,000 and then $4,500 and now we’re talking about $3,000 and $3,300,” Key said. “But just the same, everyone in this room and on this committee said last year this day would come.”
During earlier hearings the committee had studied a proposal by Key to set the scholarships at different amounts for each grade level.
A spokeswoman for Gov. Mike Beebe said Tuesday the governor supports being conservative with scholarship amounts to make sure that “we don’t offer students more help than we can actually deliver.”
“Gov. Beebe continues to place a high priority on ensuring that we keep our promise to the students who are already receiving scholarships,” spokeswoman Stacey Hall said.
Also Tuesday, the lottery oversight panel voted against recommending that students be allowed to use lottery scholarship funds for no more than one remedial course.
Rep. Darrin Williams, D-Little Rock, called the proposal “arbitrary and capricious.”
The panel also voted against recommending that the minimum course load for scholarship recipients be lowered from 15 hours to 12 hours per semester.
Broadway told the panel that the main reason students fail to retain their scholarships is a failure to complete 15 hours per semester.
Only 47 percent of recipients retain their scholarships after the second year, he said.
But Sen. Mary Anne Salmon, D-North Little Rock, said she would prefer to keep the minimum at 15 hours “for the sake of encouraging college students to get through college.”