By Fred Nathan
As printed in The Santa Fe New Mexican, March 10, 2007

Meet Azucena Miranda, a junior at Capital High School, who is taking three advanced placement classes, working approximately 20 hours a week, and still earning a 4.0 grade point average. Azucena’s dream is to become a doctor and practice medicine here in New Mexico, but her parents cannot afford the cost of a college degree.

However, thanks to Senators Michael Sanchez, Stuart Ingle and Tim Jennings, and House leaders like Ben Lujan and Lucky Varela, the proceeds of New Mexico’s Lottery (after paying for lottery prizes, operating and administrative costs) go to full-tuition college scholarships for students like Azucena.

The good news is that since 1997, these scholarships, known as Lottery Success Scholarships, have helped 43,000 of New Mexico’s best students to attend New Mexico’s colleges and public universities.

The bad news is that New Mexico’s Higher Education Department projects that the scholarship fund will face an $18 million shortfall in 2011, when Azucena will be a junior in college. At that time, the cost of the scholarships will exceed lottery proceeds and current cash reserves will be depleted.

When that occurs, the eligibility requirements for the scholarship will have to be restricted so that many deserving students will no longer qualify for the lottery scholarships, or the value of the scholarship will have to be cut for all students, increasing the financial burden on New Mexico families who are already stretched thin.

Breaking the commitment to keeping college affordable would send the wrong message to New Mexico’s high school students, many of whom, like Azucena, are working hard, staying in school and earning good grades in the hopes of one day qualifying for a full-tuition scholarship.

Last September, Think New Mexico released a report entitled, “Averting the Crisis: Making Lottery Success Scholarships Sustainable,” in which we proposed dedicating 30% of lottery revenues to the scholarships, rather than restricting the scholarships’ eligibility or value. We found that eleven states already dedicate at least 30% of lottery revenues to the beneficiaries of their lotteries.

Currently only about 24 cents of every dollar bet on the New Mexico Lottery actually go to scholarships. Another approximately 21 cents go to pay operating and administrative costs, a higher percentage than all but four of the 43 state lotteries. (The remaining 55 cents go back to players in the form of prizes.)

Early in this legislative session, Senator Majority Leader Sanchez, Senate Minority Leader Ingle and Senator Jennings introduced Senate Bill 364, which would require the Lottery to dedicate 30% of its revenues to scholarships. If the bill is enacted, the Legislature’s budget staff estimates that it will produce an additional $9 million annually for scholarships, enough to pay for about 2,500 scholarships each year when the bill is fully phased in.

SB 364 also requires the New Mexico Lottery to abide by the state Procurement Code, which should help the Lottery to reduce its relatively high operating and administrative costs.

Think New Mexico’s report documented that the New Mexico Lottery’s five-year no-bid contract with GTech, its online vendor, costs the scholarships about $3 million annually when compared with what similar states pay for their online contracts. Specifically, New Mexico pays GTech 8.52% of online sales, while comparable states pay between 2.16% and 5.10%.

Every dollar the New Mexico Lottery spends on administrative and operating costs, like its no-bid contract with GTech, is a dollar less to invest in scholarships.

Other state lotteries have successfully cut administrative and operating costs without harming overall revenues. For example, between 1998 and 2004, the Florida Lottery cut costs by 19%, yet lottery revenues increased by 48% during the same time period. Similarly, the Minnesota Lottery cut costs by 26.5% in 2004, yet realized an increase in sales of 5.5% the following year.

Reallocating more of the lottery revenues from overhead to scholarships will strengthen New Mexico’s economy. Currently, only one of four New Mexico adults has a college degree, while the Bureau of Labor Statistics predicts that 42% of new jobs by the end of the decade will require a college degree.

The urgent need to produce more college graduates may explain why the Association of Commerce and Industry, the Hispano Chamber of Commerce and many other business groups from across the state have endorsed SB 364.

They join dozens of other organizations supporting SB 364, including the Catholic Conference of Bishops, the Santa Fe Community Foundation, the Santa Fe United Way, Santa Fe Community College and Governor Bill Richardson.

Ultimately, SB 364 presents state policy-makers with a choice: should more of these lottery proceeds, which come primarily from New Mexicans, be invested in scholarships for the state’s deserving high school graduates, like Azucena Miranda, or go to out-of-state special interests, like GTech?

Please contact your legislators on behalf of Azucena and other students across New Mexico and ask them to pass SB 364 during the final, frenzied days of this legislative session.