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Home / Articles / News / Local News /  Scratch and Lose
Lottery-Fri-13-l

Scratch and Lose

Counting on lottery scholarships could be a gamble.

February 25, 2009, 12:00 am

Are you one of the millions of Americans who refused to pay $10 to see The Pink Panther 2? Then maybe you’d consider dropping $2 on New Mexico Lottery’s Pink Panther scratch ticket.

No? Then try your hand at Lucky Friday the 13th. Sure, it’s a little counterintuitive. And the leprechaun drawing doesn’t exactly clarify the concept…

Um.

Never mind. Just start gambling! Thousands of New Mexico children depend on it.

For good or ill, New Mexico Lottery scholarships are the single biggest source of state-funded financial aid.

And while the demand on the higher education system has grown, lottery sales have been trending down for the past year and a half. Through the end of January, lottery revenues were down 5 percent, or $4.25 million, from the same period in the previous fiscal year. New figures are due to be released this week, and the trend is unlikely to have changed.

Does that mean state scholarships are in danger?

Yes and no.

“We have a really healthy carryover,” New Mexico Higher Education Department Director of Communications Laura Mulry says. “Students should not worry.”

That is, current students shouldn’t worry. But New Mexico’s middle and high schoolers looking forward to college may have cause for concern.

According to projections by the Legislative Finance Committee, the demand for lottery scholarships is increasing quickly—up nearly $7 million to an estimated $49.4 million in the coming fiscal year. The committee proposes borrowing $8.5 million from the roughly $68 million cushion in the lottery scholarship fund to make up for falling ticket sales, combined with rising enrollment and tuition costs.

If current trends continue, the lottery scholarship fund would be bankrupt in under 10 years. (The LFC doesn’t project that far out, but we did, using their numbers.)

Of course, all that depends on New Mexico Lottery sales. “They expect their sales to start going up next year, and we hope they’re right,” Higher Education Department Financial Aid Division Director Tashina Banks-Moore says.

In its first 12 years, the lottery scholarships helped put 54,000 students through college—approximately 1,200 of them in Santa Fe County. Various analyses prepared by the Higher Education Department suggest many of those students would not otherwise have attended. (At Santa Fe Community College, approximately one in 10 degree-seeking students claims the lottery scholarship, according to Financial Aid Director Scott Whitaker.)

The twin pressures of rising enrollment and falling lottery sales raise questions over whether the proceeds from state-sponsored gambling are a sustainable way to pay for higher education.

State lottery officials don’t know exactly why their sales are dropping off. They hope it’s temporary. “We approach the marketplace with a lot of optimism,” New Mexico Lottery Authority spokesperson Linda Hamlin says.

Is that optimism warranted? The lottery has been forced to cut its operating costs, including advertising to attract new players, to cover the cost of scholarships. And there’s another problem, which might be too big even for the Pink Panther: Gamblers may be getting bored.

“Historically, if you look at lotteries around the country, there’s a novelty effect. When they come in, for the first 10 years, their revenues go up. After 10 years, they’re no longer a novelty, and they tend to plateau,” Fred Nathan, executive director of Think New Mexico, says.

In 2006, the state projected an $18 million deficit in lottery scholarships by 2011. Following Think New Mexico’s recommendations, the state Legislature fixed the problem by increasing the percentage of profits the lottery was required to pay toward the scholarship fund.

“If the Legislature hadn’t passed that law, there’d be almost nothing for scholarships,” Nathan says.

Now it’s looking like that might have been nothing more than a quick fix.

In the first year of the new law, the lottery paid an additional $7 million toward scholarships. Today, those gains stand to be erased by the overall decline in sales. This means state lottery scholarships could be back in the same bound-for-bankruptcy boat as a few years ago—except with more people clamoring for a college education. Obviously, this is less than ideal.

“We think it would be better not to have the lottery in New Mexico, but we realize the political realities,” Nathan says. “If you’re going to have a lottery, better to spend it on education.”

 

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