The scholarships have already shrunk in recent years as lottery sales withered. Legislators voted to shore up the scholarship fund in 2014 with about $19 million in alcohol excise tax funds annually through fiscal year 2017 because lottery revenues couldn’t fully fund it anymore.
But that funding is about to expire and lawmakers are considering alternatives for the scholarship.
About 30,700 students received nearly $61 million in scholarships in the current fiscal year, which covered 90 percent of their tuition. About two-thirds of that money came from lottery revenues, with alcohol excise taxes covering the remainder.
Joseph Cueto, a spokesman for the state Higher Education Department, said the estimated cost at the current tuition coverage rate for the 2016 fiscal year is $64 million. Without the funding from the alcohol excise tax, the lottery scholarship would likely cover only 60 percent of a student’s tuition.
For every dollar spent on a lottery ticket, 30 cents must go to the lottery scholarship, with the remainder going to administrative costs and prize money.
A bill sponsored by Sen. John Arthur Smith, D-Deming, would strike that requirement and instead require the New Mexico Lottery to channel all its net revenues to the lottery scholarship.
Smith said this would allow the lottery authority to funnel more dollars into prizes, which would encourage more New Mexicans to play the lottery. He said that increase would mean an overall increase of money into the scholarship, although the gross revenue percentage might be lower.
But Fred Nathan, head of the Santa Fe-based think tank Think New Mexico, said the 30 percent benchmark is the only accountability measure for the New Mexico Lottery and shouldn’t be removed.
Nathan said Smith’s bill, SB 180, would allow the lottery authority to pay its employees and outside contractors without regard to students. He said that, before the 30 percent requirement, the New Mexico Lottery on average turned over 24 percent of revenues from 1997 to 2007.
And Nathan argued that the 30 percent benchmark directed $9 million in additional funding annually into the lottery scholarship fund since the Legislature passed the requirement in 2007.
Rep. Jason Harper, R-Rio Rancho, said he’s conflicted about removing the 30 percent requirement. Harper introduced the measure to cap alcohol excise tax funding at two years.
He understands the argument that higher prizes could mean more business in the long run, but said there’s no guarantee of that. And if the bill were to pass, less money would go to the lottery scholarship in the short term.
That dip, combined with losing the alcohol excise tax funds, would be a “double whammy” on those who rely on the scholarship.
Senate Majority Leader Michael Sanchez, D-Belen, introduced a bill, SB 212, to fund the lottery scholarship with alcohol excise tax funds through 2019. He didn’t say how the state would fund the lottery scholarship after that.
“All I can say is we continue to look for other revenue sources,” he said.
Sanchez’s SB 79 would mandate that all unclaimed lottery prizes, about $2 million, go to the scholarship fund.
Sanchez sponsored the bill that established the lottery scholarship in 1996.
Smith has introduced a similar bill, SB 230, that would taper off the alcohol excise tax funding in the next three years. In 2017, the funding would drop from $19 million to $14 million and then to $10 million the following year.
Smith said the goal is to create a “soft landing” for the students who rely on the lottery scholarship for tuition.
Harper said the alcohol excise tax should be used to fund anti-DWI programs, the original intention of the tax. Forty-six percent of the alcohol excise tax currently funds efforts to battle drunken driving.
Harper has said students in New Mexico could cover the remaining costs through other scholarships or loans.