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Arkansas watches as Tenn rethinks lottery scholarships

Apr 14, 2008, 10:21 am

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If Lt. Gov. Bill Halter's push for a state lottery is successful, Arkansas legislators may want to consider Tennessee's dilemma before writing rules for spending proceeds that would be earmarked exclusively for college scholarships.

Arkansas' eastern neighbor is struggling with what to do with an unintended $460 million surplus from that state's version of a scholarship lottery. Part of the problem is that many scholarship recipients have not been able to maintain grades good enough to keep their awards. Among other things, Tennessee lawmakers are also considering lowering the grade-point requirement.

Halter, who is heading a drive to put a proposed lottery amendment on the November general election ballot, notes Tennessee's lottery is structured differently from his proposal, but he admits the Legislature probably would have to modify any rules and regulations it initially put in place for a lottery.

"While there may be need for modification and improvement of the (scholarship) program as it goes forward, and you certainly want to learn from experience, ... we shouldn't lose sight of the fact that this proposal, if passed by Arkansans, is going to dramatically increase the amount of financial assistance available to Arkansas families," Halter said in a recent interview with the Arkansas News Bureau.

Halter's campaign, the Hope for Arkansas Committee, has received more than $300,000 in pledges and has hired a Michigan firm, Voter Outreach, to help gather the nearly 78,000 signatures needed by July 7 to place the proposal on the November ballot.

Halter said "tens of thousands" of signatures have already been collected, and he said he expects to have the necessary signatures by the July deadline.

The lieutenant governor estimates a state lottery would generate $100 million a year for scholarships. His proposal would leave it to the Legislature to promulgate rules governing the program.

Tennessee voters approved a constitutional amendment in 2002 creating a state lottery to fund education programs — college scholarships, public school building programs, prekindergarten and after-school programs. The Tennessee Legislature developed rules and regulations, and the lottery went into effect in January 2004.

About 78,000 Tennessee college students currently receive $233 million in scholarships under the lottery program. The amount is expected to reach $238 million next academic year. Recipients receive $4,000 to attend a four-year school and $2,000 to attend a two-year school. Some need-based scholarships — an additional $1,500 a year — are available for students from households with an income of $36,000 or less.

Tennessee high school students must have at least a 3.0 grade point or score 21 on the ACT to receive a scholarship. Earlier this year, the Tennessee Higher Education Commission released a report that showed 50 percent of college freshmen receiving a scholarship fail to retain it for their sophomore year because they can't keep the required 2.75 GPA.

The requirement gets tougher after the first year; recipients must maintain a 3.0 GPA as sophomores, juniors and seniors to keep their scholarships.

Nearly 70 percent of the students receiving scholarships in 2004 lost them by the beginning of their fourth year in school, according to the commission report.

Tennessee Gov. Phil Bredesen has proposed dropping the scholarship grade-point requirement to 2.75 for all four years of college. A Tennessee Senate committee last week endorsed a bill that would reduce the grade-point requirement 2.75 for the sophomore year but maintain a 3.0 for juniors and seniors.

The Tennessee Legislature also is debating what to do with the $460 million lottery surplus.

The large sum has accumulated because lottery revenues have outpaced the number of scholarships during the four years program has been in place, said Lee Harrell, a research analyst with that state's Senate Education Committee. This is the first year where college students in all four classes have scholarships, he said.

Some of the reserve also is from money that was designated for students who were unable to retain their scholarships, Harrell said.

While most of the money goes directly to college scholarships for Tennessee residents to attend in-state institutions, the Tennessee constitutional amendment allows for some of the surplus to be used for capital outlay projects for K-12 school facilities, early childhood school programs and after-school programs. Tennessee law requires at least $50 million remain in reserve at all times.

Along with trying to decide how much of the reserves should go to school building programs and pre-school programs, some Tennessee lawmakers have filed bills that would expand the scholarships to "nontraditional" students, including honorably discharged veterans of the wars in Iraq and Afghanistan.

The so-called "Helping Heroes Grant" would take a one-time amount of $25 million from lottery reserves and place it in an endowment.

Jerry Cox, executive director of the Family Council, which opposes an Arkansas lottery, said because Halter's proposal would place all of the lottery proceeds into scholarships, Arkansas could eventually have a reserve as high or higher than Tennessee's.

"Anytime you create a pot of money and then ask the Legislature to deal with it, most of the time they grow the size of government," Cox said.

He also said he was worried about how much of the lottery revenue the state would spend every year just to advertise and encourage people to buy lottery tickets. The Legislature would decide under Halter's proposal.

The measure also does not specify what types of lottery games would be authorized, Cox noted.

"I'm deeply concerned with the Legislature working on the rules and regulations," Cox said.

Proceeds from the proposed Arkansas lottery would be segregated from the state's general revenue budget, Halter said.

He said he has been paying attention to developments in Tennessee, and the matters that state is dealing with are appropriately being handled by the Legislature, as they would be in Arkansas.

"The specific criteria for the scholarships we did not wish to write into the Arkansas Constitution. That's not the right place for it," Halter said.

Ultimately, increasing the number of high school students attending college in Arkansas is most important, the lieutenant governor said.

"The minor alterations that might be necessary for the program on an ongoing basis ... they kind of pale in comparison to the fact that we're really addressing something very significant here," he said. "I don't want a situation where minor changes and modifications in the future get in the way of people understanding that this has the potential to be a dramatic improvement for the state, the state's families and our students."

To illustrate his point, Halter noted the El Dorado Promise, a $50 million scholarship program for El Dorado School District students funded by Murphy Oil Corp.

Sixty-percent of El Dorado high school graduates attended college before the scholarships were announced last year. The first year the scholarships were available, the number of college-going students jumped to 80 percent, Halter said.

"That is an awesome accomplishment," he said.

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