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State lottery profits can’t keep pace with costs

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In considering legislation to set up the New Mexico Lottery, there was much debate in the Legislature on what to do with the profits.

There were proposals to dedicate the lottery revenues to state parks, adult continuing education, highways, public school construction and equipment, college scholarships, even prisons.

“It’s amazing. We don’t have a dime yet, and we’re fighting already” over how to spend the money, one senator said.

The Legislature made its decision in March 1995, passing legislation to set up the lottery and dedicate 40 percent of its profits to college scholarships and 60 percent to public school construction and equipment.

One representative complained public education had been made the beneficiary to ensure the support of legislators who were reluctant to vote for a lottery, but New Mexico certainly wasn’t the first state to sell a lottery on the back of education.

Then-Gov. Gary Johnson signed the legislation, and the lottery began operation in 1996.

The promise of the lottery-funded college scholarship program was this:

"When you make a promise, you keep the promise," says Senate Majority Leader Michael Sanchez, D-Belen, about lottery scholarships.

“When you make a promise, you keep the promise,” says Senate Majority Leader Michael Sanchez, D-Belen, about lottery scholarships.

All New Mexico high school graduates would have their undergraduate college tuition paid at a state school if they enrolled immediately in college, stayed enrolled full time and maintained a 2.5 grade-point average.

But within just a few years of the startup of the lottery, the demand for tuition money was projected to outstrip the 40 percent of lottery profits earmarked for college scholarships.

As a result, Johnson signed legislation in 2001 to direct 100 percent of lottery profits to college scholarships. But even then, it was known that eventually demand for college scholarships would again exceed lottery profits. That has been the case since 2009.

The state Department of Higher Education has been able to cover the shortfall with money saved from previous years when lottery profits exceeded tuition payments, but the savings have dwindled.

The department now says it needs an infusion of cash from the Legislature or it will have to reduce tuition payments to students for the spring semester. Lottery profits are projected to be $42.2 million in the fiscal year that began July 1, and tuition payments are estimated to be $66.3 million.

Gov. Susana Martinez has requested $16 million from the general fund to ensure full tuition payments for the spring, but she says the college scholarship program needs a long-term financial fix.

A state task force that included representatives of the administration, the Legislature, colleges, students and others couldn’t reach agreement last year on solvency recommendations.

The administration also hasn’t proposed a plan, and it has sent 32 scenarios to legislators, including possibly making the scholarships based on financial need.

The Legislative Finance Committee has proposed capping tuition awards, increasing the qualifying grade-point average to 2.75 and requiring students to take at least 15 credit hours per semester, up from 12.

“The saddest thing we can do is nothing,” says Senate Finance Chairman John Arthur Smith, D-Deming. “Something’s got to give.”

It certainly wouldn’t be the first time that a state lottery has fallen short of promises, but one of the Legislature’s most powerful – Senate Majority Leader Michael Sanchez, D-Belen – is in no mood to raise the white flag.

“When you make a promise, you keep the promise,” says Sanchez, who was a freshman senator in 1995 when he co-sponsored the legislation to create the lottery.

Sanchez says he isn’t interested in what he calls “punitive solutions” to the funding problem.

He says he would support a proposal under which tuition payments to students would be equal to the tuition of their first year of college and would remain the same throughout their college careers.

Sanchez says he also might support increasing the minimum number of required credit hours per semester to 15 but that he has reservations about that, also.

“A lot of people have to work even though the lottery pays the tuition,” he says.

Without major changes, however, the college scholarship program needs more money to meet demand, and Sanchez says he is trying to identify short-term and long-term potential funding solutions, including revenues generated by changes in tax law and tax increases.

“I’m going to look under every rock,” Sanchez says. “Maybe, I’m still the eternal optimist.”

UpFront is a daily front-page news and opinion column. Comment directly to Thom Cole at tcole@abqjournal.com or 505-992-6280 in Santa Fe. Go to www.abqjournal.com/letters/new to submit a letter to the editor.

 

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