LITTLE ROCK — The Legislature should cut the amounts of the Academic Challenge Scholarships to $3,300 a year at the state’s four-year universities and $1,650 a year at two-year colleges for first-time recipients in the coming school year, a legislative committee decided on Tuesday.
“Politically, it may be not be soothing to all elected officials, but from a practical standing it is simply a mathematical calculation,” said state Rep. Barry Hyde, D-North Little Rock, who proposed these scholarship amounts.
The amounts recommended by the Legislature’s lottery oversight committee for the coming school year are slightly larger than what the interim director of the state Department of Higher Education told lawmakers that he preferred.
Shane Broadway said he preferred the committee recommend $3,000 a year scholarships at the universities and $1,500 a year scholarships at the colleges for first-time recipients
The 2013 Legislature could consider increasing those recommended amounts if the lottery raises $95 million or $100 million for college scholarships in the year ending June 30, Broadway said.
Lottery Director Bishop Woosley, who projected the lottery would raise $98 million in fiscal 2013 earlier this year, told lawmakers last month that they “are probably safe to assume” that it will raise “somewhere in the $89 million-$90 million range” for the year.
The scholarship program also receives $20 million a year in state general revenue.
Currently, students who were first awarded the scholarships in the 2010-2011 school year receive $5,000 a year to attend universities and $2,500 a year for colleges. Those who were first awarded the scholarships in the 2011-2012 or 2012-2013 school years get $4,500 a year at universities and $2,250 at colleges.
Lawmakers said they want to maintain those scholarship amounts for those students through their senior year as long as they remain eligible.
More than 30,000 students have been awarded scholarships during each of the past three years, according to the state Department of Higher Education.
About 27,000 students at universities and 5,700 students at colleges are getting the scholarship this school year, according to Harold Criswell, interim deputy director of the state Department of Higher Education.
The program is projected to cost $133 million in fiscal 2013, he said.
The program is projected to cost $124 million in fiscal 2014 if the 2013 Legislature adopts the committee’s recommended cuts in the scholarship amounts for future first-time recipients, Criswell said.
Committee Co-Chairman Sen. Johnny Key, R-Mountain Home, said the committee’s members have indicated for the past year that the 2013 Legislature would have to significantly reduce the scholarship amounts for the firsttime recipients in the coming school year if the structure of the program didn’t change or without “some other revenue increases.”
Scholarship amounts have to be cut because the lottery hasn’t raised as much for scholarships as lawmakers had hoped, and more students than projected are receiving the scholarships, he said.
“I hope something changes, so that we can move that back up at some time in the future,” Key said.
Hyde said that lawmakers set the initial scholarship amounts in 2010, knowing that cuts would eventually be necessary.
The program started with what amounted to a surplus of about $85 million from the lottery’s first several months of net proceeds, and lawmakers have tried to keep the scholarship mounts as high as possible without having a large reserve fund, he said. The program has a $20 million reserve fund.
“We are not faced with this problem today because we don’t have the income that we anticipated,” he maintained. It’s largely because more students than projected are receiving the scholarships, he said.
Hyde said the department’s projections show the scholarship program would have a $3.7 million balance in June 2017 and a $20 million reserve fund, assuming it raises $90 million a year for scholarships. That projection is based on new scholarship recipients receiving $3,300 a year at the universities and $1,650 a year at the colleges.
The program would be $2.2 million short of the money needed to pay scholarships in February 2015 based on the department’s projections after using the $20 million reserve fund, he said.
The program could pay the $2 million in scholarships a month later in March 2015 under “the worst-case scenario” or the Legislature could allow the state treasury to make a short-term loan to the program to get it through this cash-flow problem like it does for several other agencies, Hyde said.
State Sen. Jonathan Dismang, R-Searcy, said he wants the program to be solvent and sustainable and for students to know what scholarship amounts they can receive each year.
“My only apprehension is I don’t want to overpromise and undeliver for these May [high school] graduates” who could receive the scholarship for the first-time in the coming school year, he said.
Front Section, Pages 1 on 12/19/2012