Board of Regents Chancellor John MorganNASHVILLE - Thousands of future Tennessee high school graduates could see their lottery-funded college scholarships cut by 50 percent under recommendations approved Tuesday by the Senate's Lottery Stabilization Task Force.
The bipartisan group voted unanimously to recommend the changes, which Republicans argue are necessary to close a funding gap and keep the HOPE lottery scholarship program solvent.
Currently, students are eligible to get the full $4,000 scholarship with either a 3.0 grade-point average or a 21 on their ACT standardized test. Now, if they meet only the GPA or the ACT targets, their awards will be reduced to $2,000.
The changes will go into effect in four years after the state's three top higher education officials argued that students and parents needed advance warning to prepare.
Once in school, if students maintain a good GPA, they could receive the full $4,000 scholarship in their junior and senior years.
Students on the reduced scholarships attending two-year community colleges would not be affected by the changes.
Senate Speaker Pro Tempore Bo Watson, R-Hixson, a task force member, said he "really likes the recommendation."
He said it fits with recent state initiatives that include pressing public colleges and universities to graduate more students more quickly as well as an increased focus on community colleges and K-12 changes designed to raise student achievement.
"It integrates with the Complete College Act. It integrates with everything we've been doing," Watson said.
But State Board of Regents Chancellor John Morgan, who pushed to delay implementation for four years, said, "I still have questions about how it will play out over time."
Morgan said the four-year delay "helps a lot. That gives our institutions a chance to adjust and more importantly it gives parents and students a chance to adjust to the system."
Higher education officials estimate the plan will save an $13 million in its first year and $17 million annually after that.
Republicans argue it will deal with a current $8 million deficit in the scholarship program that is projected to grow to $20 million in 10 years.
According to Tennessee Higher Education Commission figures, if the changes had been implemented in 2010, they would have reduced the number of high school graduates eligible for the full four-year scholarships by 5,257, or 22 percent.
Students who are black or from low-income backgrounds were hardest hit by the changes in the merit-based scholarships.
But the task force adopted a recommendation that provides an additional $10 million for needs-based scholarships, which is expected to provide relief.
The recommendations will be presented to the GOP-controlled General Assembly when lawmakers convene in January.
According to Republican lawmakers' figures, lottery reserves in the current fiscal year are $364.8 million. That includes a special $50 million "shortfall reserve."
Projections show reserves would shrink by 2020-21 to about $190 million, which includes the $50 million reserve.
Senate Minority Leader Jim Kyle said the projections are based on "static growth" in the lottery.
He called it "very ironic that they [Republicans] never got off how we're going to reduce the lottery program" despite Tennessee Education Lottery President and CEO Rebecca Hargrove "telling them right before they voted that she'd collected $5 million more in lottery money" than expected during the first four months of this fiscal year.
If the issue is concern about the reserve fund, Kyle said, he thinks the proposal shouldn't be implemented on an "arbitrary date" but rather when the reserve fund falls to $100 million.
"It seems to me before we start taking things away from folks, we should truly have to do it," Kyle said.
Meanwhile, the task force approved recommendations that will put the Tennessee Education Lottery Corp., its staff and board on a shorter leash.
One would require the State Funding Board, which includes the three constitutional officers and Finance Commissioner Mark Emkes, to sign off on bonuses awarded to lottery officials for meeting goals.
A second one would require the State Funding Board to sign off on the percentage of lottery funds that go toward scholarships. The idea there is to increase the amount of money going into scholarships.
Watson opposed the original plan to require fixed percentages. Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, who made the proposal, agreed to leave it up to the funding board's discretion.