Gov. Sonny Perdue wants to divert $34 million in lottery money to pay for scholarships and grants now funded by taxpayers, a move that would deepen the financial hole for HOPE and other programs funded by the games.
Even without the expansion proposed by the governor, the cost of lottery-funded programs will surpass the revenue the games produce this year for the first time.
The shortfall will force HOPE to dip into its reserves; Perdue’s proposal would force even greater use of reserves, depleting the fund more quickly and potentially triggering cuts in benefits to recipients of the popular college scholarship.
Perdue didn’t mention the shift of $34 million to the lottery when he released his budget proposals Jan. 15. And little was said about the changes in last week’s budget hearings.
However, his plan alarmed the lawmakers who did notice it in the nearly 700 pages of budget documents the governor’s office released.
While it would help balance the state’s recession-ravaged budget, lawmakers from both parties said the shift might be unconstitutional.
The 1992 constitutional amendment that created the Georgia Lottery prohibits lawmakers from using revenue from the games to replace state funding for existing programs.
The lottery provides most of the funding for the Student Finance Commission, which handles HOPE scholarships and grants. The commission also oversees a handful of other scholarship and loan programs funded by taxpayers. Perdue wants to cut some of those programs and shift the cost of others to the lottery. Those programs, such as special military scholarships for North Georgia College and State University students, private college grants and ROTC awards, are now funded with tax dollars.
Grants to 30,000 private college students would be funded by the lottery this year, and then eliminated next year. But Perdue proposes increasing awards to private college HOPE scholars, eating up a sizable chunk of the savings.
Perdue’s budget director, Trey Childress, argues that without the shift, officials would have to consider eliminating more scholarship and grant programs. He said what Perdue wants to do is legal because it is “in lieu of further reductions of scholarships.”
“We view it as further staving off the elimination and reduction of programs,” he said.
But Democrats told The Atlanta Journal-Constitution that Perdue’s proposal has lawyers already looking at suing the state if the General Assembly doesn’t nix it.
“This can’t be allowed to happen,” said House Minority Leader DuBose Porter (D-Dublin), a gubernatorial candidate and one of the lawmakers who shepherded the constitutional amendment that created HOPE through the General Assembly.
Some of his Republican colleagues agree.
“I think it’s unconstitutional, but whether it is unconstitutional or not, it’s the wrong approach for handling our lottery money,” said House Appropriations Chairman Ben Harbin (R-Evans). “I am concerned that he’s not looking beyond this year.”
Declining tax collections will have forced lawmakers to reduce the state budget by more than $3 billion by the time they end the 2010 session.
The cost of HOPE is skyrocketing, even without the addition of new programs.
The recession has triggered a surge in university and technical college enrollment. More students typically stay in school when jobs are hard to find and more adults return for training and advanced degrees.
In addition, when tuition goes up, so does the cost of each HOPE public college scholarship or grant.
HOPE pays tuition and some book and fee money to students who maintain at least a B average in the university system. Technical college and private college students also receive HOPE grants and scholarships.
The growth in HOPE has been phenomenal. For instance, the cost of the HOPE grant — which goes to technical college students — will jump by more than a third this year.
In total, the cost of all the lottery-funded programs — including pre-kindergarten classes — would jump by $189.5 million to $1.127 billion.
Lottery ticket sales and revenue can’t keep up. While the Georgia Lottery voters approved in 1992 has seen remarkable success — including another sales record for the first half of this fiscal year — revenue increases have been relatively modest of late. Last year the state had about $884 million in lottery revenue to spend. That’s about $250 million short of what Perdue’s has proposed to spend in the upcoming year.
The state will have to dip into lottery reserves — which contain about $1 billion — to cover the difference.
Under state law, using substantial reserves would trigger reductions in book and fee payments to students over the next few years.
Even with those cuts, state officials warn that the reserves could be used up in a few years without changes in the program. Student Finance Commission officials are planning to begin brainstorming to come up with ideas to keep HOPE solvent.
While he acknowledges that Perdue’s plan will increase lottery costs, Childress said the state would be digging into lottery reserves to pay HOPE bills anyway this year.
“That’s something we have been warning about for years,” he said. “Something will have to be done no matter what happens on these state-funded scholarships.”
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