Mar 3, 2016, 12:23 pm
The ticket-buying frenzy that erupted over January's $1.6 billion Powerball jackpot wasn't enough to reverse a long-running trend: Proceeds from lottery games aren't keeping pace with the higher education costs they were supposed to pay.
Now lawmakers in at least eight states have made or are considering making dramatic cuts to scholarship programs funded by lotteries. The programs, aimed at opening access to college by providing nearly free tuition, include one at the University of New Mexico that helps nearly half of all first-time full-time students.
College administrators and students alike are bracing for a blow if more money isn't found.
"This would force students to pay about $1,700 more out of their pockets annually, and most likely it would mean borrowing more in student loans," said Terry Babbitt, an associate vice president at the university.
New Mexico has one of the nation's most generous programs, paying more than 90 percent of tuition for eligible students. Without any new money, the benefit will have to be reduced to about 60 percent, according to the state Department of Higher Education.
The problem begins with declining ticket sales. When a state establishes a lottery, excitement typically builds and consumers rush to buy tickets. As the games mature, sales level off. After 20 years, New Mexico's lottery sales have plateaued, as have sales for multi-state games like Powerball.
Changing spending habits play a role too. Millennial consumers, according to some experts, are moving away from lotteries. And many Americans never go inside a convenience store to buy gas anymore, choosing instead to swipe a credit card at the pump. That means fewer opportunities to sell lotto tickets.
The rising cost of tuition and tight state budgets add to the strain.
Affected states have been forced to make painful changes in recent years, tightening eligibility requirements or reducing the amount of aid a student receives.
In New Mexico, lawmakers introduced dozens of measures over the last decade to shore up their program, including making one-time appropriations to prop up the scholarships and shifting $19 million in liquor excise tax revenue.
During the legislative session that ended last month, Senate majority leader Michael Sanchez, a Democrat, pushed through a bill allowing for unclaimed prize money to be transferred to the lottery tuition fund. Experts said that's a step in the right direction but not enough to close the growing gap.
Other ideas include raising the bar for eligibility. To qualify, New Mexico students must maintain a 2.5 grade-point average and complete at least 15 credit hours a semester at a four-year school.
Students are frustrated at the prospect of cuts.
"The reason we were pushing so hard for solvency this year was because we don't want to reach the point where we're looking at a cliff, where we either have to make a decision or students are looking at a 30 percent decrease in funding," said Jenna Hagengruber, a college senior and president of Associated Students of the University of New Mexico. "That's an incredibly large drop."
The scholarships were created two decades ago, shortly after Georgia established a lottery scholarship that became a model for similar programs throughout the South. Georgia was forced to make changes in 2011 that resulted in a nearly 25 percent cut in the number of students who qualified.
Tennessee has tried to buffer its program from the volatility of lottery sales by establishing an endowment that can fund scholarships through interest and earnings. The move could provide a cushion over the short term.
New Mexico already leads the nation with the highest student loan default rate, federal data show. And even if new funding could be tapped, the problem is expected to linger.
Annual revenue from lottery ticket sales has plateaued at about $40 million. Tuition costs for eligible students are expected to top $65 million a year.
Legislators have floated some three dozen ideas in recent years.
One Republican lawmaker said New Mexico's four-year research colleges regarded the lottery scholarship "as a blank check from Santa Fe" and rapidly raised tuition over the last 15 years.
State Representative Jason Harper, who has been working on the issue since his election in 2013, suggests that the scholarships serve as a bridge for students after all other financial aid is exhausted.
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