The Arkansas House of Representatives on Tuesday sent Gov. Asa Hutchinson a bill to terminate the Arkansas Lottery Commission and require the governor to appoint the lottery director.
Senate Bill 7 by Sen. Jimmy Hickey, R-Texarkana, also would create the Office of Arkansas Lottery in the state Department of Finance and Administration's Management Services Division.
"It makes practical sense to put the lottery commission under the operations of the state Department of Finance and Administration," Hutchinson said in a written statement after the House approved SB7.
"It's a responsible move and should reassure the people of Arkansas that the lottery will be efficiently run and properly benefit the state's scholarship-eligible students," the Republican governor said.
SB7 will become effective upon the governor signing it, which will probably occur this week, Hutchinson spokesman J.R. Davis said.
"There is not an immediate plan to make any changes to [lottery] personnel," Davis added.
The House voted 84-3 to approve SB7 Tuesday, which cleared the Senate in a 34-0 vote Feb. 11.
State Rep. Robin Lundstrum, R-Springdale, who is the House sponsor of SB7, said the lottery is "in trouble" and the governor needs to have oversight of the program.
"It is not my intention to show disrespect to the lottery commissioners," she said.
"These are Arkansans who have put in many hard hours and have sacrificed their personal time," Lundstrum said. "This is about business management, analysis of trends and financial data and a need to change direction to correct a critical situation."
The nine-member commission is made up of Chairman John "Smokey" Campbell of Hot Springs, Vice Chairman Julie Baldridge of Little Rock, Bruce Engstrom of North Little Rock, Dianne Lamberth of Batesville, Raymond Frazier of Little Rock, Doug Pierce of Jonesboro, Mark Scott of Rogers, George Hammons of Pine Bluff, and Alex Streett of Russellville.
Rep. Chris Richey, D-Helena-West Helena, who is co-chairman of the Legislature's lottery oversight committee, told his colleagues that he couldn't say whether eliminating the commission would make the lottery the best it could be.
"As I have shared these reservations with the governor's office, I have been assured that he wants this," Richey said. "And that he is going to do the best he can with it. He is going to make sure it runs the best it can to benefit the students of Arkansas. I am willing to give him that opportunity."
Nearly 63 percent of Arkansas voters approved a constitutional amendment authorizing the lottery in 2008.
In 2009, the Legislature enacted a law to create the state lottery, including the nine-member commission, with the governor, the Senate president pro tempore and the House speaker each appointing three members. The commission was tasked with hiring a lottery director. That law also created a 12-member legislative committee to oversee and review the lottery's operations.
The aim was to set up the lottery to run like a business and prevent lawmakers from micromanaging the lottery, the sponsors of the law -- then-Sen. Terry Smith, D-Hot Springs, and then-Rep. Robbie Wills, D-Conway -- said in 2009.
More than 30,000 students have received lottery-financed Arkansas Academic Challenge scholarships during each of the past five fiscal years.
But the lottery's ticket revenue and the amount raised for college scholarships have slipped each of the past two fiscal years. The Legislature has twice cut the size of the scholarships for future recipients, partly because of the lottery's net proceeds for college scholarships falling short of projections.
In addition to the lottery's net proceeds, the Arkansas Academic Challenge Scholarship program is financed with $20 million a year in state general revenue.
A $20 million lottery reserve fund is aimed at helping the scholarship program handle temporary cash-flow shortfalls.
After raising $82.7 million for scholarships in nine months in fiscal 2010, the lottery raised $94.2 million during the first full fiscal year, 2011. Proceeds for scholarships climbed to $97.5 million in fiscal 2012 but dropped to $90.3 million in fiscal 2013. In 2014, proceeds fell to $81.4 million.
Lottery Director Bishop Woosley has projected that the lottery would raise $78.2 million in fiscal 2015 for scholarships.
The Arkansas Academic Challenge Scholarship program paid out $122.7 million in scholarships in fiscal 2011, $129 million in fiscal 2012, $133.1 million in fiscal 2013 and $112.8 million in fiscal 2014. It is projected to pay out $101.5 million in scholarships in the current fiscal year and then $99.4 million in fiscal 2016, according to the state Department of Higher Education.
In July, the Legislature enacted Hickey's legislation to bar the lottery from deploying electronic monitor games. The legislative action came after the lottery commission voted to deploy electronic monitor games to help reverse declining ticket revenue and net proceeds for college scholarships, though a majority of the Legislature's lottery oversight commission already has declared its opposition to these games, which also were opposed by Oaklawn Park.
Lottery Commission member Scott said Tuesday that "I don't think the commission was effective or could be effective without a laser -- and more routine -- focus on sales and marketing.
"The governor and his team will have the ability to oversee those issues on a day-to-day basis, unlike a nine-member commission that meets monthly," said Scott, who was appointed to the commission by then-Senate President Pro Tempore Michael Lamoureux, R-Russellville, in 2013.
Woosley said Tuesday that "we look forward to working with Gov. Hutchinson's office, [Department of Finance and Administration] Director [Larry] Walther and DFA staff in this transition and to making this lottery as successful as possible to support the students of Arkansas.
"The staff and I stand ready to make this transition as seamless as possible," said Woosley, who has been the lottery's director since February 2012.
Meanwhile, Hickey said he plans to change his SB5 to require future high school graduates to have at least a score of 19 on the ACT or an equivalent score on a comparable college entrance exam to receive an Arkansas Academic Challenge scholarship.
To get the scholarship, Arkansas high school graduates are now required to have at least a 2.5 grade-point average or a minimum ACT score of 19 or an equivalent score on a comparable college entrance exam.
He said he also plans to propose reducing the scholarship from $2,000 to $1,000 for future recipients during their first year at two and four-year campuses and increasing the scholarship from $3,000 to $4,000 during their second year at the four-year schools and from $2,000 to $3,000 during their second year at a two-year college.
"It still gives those students some money on the front end and it helps with our cash flow because that extra $1,000 ... will be paid in the second year, so those students that are not meeting the current qualifications of a 2.5 [college grade-point average] and full-time in college for the first year, they won't be eligible for that," Hickey said.
That would save the scholarship program about $7 million a year, he said.
Future scholarship recipients would receive $4,000 for their third year and $5,000 for their fourth year at the four-year colleges under his bill, Hickey said. He said he plans to ask the Senate Education Committee to approve SB5 next week.
Metro on 02/25/2015