Lottery Scholarship program needs more transparency

New Mexico’s Higher Education Department recently announced that New Mexico’s Lottery Scholarship will cover an average of “only” 60 percent of qualifying students’ tuition at New Mexico institutions. That’s down from 90 percent coverage this year thanks to long-term declines in lottery revenues, rising tuition and, most notably, the fact that liquor taxes will no longer be diverted to prop up the Scholarship program.

These problems were easy to foresee. A few years ago, the Rio Grande Foundation outlined problems with the program as currently formulated and detailed some potential changes to the Scholarship a few years ago in a paper, “A Market-Based Approach to New Mexico’s Lottery Scholarship Program.”

Here are a few initial issues with the program itself:

1) By traditionally covering 100 percent of costs, the Scholarship created an entitlement mentality among students who failed to value the benefit they are receiving;

2) Students who would otherwise spend their own or their family’s money or obtain scholarships no longer did;

3) The scholarship subsidized New Mexico’s institutes of higher learning as they priced tuition to maximize scholarship funding;

4) There will always be more demand for “free” college tuition than there are people willing to make long-shot bets on lotteries. This is the very definition of a “regressive” (albeit voluntary) tax. People playing the lottery are generally of low income levels while those benefitting tend to be of higher than average incomes.

Based on the points outlined above and more (and given New Mexico’s ongoing budget woes) filling the Lottery Scholarship budget with money from elsewhere in the budget is unacceptable. In fact, a scholarship that “only” covers 60 percent of tuition might be preferable in many ways to one covering 100 percent as it reduces the entitlement mentality and creates incentives for students to look for additional financing for college.

Should there be higher standards or income limits on the Scholarship Program? Those are good questions, but it is hard to hold a physics major scraping by at demanding New Mexico Tech to the same GPA requirements as a student in a less-challenging field like Political Science Major (my chosen area of study).

And, while it is tempting to make the Lottery Scholarship yet another “progressive” government program geared to helping those of modest incomes, policymakers should demand results from both the Lottery Scholarship and higher education in general rather than punishing “the rich.”

For instance, how many Scholarship recipients stay in New Mexico to work as opposed to leaving our state? Should we limit the Scholarship to fund scholarships to just New Mexico schools or should the program give students a fixed amount to use at the school of their choice whether that is in or out of state?

It’s worth noting that New Mexico spends generously on higher education and that tuition here is lowest in the nation. In March, Student Loan Hero, an Austin, Texas-based student loan management company, used U.S. Department of Education data to calculate the average cost per credit hour for residents to attend public colleges and universities in each state. The average rate at schools around New Mexico is by far the lowest, at $112.77.

All of this spending hasn’t done much for New Mexico’s economy with its highest-in-the-nation unemployment rate. In New Hampshire, on the other hand, a credit hour costs $387 yet the economy is among the most vibrant in the nation.

If used correctly, the Lottery Scholarship could force New Mexico’s higher education system to excel and be more cost-effective. Policymakers can and should reform the Lottery Scholarship to bring increased transparency and accountability to all of higher education.

Paul Gessing is president of New Mexico’s Rio Grande Foundation, which promotes limited government, economic freedom and individual responsibility. Contact him at: [email protected]