LITTLE ROCK, Ark.—Students who are awarded lottery-funded college scholarships next fall could receive 10 percent less than students in 2010 if a measure discussed by legislators Thursday becomes law.
Rep. Barry Hyde, D-North Little Rock, said financial projections show that there won't be enough money to fund the next class of scholarship recipients for four years without cutting the award amount.
Students who were awarded scholarships for the fall received $5,000 to attend four-year colleges or $2,500 for community college. Those amounts would be trimmed to $4,500 and $2,250 under the new proposal.
Hyde, co-chairman of the Joint Lottery Oversight Committee, said organizers anticipated the initial scholarship awards would include 65 percent for university students and 35 percent for community college students. But the availability of the money apparently inspired more students to seek university educations, with 80 percent of scholarships awarded for students at four-year schools.
Hyde said he had expected a carryover of $10 million from the initial round of scholarships but that money was distributed to students.
The estimated cost for funding the next scholarship class at $5,000 and $2,500 would be $138 million, while anticipated revenue is $124 million, Hyde said.
"The setting of the scholarship amount is a math equation," Hyde said.
On a motion by Sen. Mary Anne Salmon, D-North Little Rock, the committee agreed to defer action on changing the language until after the start of the legislative session, which begins Jan. 10. The panel is scheduled to meet again on Feb. 16.
"I think that toward the end of the session is the best time," Salmon said.
Hyde said there could be money to award the original amount if there is a greater dropout rate than anticipated among the initial scholarship recipients. Also, revenue from the losses of lottery players could be higher than projected.
Hyde noted the difficulty in setting scholarship policy without the benefit of historical data because of the newness of the program. Hyde said that it would take three years of data on the performance of students receiving the scholarships to get a clear idea of what to expect from year to year.
Stacey Hall, a spokeswoman for Gov. Mike Beebe, said the move to trim scholarship amounts appeared to be a prudent step.
"The governor does not have a specific dollar amount in mind, but he has said consistently that he would prefer to be more conservative to ensure that the state can afford to honor its promises to students who receive the lottery scholarships," Hall said.
In the last legislative session, a measure passed that shifted revenue from unclaimed prizes into scholarships, which was counter to the lottery's plan to use that money for marketing. A measure under consideration for the coming session would restore $5 million of that money to the marketing budget and allow the Arkansas Scholarship Lottery to enter into contracts for multi-state games in which unclaimed prize money is returned to the game itself.
The Arkansas Lottery Commission is seeking the flexibility to enter into such contracts without legislative approval. Several states are developing a "Dollars for Decades" game that the Arkansas lottery wants to join, but current rules won't allow it to move quickly to do so.
The committee again decided to wait until the legislative session to consider the change.
Ticket sales began Sept. 28, 2009, and the Higher Education Department awarded $83 million in lottery-generated scholarships last fall.
The lottery has drawn praise for the speed of its launch and for its smooth operation in selling tickets and awarding prizes. But it has also weathered one storm of criticism after another. Twice, lottery director Ernie Passailaigue has survived attempts by two members of the lottery commission to fire him.
A legislative audit report in November found problems ranging from the lottery's failure to use generally accepted accounting practices to insufficient documentation in Passailaigue's travel reimbursements. The commission had to revise its budget after the last session because Passailaigue didn't know about the change the Legislature approved for allocation of unclaimed prize money.