That’s because about half the money the lawmakers had planned to use this year to temporarily shore up the lottery scholarship will likely not be forthcoming due to the ruling.
In dollar amounts, that could mean $5 million less to help plug the scholarship fund’s growing budget shortfall, Finance and Administration Secretary Tom Clifford told members of the Legislative Finance Committee.
However, Rep. Luciano “Lucky” Varela, D-Santa Fe, the committee’s chairman, said lawmakers will consider using other state money to offset the budget hit as part of a larger conversation about the lottery scholarship’s future.
“I think we’ll be able to do that when we take a look at the total budget,” Varela said after Thursday’s hearing.
The lottery scholarship is already facing a solvency crisis, due largely to rising tuition costs and increased use.
Higher Education Secretary José Garcia has said scholarships might have to be scaled back, possibly starting next year, if a solvency fix is not adopted during the 2014 legislative session. This year, the lottery scholarship is expected to pay out $67 million in scholarships while taking in only about $40 million in revenue.
Although lawmakers did not approve major changes to the lottery scholarship program during the 2013 legislative session, they did allocate roughly $10 million from the state’s annual tobacco settlement payment to bolster the scholarship fund.
However, a September arbitration ruling by a panel of three retired judges – which came about over a dispute over 2003 payment amounts – means the state will likely have its 2014 payment reduced by $20 million, Clifford said.
In addition to the lottery scholarship fund, the ruling also means less money for tobacco cessation and prevention, cancer treatment and early childhood intervention programs. All those programs also were allocated money this year by lawmakers.
During his Thursday testimony to lawmakers, Clifford said monthly budget allotments for those programs will start being scaled back starting next month in anticipation of the reduced 2014 tobacco payment.
He also questioned whether the state should earmark future tobacco settlement money for certain core government programs, given the unpredictable nature of the payment amounts.
New Mexico receives its yearly payment from big tobacco companies due to a landmark 1998 deal known as the master settlement agreement. In New Mexico’s case, the yearly payments have averaged about $38 million.