Officials optimistic excess funds will mean win for construction, early at-risk programs
About six weeks from now, Tennesseans will be able to participate in their own state lottery, and through it finance higher education for 65,000 students.
"The process is moving very smoothly and rapidly," Rebecca Paul, lottery CEO, told her board of directors recently.
Feb. 10 is the target start-up date for sales of "instant winner" lottery tickets. Paul says 3,000 retail outlets will be ready to sell tickets by then - 2,668 had been approved last week - and all major contracts needed to run the operation are in place.
Advertising for the lottery kickoff will begin at least a couple of weeks before that, says lottery Executive Vice President Wanda Young Wilson, with a theme of "the lottery is fun."
But under the system enacted earlier this year by the state Legislature and signed by Gov. Phil Bredesen, the official purpose of the lottery is funds for education rather than fun for participants.
According to Tennessee Higher Education Commission projections, the lottery needs to produce almost $177 million to cover the cost of scholarships that will be awarded in the first academic year of operation.
The first portion of that - about $88 million - will be needed next August to cover the estimated first-semester enrollment for the fall.
If there is any excess money, pre-kindergarten programs for "at risk" children and construction of kindergarten-through-12th-grade education facilities will also be funded.
Many legislators thought the prospects of excess money unlikely earlier this year, but Sen. Steve Cohen, D-Memphis, says that was "a lot of Chicken Little, the-sky-is-falling fears" from lottery detractors.
Under the leadership of Paul, who was hired away from the Georgia lottery that served as a model for Tennessee's law, the operation is now poised for "phenomenal success" that should assure ample money for everything, says Cohen, who has been called "the father of the lottery" by lottery board Chairman Denny Bottorff and others.
"I was much more comfortable with our projections of expenditures (for lottery scholarships) than with the projections of revenue (from lottery sales)," says Brian Nolan, associate director of THEC, recalling that the legislative consensus was to keep scholarship costs below $200 million in the first year.
"I think now, we're going to have much more than that," he said last week. "Sen. Cohen once said that we're going to have more money than we know what to do with. I tend to go in Sen. Cohen's direction now. I certainly hope so, because we're going to have a lot of scholarships."
The lottery corporation has been operating on borrowed money so far, with plans to promptly repay that debt once ticket sales are under way.
The scholarship program sets the basic amount for a student at a four-year college or university at $3,000 annually. Students must have either a 3.0 grade average in high school or a score of 19 on the ACT test.
The standard for home school graduates is a 23 on the ACT. Those with a GED diploma must have a 19 ACT and score 500 on the GED test.
Students from families with income of less than $36,000 per year are eligible for an extra $1,000. So are those with a 3.75 GPA in high school and a 26 ACT score, though in no case can the award be more than $4,000.
Low-income students can also qualify for smaller scholarships with a 2.75 GPA and an 18 ACT score.
Students attending a technical school to learn a skill or trade have no qualifying test or grade standards. They can receive $1,250 per year.
Applications are slated to be available by Jan. 2 at the Tennessee Student Assistance Corp.'s Web site, www.tennessee.gov/tsac, or toll-free at 1-800-342-1663. They will also be available through most high school guidance counselors in January.
All scholarships are subject to being reduced, pro rata, if money fails to flow in from lottery ticket sales as projected. Thus, if profits are 10 percent short, each award is reduced by 10 percent - $300 in the case of the basic $3,000 scholarship.
But, again, lottery advocates are now saying that's unlikely.
Indeed, for Paul to maximize the bonus she could earn as lottery CEO, the lottery will have to generate $122 million in profits - not just the $88 million needed to cover the first payment on scholarships - by August.
Another standard required for Paul to receive the maximum bonuses - which could raise her salary from its base of $350,000 per year to $752,500 - is having gross ticket sales of more than $165 per capita in the first year of operations and $50 per capita in profits. That's the same level Paul achieved in her first year as CEO of the Georgia lottery.
When the bonus goals were set, Bortorff and other board members said they thought it unlikely that Paul could meet them - though they hope she does because of the money that will mean for scholarships.
But Cohen says meeting the $88 million profits goal next summer will be "a slam dunk" and predicts that first-year profits will reach close to $300 million. That would mean full funding for pre-kindergarten and school construction programs as well as scholarships for 65,000 students.
"Tennesseans want to play the lottery and they've been playing it in other states. It's just been folly for us not to have a lottery," he said.
For students, he said, the scholarships will provide an incentive to make better grades and graduate from high school and, ultimately, leave more college graduates to begin their careers without the "tremendous burden" of paying off student loans.
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