In a rare political victory for Tennessee Democrats, Republicans have backed down in one of the hottest controversies of this year’s legislative session.
At the center of the fight is the Tennessee lottery, with Democrats denouncing a GOP proposal to curtail the number of students earning HOPE scholarships to college.
Republicans contend they must tighten the scholarship’s eligibility standards to stabilize the lottery fund, which now is running an annual deficit of up to $20 million.
“We’re spending more than we’re taking in. You can’t do that,” said Senate Education Committee Chair Dolores Gresham, R-Somerville.
But Democrats point out the lottery is enjoying record sales, and it’s still flush with $366 million in reserves built up by surpluses in the early days of the 7-year-old program before many scholarships had been given. At the current rate of expenditure, it will take until 2024 to drain the surplus to $50 million, the lowest level state law allows.
“Republicans want to take more scholarship money and just stuff it in a mattress,” said Senate Democratic leader Jim Kyle of Memphis.
Last week with criticism mounting, Republicans changed course. Their plan wouldn’t go into place until 2015 anyway, and they agreed to keep the status quo as long as lottery profits grow by at least $10 million as expected this year and then maintain that level until 2015. With that amendment, the Senate Education Committee adopted the legislation. The full Senate could vote this week.
“I declare victory for the students of Tennessee, and the credit goes to Democrats in the Senate,” Kyle crowed.
The GOP’s new eligibility standards would mean fewer scholarships for African-American students and the middle class and more for white upper-middle-class families, according to higher education officials. In addition, one Republican proposal would make it easier for another GOP constituency — home-schooling families — to earn scholarships for their children.
Asked at a press conference whether Republicans are using the lottery education fund to engage in right-wing social engineering, Senate Speaker Ron Ramsey responded vigorously.
“Lordy mercy. That is the most ridiculous statement I’ve ever heard in my life,” Ramsey said. “The reason we’re doing this is to make sure the lottery is stable five years from now and 10 years from now. That’s a conspiracy theory run amok. The qualifications will be the same if you’re black, white, Hispanic, it should be exactly the same. If it’s skewed [against African-Americans], we’ve got a problem and we need to fix the Memphis city schools or whatever.”
In deciding how to cut scholarships, higher education officials offered as one recommendation capping family income on eligibility. A $100,000 cap would have saved $66 million annually. A $200,000 cap would save $13 million.
But lawmakers rejected income caps on the theory that HOPE scholarships should go to the “best and brightest” kids to encourage them to stay in Tennessee. If wealthy children are excluded, that would defeat that purpose, they say.
“I’m not into class warfare,” Ramsey said. “If you qualify for something, you ought to qualify for something, period. I don’t care if you’re making a thousand dollars a year or $100,000 a year. If you set your goals high and you work hard and you qualify, then you ought to qualify. I’m not into class warfare. I’m not.”
Republicans point out the bill also recommends that the legislature increase funding to lower-income families by $10 million a year, making 5,700 more students eligible for those need-based grants.
But the Republican plan would make more than 5,000 students ineligible for full HOPE scholarships. It would cut in half the award for students who fail to meet both standardized testing and high school grade requirements.
Currently, students earn a $4,000 annual scholarship with either a 3.0 grade point average in high school or a score of 21 on their ACT college entrance exam. Under the GOP plan, they would have to meet both the requirements to win $4,000. If they met only one, they would receive only $2,000.
The plan is estimated to save $13 million the first year and $17 million annual after that. A special panel of lawmakers recommended the proposal in November.
Since then, Gresham has drawn criticism from Democrats for proposing an amendment to let home-schoolers qualify for full scholarships with only the ACT composite as long as they score at least 21 on two of the test’s four components.
“We’re going to it one way for one group and another way for another, that doesn’t seem fair to me,” said Sen. Andy Berke, D-Chattanooga.
At one hearing this month, Lottery CEO Rebecca Hargrove told lawmakers lottery profits are up $10 million in the first seven months of the fiscal year. What’s more, Hargrove said she believes the lottery can sustain those profits in the future. That would cut the annual scholarship deficit in half.
Republicans senators who have always opposed the lottery responded by criticizing Hargrove.
“Just for the record, I think your industry is a blight on our beautiful state. I think it’s immoral and I think it’s corrupt,” said Sen. Jim Summerville, R-Dickson.
Sen. Brian Kelsey, R-Germantown, complained about the lottery’s $11 million annual advertising budget.
“I personally think that the advertising is a real problem in our justification of this program in Tennessee,” he said. “The whole justification is there’s latent demand already among Tennessee citizens and we’re just tapping into it. But to the extent that we’re spending $11 million a year in advertising, we’re actually not tapping into latent demand but we’re actually creating new demand for the product and encouraging people to make very poor financial decisions.”
Sen. Stacey Campfield, R-Knoxville, asked about “exorbitant salaries” paid to Hargrove and the lottery board. Hargrove noted unpaid volunteers serve on the board. Hargrove said she made $467,000 last year to run what amounts to a billion-dollar corporation.
The criticisms raised questions about whether lawmakers who oppose the lottery on moral grounds should make decisions about its future. Gresham dismissed those concerns.
“I’m sure that you understand that for all of us who are elected our obligation to good stewardship no matter what our philosophy is on whether something should have been put into legislation in the first place,” she told Hargrove. “Not withstanding that, our obligation to good stewardship is our primary motive. Please don’t take anything personally.”