By Haley Wachdorf, New Mexico Business Weekly, November 3, 2006

Business groups are lining up behind think tank Think New Mexico and Gov. Bill Richardson to support requiring the New Mexico Lottery to give 30 percent of its gross revenues to the Lottery Success Scholarship fund.

The Association of Commerce and Industry voted during its Oct. 26 general membership meeting to lobby in favor of the Think NM plan.

ACI also gave its nod to the governor's recent proposal to allow students who do not enter college immediately after high school graduation to retain their eligibility for the scholarship.

Richardson has called for a one-year eligibility extension after high school graduation; ACI is endorsing a two year period.

The New Mexico Business Roundtable for Educational Excellence also has voted to endorse both the Think NM plan and the proposed eligibility expansion. Think New Mexico soon will meet with the Greater Albuquerque Chamber of Commerce and Hispano Chamber of Commerce to present its plan in an attempt to garner more business support.

Business groups largely see the lottery scholarships as important for helping to educate the state's workforce and better prepare it for economic development and the expansion of a high-wage economy.

Projections from the New Mexico Higher Education Department in 2005 predict that the scholarship fund will be operating with a $16 million deficit by 2011 if tuition costs continue to rise, the use of the scholarship increases as expected and if lottery sales remain relatively flat. The scholarship pays tuition for students who graduate from New Mexico high schools, enter college immediately and maintain a 2.5 grade point average.

Think New Mexico's fall 2006 report recommends the Legislature require the Lottery to give 30 percent of its revenues to the scholarship before expenses and prizes are paid.

Currently, the lottery gives roughly 24 percent of its total revenues to the scholarships and spends 19 percent of revenues on administrative costs, an amount Think New Mexico asserts is too high compared to administrative costs of other state lotteries.

How a 30 percent requirement would affect the operations of the lottery would depend largely on how any legislation is worded, according to New Mexico Lottery CEO Tom Romero. Romero says the lottery does not oppose giving 30 percent to scholarships, but cautions that if legislators approve a 30 percent return that is to start immediately, the cuts required will affect the prize payout money of the lottery.

Historically, lower prize payouts result in a decrease in ticket sales, which would mean lower revenues for the lottery and even less money for the scholarships.

"I can tell you that today we could not do that without significantly cutting prize percentage payout and advertising," Romero says. "It's pretty hard to sell your product if you can't market and advertise and promote your product. So we're going to take a hit on both levels, which means we will, in all likelihood, see a decrease in revenues."

The lottery, through a lobbyist, will give legislators feedback about the risks or benefits for the lottery of any proposed legislation, Romero says. Lotteries, which some call a "soft tax," traditionally were established as a revenue generator for a state.

John Carey, president of ACI, says his group for one is more interested in the long-term financial stability of the scholarships than in getting a 30 percent return immediately.

"If we don't get all the way to 30 percent in one year, that's fine, but it's a reasonable goal to shoot for," Carey says.

While Think New Mexico's idea is receiving wide-spread support, the eligibility expansions are, as usual, more controversial.

In addition to extending eligibility past high school graduation, Richardson has called for students of tribal colleges and military dependents of New Mexico residents stationed out of state to have scholarship eligibility.

Senate Majority Floor Leader Michael Sanchez, D-Belen, one of the original legislators involved in the inception of the scholarships, says he supports Think New Mexico's idea. He also says the state should consider giving the scholarship fund an infusion of cash like the $50 million proposed for the College Affordability Scholarship endowment created last year to provide scholarships to low-income students.

However, Sanchez opposes a waiting period, because he says it defeats the scholarship program's goal of steering high school graduates directly into college.

He also opposes opening up the scholarship to new groups of students, largely because he fears doing so would endanger the financial stability of the scholarship program.

Larry Langley, president of NMBREE, says his group has been pushing for expanded eligibility for years. He thinks, with the governor's support, those things have a good shot at becoming reality next year.

"The Lottery Scholarship Act has been a real sacred cow," he says. "I think that those who were instrumental in the drafting of it are just very protective of changing any of it. We've met a lot of resistance, so it's great to see the executive branch jump into the fray."