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Lottery scholarship bill now in limbo

Copyright © 2018 Albuquerque Journal

A divisive proposal to free the New Mexico Lottery from a scholarship-funding mandate hit a roadblock Wednesday in a House committee.

House Bill 147 would remove a requirement that the lottery put at least 30 percent of its gross revenues into the Legislative Lottery Scholarship program.

But the legislation, sponsored by Rep. Jim Smith, R-Tijeras, failed to advance out of the House Appropriations and Finance Committee, which voted to table the legislation on an 8-8 vote. The vote leaves the bill essentially in limbo, though it could be brought back up.

Lottery officials have backed several similar proposals through the years, contending that the 30 percent mandate hurts sales by limiting the funds available for prizes. They say removing it would improve sales and ultimately benefit students.

But opponents argue that more money has gone into scholarships every year since the mandate was implemented in 2008 than any year before it and that removing it would enable the lottery to raise spending on administrative costs and third-party vendors.

Under Smith’s proposal, the lottery would instead put all net proceeds into scholarships. But the bill would have reinstated the 30 percent-of-gross requirement if the contribution fell below $38 million. The lottery has pumped anywhere from $37.8 million to $46.3 million into scholarships each year since the mandate.

Smith’s proposal also would add the lottery’s unclaimed prize money to the pot – a sum estimated at $1.3 million to $2 million.

The latest version also walked back a recent amendment that would have eliminated that $38 million safeguard after 2023, an expiration date Smith said Wednesday would’ve worked “against the students.”

Lottery CEO David Barden testified in the bill’s behalf, saying sales of Scratchers have decreased over the past 11 years, despite growth trends nationally.

“We’ve been told by our players they will play in border states,” he said. “They will spend their money somewhere else if we don’t have a game they enjoy playing.”

But committee members expressed skepticism about how the change would help students. Rep. Harry Garcia, D-Grants, said the lottery gave an average of 24 percent of its gross revenue to scholarships before the mandate.

“Why are we getting rid of something that’s benefiting our students?” he asked.

Rep. Liz Thomson, D-Albuquerque, noted that the $38 million safeguard matched the lowest of the lottery’s contributions since the mandate.

An estimated 26,000 New Mexico college students get the scholarship annually, but its value has diminished to cover an average of 60 percent of their tuition – down from 90 percent last year. Growing demand and rising tuition have strained the fund, prompting various solvency proposals each year in Santa Fe.