UT study shows shortfall is less than previously projected

The dollar shortfall between Tennessee lottery revenue and the scholarship programs it funds is much less than previously projected, a study shows, indicating that lottery scholarships won't have to be cut or made harder to get.

The Commercial Appeal of Memphis reported that the study by the University of Tennessee Center for Business and Economic Research was presented this week at the Lottery Scholarship Stabilization Task Force's inaugural meeting.

Projections last year anticipated that the gap between revenue and spending, which started at $11 million in the 2008-09 school year, would rise sharply to $110 million in 2013-14. The deficits threatened to burn through the scholarship program's $319 million in reserve funds by then.

The new projections indicate the shortfall will total almost $17 million in the school year that starts this month, rise to $22 million next year and then decline to $19 million in 2013-2014, leaving a healthy $240 million in the reserve fundat mid-2014.

The earlier projections prompted the legislature to create the 29-member task force and ask it to come up with a plan by next year to bring the scholarship program into fiscal balance.

Legislators faced the unpopular choice of making it harder for students to qualify for the aid, reducing the grant amounts, or both. HOPE Scholarships now range up to $5,000 for an academic year.

"I think we don't have to make dramatic changes for fiscal purposes like we were going to be forced to before," said Rep. Craig Fitzhugh, D-Ripley, a task force member and chairman of the House Finance Committee.

The new numbers relieve the pressure to make such draconian moves as cutting basic HOPE Scholarships from $4,000 a year to $3,000 — one of 20 different cost-cutting options presented — but there is still a need for some action to balance revenues with spending.

The group made no recommendations at its first meeting, but discussed allowing students to use the scholarships for summer school to get through college faster, and limiting the scholarships to four academic years.

Program Began In '04

Currently, HOPE scholars do not get lottery-funded grants for summer classes and are eligible for the aid for up to five years. When the program began in 2004, it was limited to four years, or 120 semester hours of credit, but was expanded to five years, or 150 hours, later when it was operating with large surpluses.

"The new numbers give us a chance to look at the program longer term and to consider tweaking it for other than fiscal purposes, like trying to provide greater accessibility and quicker completion of degrees," Fitzhugh said.

Since its inception, the program has provided almost $1.2 billion to about 247,000 students, according to the Tennessee Higher Education Commission.

Thanks to Helen for the tip.