Shrinking lottery revenue pinches HOPE scholarship
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Lottery revenue that has funded college scholarships in Tennessee for decades is shrinking, and it could require painful cuts in the years ahead.
Why it matters: Tennessee's HOPE scholarship and other financial aid options backed by lottery revenue have made college more affordable for hundreds of thousands of students.
- A funding shortfall could mean students get less help.
The big picture: The Tennessee HOPE scholarship was established in 2003 to help subsidize college for students who met academic requirements. HOPE funding currently starts at $4,500 per year for students at four-year universities.
State of play: State estimates approved last November showed an alarming $114 million shortfall in the lottery revenue needed to fund the scholarships during this fiscal year.
Reality check: Current revenue collections are exceeding those estimates so far. If they continue to outperform, that could stave off scholarship cuts in the short term.
Yes, but: Higher education officials warn that an underlying "structural deficit" remains that needs to be addressed in order to avoid across-the-board scholarship cuts in the future.
What they're saying: "This is on the horizon," higher education commission executive director Steven Gentile said in a meeting last month.
- "Just because this year we might be OK does not mean that we need to rest," he said. "We need to address this."
Zoom in: There are multiple ways to fill the funding gap for scholarships. But at a certain point, cuts will be required.
Between the lines: Sports betting revenue that previously flowed to lottery scholarship programs was rerouted to K-12 school upgrades last year as part of Gov. Bill Lee's voucher expansion plan.
- That accounts for part of the deficit. Although state law allows for that money to revert back to covering lottery programs if there is a shortfall.
- This year, that would fill in $87.5 million of the gap.
If the shortfall exceeds a certain cushion, though, it would dip into a fund called the general shortfall reserve, which must be paid back.
- Replenishing that fund would then trigger cuts, Gentile said.
What's next: Leading lawmakers have asked Gentile and his team at the higher education commission to review the suite of scholarships funded by the lottery.
- The commission hopes to recommend ways to avoid across-the-board cuts, perhaps by cutting specific scholarships that are less successful or popular.
Any changes would ultimately need legislative approval.