Lottery Scholarship Program Should Not Pay Full Costs

The Legislature will soon be considering reforms to New Mexico’s Lottery Scholarship Program. While a number of tweaks such as increasing the GPA requirement have been offered and will likely be considered, after taking a careful look at the program as a whole, it would appear that the Lottery Scholarship could use a serious overhaul.

Before getting into specific reforms, it is worth pointing out that while they have provided college educations for thousands of New Mexico students, the Lottery Scholarships are not free money. Their proceeds are the result of voluntary lottery ticket purchases which are disproportionately made by middle and low income people. These people could have potentially saved, invested, or even invested in their own child’s educations.

The fact that there are tradeoffs and that the Lottery Scholarship is a regressive (albeit voluntary) tax, makes it extremely urgent that the return on New Mexico’s Lottery Scholarships must be maximized both in terms of educational outcome and overall impact on our state’s economy.

To maximize the program’s positive impact, it is imperative that lottery scholarships not cover 100% of tuition and that they instead be offered in limited amounts. This policy change alone would force New Mexico’s institutes of higher education to compete on price for the 26 percent of their undergraduate customers receiving lottery scholarships. It would also encourage students to look for additional funding sources for their educations. Outside scholarships, parents, and obtaining employment could provide additional funds for college that would in turn allow more students to receive a college education.

Furthermore, having scholarships of a set, limited value would encourage students to look for the educational option that makes the most sense for them such as a community college or a vocational degree without feeling the need to “take advantage” of a four-year full-ride at a more expensive, four-year institute.

Simply, in its current form, the Lottery Scholarship reinforces the idea that a free higher education is an “entitlement.” Providing scholarships in a fixed amount will both encourage students to value their educations while encouraging our institutes of higher education to compete for those students.

Ideally, once this most important reform is enacted, we at the Rio Grande Foundation would like to see that Lottery Scholarships be made available for any institute chosen by the student whether that is in or outside New Mexico. There is no educational justification for forcing students to use their scholarship at an institution here in New Mexico. In fact, enabling students to experience cultural and educational institutions outside New Mexico could go a long way towards broadening the outlook of top students throughout our state.

No matter what happens with the Lottery Scholarship program, it makes no sense to prop it up with revenues from the General Fund. The Gov. is calling for $16 million in state funds while the Legislative Finance Committee is calling for $22 million. The Legislature has already spent $10 million from the state’s Tobacco Settlement Fund (really the General Fund) to prop up the Lottery Scholarship program.

Unfortunately, human nature being what it is, the Legislature is only likely to deal with the issue when students and their families lose of face the threat of losing their scholarships and put pressure on their elected officials. More money will just kick the proverbial can down the road again.

Lastly, while raising GPA standards sounds like an easy enough fix for the Program’s finances, this must be done with great care. Maintaining a 2.5 GPA in University Studies or Political Science (I was once a Poly Sci major) is far cry from maintaining the same grade in Engineering or Math at New Mexico Tech. At a time when STEM is being encouraged throughout our schools, some accounting must be made not to discourage Scholarship recipients from those areas of study for fear of losing their scholarships.

The program as designed today has several unattractive features and inefficiencies as outlined above that need to be changed. Hopefully, the Legislature will lead the way to maximizing the benefits of this program.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.