Lottery

Lawmakers put the bill to create a state lottery for college scholarships, one step closer to the governor's desk.

After nearly two hours of testimony Tuesday for the proposed scholarship lottery legislation, the senate committee passed the bill 5-2.

"Getting the bill out sets the framework for the business side, and the scholarship side. The process begins," Senator Shane Broadway of Bryant said.  

A process that has been months in the making.  Lt. Governor Bill Halter says through the lottery, Arkansas students will receive scholarships, that are universally available for all Arkansans, no matter their race, gender, family income, or course of study, achievement based with a 2.5 grade point average as a standard, and expanded scholarships for non traditional students.

Though Halter says changes could be made to the lottery bill. Right now, it allows the director of the lottery to make a salary of up to $500,000.

"The public is outraged by the possibility of someone making $500,000 to manage the lottery," Lt. Governor Bill Halter said.

Halter says the lottery needs a director with a record of success

"Obviously we'll need to pay a competitive salary. Nearly half a million dollars, however, is over the top," Halter said.  

Family council director Jerry Cox also believes changes needed to be made to the bill, including making it mandatory to print the odds of winning the lottery, and having more protection for the people who buy lottery tickets.

"I understand the business model, but I think there's a consumer protection side that I think this bill overlooks," Family Council Director Jerry Cox said.  

Lawmakers say changes could be made to the bill in the future, but the legislation needs to go through now, in order to meet their goal of providing scholarships to Arkansas students by fall of 2010.

Now the lottery bill will go before the full house and senate, legislators say it could be on the governor's desk by next week.




Lieutenant Governor Bill Halter's Statement on Proposed Lottery Legislation:

Thank you, Mr. Chairman and members of the committee. I appreciate the opportunity to address you this morning about the signature issue of this legislative session, the Scholarship Lottery for higher education.

I thank the over 138,000 Arkansans who signed petitions and the over 648,000 Arkansans who voted to change our state's constitution. Without them, this bill would never have been drafted and without them, this public discussion would never have begun.

Thanks also to the ad hoc committee of legislators who drafted companion enabling bills. This legislation is vitally important for Arkansas. We have to get it right.

When Arkansas voters approved a constitutional amendment authorizing the Scholarship Lottery for higher education, they set the stage for a long-overdue debate in this building. We have languished near the bottom of national rankings in higher education and personal income for decades. Being 49th in the percentage of adults with a bachelor's degree is no way to prepare for, or compete in, the 21st century economy.

We now have a historic opportunity to move forward in a bold and dramatic fashion with a Scholarship Lottery that should deliver maximum scholarship dollars to maximum numbers of Arkansas citizens. My staff and I are delighted to see that the bill includes so many of the principles for Scholarship Lottery legislation that we first proposed in mid-December.

A short list of these principles includes:

* Universally available college scholarships available to all Arkansans no matter their race, gender, family income or course of study.

* Achievement-based scholarships with a 2.5 grade point average as a standard.

* Expanded scholarships for non-traditional students.

* An independent Lottery Commission with rule-making authority.

* A 2-year ban on lobbying by former Lottery Commission employees.

* The "Wal-Mart rule" of no gifts from lottery vendors.

* Criminal background checks of people who want to work for or do business with the lottery.

* No sales of lottery tickets to minors.

* Garnishment of winnings of lottery winners who are behind on their child support or in debt to the state.

* Accountability and transparency of lottery operations.

While we are grateful that these ideas have been followed, there is room for improvement. As I said earlier, we have to get this right. No one wants to see a Scholarship Lottery bill passed and signed into law more than I do. But we owe it to the public to act responsibly and with attention to detail.

In the interest of time, I will not hit on every point. I will, however, respectfully offer some suggestions that I believe go to the heart of what Arkansans have a right to expect from the Scholarship Lottery:

* Bigger scholarship awards for students than currently available
* Tighter ethics
* Simpler scholarship process

Very importantly, in this bill, you should repeatedly and specifically ensure that every dollar produced by the lottery adds to existing state scholarship efforts. No replacement of existing state general revenues allocated to scholarships. No shell games. The voters enshrined this commitment in our state's constitution.

Bigger scholarships

Under the most conservative estimates of lottery proceeds, Arkansas will at least double funding currently available for state-provided scholarships. Therefore, it's profoundly disappointing to see that some students would see the scholarships available to them cut in half relative to current law while others would see no increase in scholarships if the lottery achieves $50 million of net proceeds per year. This will be hard to explain.

In addition, to making the "sliding scale" of scholarships awards in the bill more realistic, you should consider the following suggestions to make sure that the net proceeds available for scholarships are as large as possible and the overall level of general revenue effort is maintained:

* Appropriate salaries: As currently written, the bill allows a salary approaching $500,000 for the person hired to manage the Scholarship Lottery. Judging from the conversations I've had with Arkansans and the calls that my office has received since this bill was rolled out, the public is outraged by this possibility. I have advocated running the scholarship lottery like a business headed by a first-rate CEO with a record of success. Obviously, we'll need to pay a competitive salary. Nearly half-a-million dollars, however, is over the top. And this bill allows the same salary rate for the lottery's internal auditor. These dollars would come straight from scholarship funds.
 
* Tighter rules on the use of net lottery proceeds: As currently written, the bill allows the use of net lottery proceeds for "an improved system of communication" about scholarship opportunities as well as "an evaluation and analysis" of state scholarship funding. I suggest you make it clear that all net lottery proceeds be used only for scholarships and grants, which is what Arkansans voted for in November. Don't divert net lottery proceeds for any other purpose.

* Tighter rules for what constitutes operating expenses of a lottery: As currently written, the bill defines payments to the Arkansas Department of Higher Education to cover the costs of administrating the lottery scholarships as an operating expense. I suggest that you add language requiring state general revenues to cover these costs, not lottery revenues.

* Supplement not supplant, increase not replace current scholarship funding: Arkansans should not need to be forensic accountants to determine whether or not our constitution is being followed. You could make the monitoring process easier and more transparent by avoiding commingling of lottery funds with multiple existing state scholarship programs. Despite what has been publicly stated, net lottery proceeds would not necessarily flow into one big scholarship program, but possibly into two or more existing state programs. In addition, to increase transparency, you should explicitly state 1) total general revenues currently authorized for state scholarship funding, 2) general revenues currently authorized for the Academic Challenge scholarship program, and 3) the inflation adjustment to future state scholarship funding required to maintain current levels of effort.

* Tighter rules on set-up and maintenance of the lottery's reserve trust account: As currently written, the bill provides no direction to the Lottery Commission on the use of interest earned on what will become a $50 million reserve. Nor does the bill provide direction to the Lottery Commission about the use of net lottery proceeds over and above the $50 million reserve. I suggest that you explicitly specify that interest earned on the reserve as well as net lottery proceeds over and above the reserve may be used only to fund scholarships.

Tighter ethics

* Tighter ethics on lobbying: As currently written, the bill imposes a two-year ban on lobbying related to lottery operations by former Lottery Commission employees. I suggest you expand this two-year ban on lobbying to include former Arkansas legislators. Such a cooling-off period would help protect the integrity of lottery operations now and in the future.

* Tighter ethics on gift-giving: As currently written, the bill imposes a ban on gifts from lottery vendors and contract applicants to legislators appointed to the Arkansas Lottery Commission Legislative Oversight Committee. I suggest you expand the gift ban to include all Arkansas legislators.

Simplify the Scholarship Process

Arkansas currently has a complex state-funded system of 21 separate scholarship programs. We've accumulated a $52 million surplus in scholarship funds largely because of the complexity of these programs. Ideally, every student, parent, grandparent, teacher and high school counselor would be able to easily understand the eligibility rules for the Arkansas scholarships. As legislators, you must be able to clearly explain the rules to your constituents. Further simplification of our scholarship programs would help reach our goal of providing higher education opportunities to all Arkansans who work hard and play by the rules.

While the removal of income limits in the bill makes scholarships universally available to all Arkansans, I urge you to simplify language in the bill dealing with who can earn a scholarship. As currently written, the bill appears to establish at least seven sets of eligibility rules for graduating high school seniors, non-traditional students and college students.
 
In closing, as a political realist, I am confident that you plan to move this bill out of committee today with a do-pass recommendation. I am also confident that many provisions of this legislation will be changed in the future.
 
I urge you to look for ways today and in the future to increase scholarships, strengthen ethics and simplify the scholarship process. We owe that to Arkansas voters who put their faith in good government when they approved the Scholarship Lottery amendment by a nearly 2-1 margin. We owe that to the Arkansas families who work hard and play by the rules and who have earned the opportunity for a higher education.