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Editorial: ’18 session time for lottery bosses to put up or shut up

Once again, the state Higher Education Department is warning that scholarships funded by the state lottery – which for years paid 100 percent of the tuition for students attending state colleges and universities, but now pays only 90 percent – could fall to covering 70 percent or less of tuition by next fall.

And once again, lottery officials are claiming that the only way they can boost sales and put more money into the scholarship fund is to remove the requirement that at least 30 percent of lottery revenues go to scholarships. That’s been the refrain for years from lottery CEO David Barden, who claims removing the 30 percent benchmark will let the lottery to increase prizes, which will boost sales, which will pump more money into the scholarship fund. Dan Salzwedel, the lottery board chairman, has joined Barden’s chorus.

Here’s the concern: Between the lottery’s inception in 1996 and July 2007, it contributed an average of 23.4 percent of its gross revenues to scholarships, while spending nearly that much on administrative and operating costs. After the independent think tank Think New Mexico released a report in 2006 critical of the lottery’s low contribution to the scholarship fund, the Legislature mandated that, beginning July 1, 2007, the lottery had to contribute at least 27 percent of its gross revenues to scholarships. That mandatory contribution rose to a minimum of 30 percent beginning Jan. 1, 2009. The lottery has made that benchmark ever since.

But there are new problems. With lottery proceeds this year projected to be about $9 million less than last year’s, it’s clear that gambling revenues in our poor state might have hit a saturation point. Legislators have known since 2009 that demand for the scholarships has been outstripping the state lottery’s ability to pay for them but have yet to come up with a permanent fix. Instead, lawmakers have tried Band-Aid approaches such as supplementing the scholarship fund with liquor excise tax revenues.

Meanwhile, the students for whom the lottery was ostensibly set up are getting less – and this fall maybe get even less than that – of their tuition costs covered.

More than 109,000 students have used lottery scholarships. Discussions about raising the academic requirements for students to receive lottery scholarships, which the Journal has supported, have been non-starters. The Journal has also consistently supported the retention of the 30 percent benchmark because of what has happened here and in other states when it’s not there: High administrative costs and lucrative deals for lottery vendors. But watching students receive less and less from the lottery doesn’t honor the program’s intent, either.

So here’s a suggestion for lawmakers in the 2018 session:

Require that Barden’s contract, which ties his bonuses to revenues, ticket sales and operational savings, be changed so those bonuses are linked to the amount of money going into the scholarship fund. (Barden’s base pay and possible incentives added up to close to $175,000 in 2015.)

Consider legislation to remove the 30 percent benchmark but require that contributions to the scholarship fund increase by an average of at least 8 percent annually over the next three years. Even with the benchmark, the lottery scholarship fund increased an average of 3.3 percent annually between 2012 and 2016, so roughly doubling it without the benchmark seems plausible.

If, after three years the lottery can’t hit that number, reinstate the 30 percent benchmark and require Barden, his executive staff, and all seven members of the governor-appointed Lottery Authority board tender their resignations without the possibility of reappointment.

In other words, let the people responsible for running the lottery take the same gamble they’ve been asking everyone else to take since 2009. It’s time lottery officials put their money where their mouths are.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.