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Lottery scholarship funds running $8M behind last year

As New Mexico’s higher education officials near a deadline for deciding whether to roll back scholarship assistance for tens of thousands of college students, lottery officials said Thursday they’re transferring less money into the fund that supports the program.

Transfers of lottery proceeds through April are lagging by nearly $8 million compared to the same time last year, and projections show the overall return to the scholarship fund by the end of this fiscal year is expected to fall short of last year’s levels by about $9 million.

New Mexico has struggled in recent years to find a solution to solvency problems with the program. Legislators during their regular session did not pass any measures that would affect the program’s long-term bottom line, leaving state higher education officials to sort out how to stretch the funding.

Some have warned that the scholarships might only pay 70 percent of tuition starting next fall. State officials are still crunching the numbers and it will likely be next month before any decisions are made.

Officials with the state Higher Education Department did not immediately return messages seeking comment Thursday.

Tuition and demand for the financial aid have outpaced revenues from lottery sales since 2009, forcing lawmakers to be creative. When ticket sales didn’t cut it, they turned to liquor excise revenues but now that funding is being phased out and the urgency is growing as the state grapples with a budget crisis.

New Mexico is among several states that offer scholarships fueled by lottery revenues. However, the state is among one of the poorest in the nation and a place where higher education is seen as a luxury by some who have a difficult time meeting eligibility requirements and rounding up needed financial aid.

Advocates are worried that any decrease in the scholarship award could result in fewer students pursuing degrees. More than 30,000 students now receive the scholarships.

Lottery Chairman Dan Salzwedel is blaming what he called artificial barriers for keeping the lottery from maximizing sales.

Pointing to an existing requirement that 30 percent of lottery sales be funneled to the scholarship program, he and others have suggested that repealing the requirement would free up more money for higher prize payouts, which would boost sales and result in more proceeds for scholarships.

Lottery officials said doing away with similar requirements have helped scholarship programs in Arizona, Colorado, Texas and Oklahoma.

“The dynamics are simple. Without legislative relief from the mandate, my worst fear is that next year we will be reporting another decline in lottery transfers,” he said.

Annual revenue from ticket sales plateaued at $46 million last year, while tuition costs for eligible students are closer to $60 million a year, according to state higher education and lottery officials.

The figures released Thursday also show that monthly proceeds this fiscal year exceeded last year’s levels only twice in a 10-month period.

Lottery officials also are warning lawmakers, who will be meeting next week for a special session, that doing away with the lottery’s gross receipts tax exemption could further harm the scholarship fund.

Funding for lottery scholarships lags by nearly $8M