LITTLE ROCK — A coalition of Republican and Democratic state representatives and the Green Party’s representative want the Arkansas General Assembly to enact legislation requiring at least 30 percent of the Arkansas lottery’s proceeds to go for college scholarships.
The percentage of the lottery’s receipts that have funded college scholarships has ranged from 20.2 percent to 21.5 percent during its first three fiscal years of operations.
It’s a timely topic.
The Republican-controlled Legislature and Democratic Gov. Mike Beebe have enacted Act 234 to restructure the lottery-financed Academic Challenge Scholarship program, after more students than expected received the scholarships and the lottery’s net proceeds fell short of former lottery Director Ernie Passailaigue’s initial projections.
More than 30,000 students have received the scholarships during each of the past three years.
In the coming school year, first-time recipients of the scholarship will receive $2,000 as freshmen, $3,000 as sophomores, $4,000 as juniors and $5,000 as seniors at four-year universities. New scholarship recipients enrolling in two-year colleges will get $2,000 a year for both years.
Students who were first awarded the scholarships in the 2010-11 school year each receive $5,000 a year to attend four-year Arkansas universities and $2,500 a year for community and technical colleges. Those who were first awarded the scholarships in the 2011-12 or 2012-13 school years each get $4,500 a year at four-year universities and $2,250 at two-year colleges.
Last week, state Rep. Ann Clemmer, R-Benton, filed the bill to require the Arkansas Lottery Commission to make sure that at least 30 percent of the lottery’s proceeds go toward net proceeds for college scholarships in fiscal 2014 and each year thereafter.
She has stitched together a coalition of 15 other Republican representatives, eight Democratic representatives and the Green Party’s Rep. Fred Smith of Crawfordsville to co-sponsor her legislation. The bill has been assigned to the House Rules Committee, whose members are appointed by House Speaker Davy Carter, R-Cabot.
Two years ago, Clemmer was the only sponsor of a proposed constitutional amendment to require that at least 35 percent of the lottery’s proceeds be used for college scholarships. But the proposal failed to clear a Senate committee.
Clemmer, a political science instructor at the University of Arkansas at Little Rock, said she voted against Amendment 87, which authorized the General Assembly to create a lottery to raise money for college scholarships.
But, she said, her youngest daughter received $5,000-a-year lottery scholarships for two years at the University of Arkansas at Fayetteville, and “if we are going to have gambling, then I am thrilled it is going for scholarships.” She said she has purchased several lottery tickets and even won a few dollars.
She said she proposed the constitutional amendment two years ago after visiting with Jerry Cox, president of the Family Council, which tried to defeat the 2008 lottery ballot measure. “I think the public, if they are paying attention, will be shocked we only have about 21 percent [of lottery proceeds going for college scholarships].”
Clemmer pointed to a National Conference of State Legislatures report that showed that the net proceeds from the nation’s 43 state lotteries averaged 33.4 percent of their total ticket sale revenue in 2010, compared with 22.4 percent in Arkansas. Arkansas’ 22.4 percent ranked above only Minnesota’s 20.7 percent, Oregon’s 21 percent and Massachusetts’ 21.5 percent; it tied with Vermont’s 22.4 percent.
“I think we can do better. I think we can negotiate better contracts [with lottery vendors]. I think we can design better games,” she said.
But lottery Director Bishop Woosley estimated that Clemmer’s bill, if enacted, would reduce the amount the lottery raises for college scholarships by $20 million to $30 million a year.
The lottery raised $94.2 million for college scholarships during fiscal 2011 - its first full fiscal year of ticket sales - and $97.5 million in fiscal 2012.
Last April, Woosley projected that the lottery would raise $98.5 million for scholarships in fiscal 2013.
But he later lowered his estimates, telling lawmakers in November that they “are probably safe to assume” that the lottery will raise “somewhere in the $89 million to $90 million” range for scholarships in fiscal 2013 “if salestrends continue to hold.”
Woosley said last week that “setting aside a greater percentage of the lottery revenue toward scholarships may sound like a good idea.
“But if HB2263 becomes law, the Arkansas Lottery Commission will be forced to significantly lower lottery game prizes paid to Arkansas players. Lower prizes will depress ticket sales [and] reduced ticket sales mean reduced scholarship revenue,” he said.
Woosley said the resulting lower ticket sales alsowould mean reduced commissions paid to the lottery’s more than 1,850 retailers and higher contract rates from future lottery vendors, resulting in less money for scholarships.
He said the percentage of lottery receipts going to net proceeds is lower in Arkansas than in many other states because the Arkansas lottery has a robust scratch-off ticket program. Scratch-off tickets return a higher percentage of sales revenue to lottery players than from other lottery games, he explained.
“In order to have a [scratch-off ticket] program as robust as what we have, the players expect to have the opportunity to win. If they feel they can’t win, they don’t buy tickets, sales decline and the lottery raises less for scholarships,” Woosley said.
According to the National Conference of State Legislatures report, Arkansas’ lottery paid out 68.4 percent of its ticket-sale revenue on prizes in 2010, compared with 61.7 percent for the nation’s 43 lotteries. Only the Massachusetts, Minnesota, Missouri and South Carolina lotteries paid larger shares of their ticket-sale revenue on prizes.
Clemmer acknowledged that her legislation might reduce lottery ticket sales, although she said that’s not her intent.
“If we went down to $300 million [in ticket sales a year], we would have $100 million for scholarships roughly,” Clemmer said.
In Clemmer’s scenario, 30 percent of the $300 million in revenue would be shifted to the lottery program, generating at least $90 million for the college-bound students.
Freshman Rep. Charles Armstrong, D-Little Rock, who is co-sponsoring Clemmer’s legislation, said he voted for Amendment 87.
“If we can get a bigger percentage of lottery [revenue] allocated for higher education, the better off we are,” he said.
“How could [Clemmer’s legislation] drive down sales when the same people are buying the tickets week in and week out. I don’t buy that argument. I don’t see it would drive down sales. Most of the people buying the tickets are low-income and people of color, and they are looking at these tickets as pulling them out of poverty to become millionaires. It’s a dream,” said Armstrong, a former member of the Little Rock School Board.
But Woosley disputed Armstrong’s characterization of most lottery players.
Clemmer said she expects her legislation to have “a really uphill climb” to clear the House Rules Committee.
“This may be a matter of education,” she said.
The man who led the pro-lottery campaign in 2008, former Lt. Gov. Bill Halter of North Little Rock, opposes Clemmer’s bill.
Clemmer opposed the 2008 pro-lottery ballot measure, and “that should give you a hint that this [legislation] is a Trojan horse,” he said.
Clemmer’s legislation would sharply reduce the amount raised for college scholarships and take funds away from scholarships for Arkansas’ college students and their families, Halter said.
Oklahoma passed legislation for its lottery that’s similar to Clemmer’s, and it has hurt ticket sales and net proceeds, Halter said.
Earlier this year, Oklahoma lottery officials told their lawmakers that they would like to eliminate or reduce the requirement that 35 percent of the proceeds go to education because lowering the profit margin would allow the lottery to increase prizes, which would generate more sales and increase money going to education.
Arkansas Republican gubernatorial candidate Asa Hutchinson of Rogers, a former congressman and federal Homeland Security undersecretary, said he opposed the lottery amendment when it was adopted, but he realizes how many students use and depend on the scholarships.
“Since the beginning, the lottery in Arkansas has been plagued by excessive administrative costs and controversy,” he said. “Any reasonable effort to increase the amount going to scholarships and to control administrative costs should be applauded. I look forward to more information and discussion as to whether Rep. Clemmer’s approach is the correct formula.”
Republican gubernatorial candidate Curtis Coleman of Little Rock, who is a businessman, said he supports Clemmer’s legislation.
“I did not vote for authorization of the lottery, but since it is law in Arkansas, I hope to see more lottery scholarships benefit Arkansas’ two-year community college students, especially those students who plan to enter the skilled-labor work force in Arkansas,” he said.
Coleman said he doubts that the lottery would sell fewer tickets and raise less for college scholarships as a result of Clemmer’s legislation. “My guess is that most lottery players rarely consider the odds.”
Front Section, Pages 1 on 03/17/2013