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F I S C A L I M P A C T R E P O R T

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

2-27-07

2-28-07 HB

SHORT TITLE Legislative Lottery Tuition Scholarship Act

SB 929

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$100,000.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received

Department of Finance and Administration (DFA)

Higher Education Department (HED)

SUMMARY

Synopsis of Bill

Senate Bill 929 appropriates $100 million from the General Fund to the Lottery Tuition trust

fund created in the bill prior to the end of FY07. The legislation amends the Lottery Tuition

Scholarship Act, Section 21-1-4.4 NMSA 1978 such that the program shall be named the

Legislative Lottery Tuition Scholarship Act. Senate Bill 929 creates both the lottery tuition trust

fund and the legislative lottery tuition scholarship fund, both non-reverting; in addition to

specifying investment of the trust fund be performed by the State Investment Council, with

investment responsibilities of the scholarship fund placed with the State treasury.

Senate Bill 929 enacts a new section of statute to provide procedures for administration of the

Legislative Lottery Tuition Scholarship program. The bill amends sections of the existing

Lottery Tuition Scholarship Act, Section 21-1-4.4 NMSA 1978 to include the new program

name, update other state institution names to currently used terms, and includes a clause such

that awards from the fund in no circumstance exceed the costs of tuition at public postsecondary

institutions.

Senate Bill 929 – Page

2

Senate Bill 929 repeals sections Sections 6-24-23, 21-1-4.3 and 21-16-10.1 NMSA 1978 (being

Laws 1995, Chapter 155, Section 23 and Laws 1996, Chapter 71, Sections 3 and 6, as amended).

FISCAL IMPLICATIONS

The appropriation of $100 million contained in Senate Bill 929 is a nonrecurring expense to the

General Fund. Any unexpended or unencumbered balance remaining at the end of FY08 shall

not revert to the General Fund.

Senate Bill creates two new funds. The LFC has concerns with including continuing

appropriation language in the statutory provisions for newly created funds, as earmarking

reduces the ability of the legislature to establish spending priorities.

As written, Senate Bill 929 will address several items of ongoing concern and has the potential to

extend the longevity of the scholarship fund through these changes and a one-time appropriation

of $100 million.

1.)

The bill enacts a requirement that recipient students maintain a 2.5/4.0 G.P.A for the

duration that they receive the scholarship. Current statute provides that students must

earn the 2.5 G.P.A for their first semester of full-time enrollment.

2.)

The bill provides for a requalification process for students that have fallen below the

minimum G.P.A., however, students may fall below a 2.5 G.P.A. only once.

3.)

Lastly, a non-reverting lottery tuition trust fund is created. The fund would initially

be charged with a $100 million appropriation to be invested with the State Investment

Council. Interest earnings from this appropriation would subsidize operating/sales

revenues transferred from the New Mexico Lottery Authority to the previously named

lottery tuition scholarship fund; re-named the legislative lottery tuition scholarship

fund with passage of Senate Bill 929. This appropriation could provide an

approximate $8 million annual perpetuity contribution to the scholarship fund. This

contribution could markedly extend the solvency of the fund.

RELATIONSHIP

Senate Bill 687 relates to:

Senate Bill (s): 110, 689, 426, 686, and 687

House Bill (s): 571, 209, 275, 361, and 740

These listed bills create various changes to lottery scholarship eligibility, distributions from the

fund, or otherwise change the Lottery Success program framework.

Senate Bill 929 – Page

3

2004-2005 New Mexico

Combined State and

Federal Student

Financial Aid, in m illions

$28.3

$14.8

$183.

$142.

NM Lottery Success

Sc holar ship

Fed. & NM Other Grant &

Sc holar ship

Fed. & NM Work Study/Ser vice

Re lat ed

Fed. & NM Loan Programs

S o ur c e: T he C o nd i t i o n o f Hi g he r ed u c t io n in

Ne w M e xi co , HED, v ar io us ye ar s

Lottery Schol arshi p

Fund Fi sca l

Projections

$0 $20 $40 $60

FY12

FY11

FY10

FY09

FY08

FY07

FY06

M i ll io ns

So ur c e: HED Ex p en di t ur e Es t . ; LF C / DF A

Co n s en s us R ev e nue E s t ima t e

Fund Balance

Revenues

Expenditures

ALTERNATIVES, OTHER SIGNIFICANT ISSUES

In the 2005-2006 academic year, approximately $36.9 million in Lottery Success scholarship

funds were distributed to New Mexico students. Payouts to beneficiaries continue to exceed

New Mexico Lottery Authority disbursements to the scholarship fund.

Recent projections show fund insolvency around 2012-2013. With

overall flat high school graduation rates expected over this period,

projected increases in expenditures are primarily based on tuition

inflation. State student aid dollars from the lottery program comprise

an ever larger component of state spending on higher education,

increasing from 38 percent to 42 percent over the 2002-2003 academic

year with subsequent reductions in work-study and service aid.

Across the country, merit scholarship

programs are undergoing similar solvency

issues. Underestimated and rapidly

increasing demand for merit scholarships

and scarce resources have forced other states

to pursue alternatives.

The Lottery program is one component

among many available federal and state

student financial aid sources. Including

federal and other state grants, work-study,

and loan programs, the Lottery program

comprises just about 7.7 % of available student financial aid in NM.

Students excluded from the Lottery Success Scholarship have the

option to apply for other state and federal financial aid programs.

PD/nt