I Won $33,000 in the Lottery! (Gwen Moritz Editor's Note)

by Gwen Moritz  on Monday, Apr. 16, 2012 12:00 am  

Gwen Moritz

I knew that headline would reel you in - especially readers who know that I vehemently opposed the Arkansas Scholarship Lottery because government simply should not be in the business of promoting long-odds gambling.

Since a large majority of Arkansas voters disagreed with me, the Moritz household is now a big lottery winner.

Our older son, who was a sophomore at the University of Arkansas when the lottery scholarships started flowing, has already received $10,000 and is assured of getting another $5,000. Our younger son, one of 8,000 high school seniors who received lottery scholarship confirmation notices earlier this month, will get at least $4,500 and as much as $18,000 if he makes the grade at UALR.

So we've won at least $19,500 and potentially $33,000. Someone ought to take my picture with a big check.

We could forgo the money as a matter of principle, but what good would come of that? Instead, we are trying to use the money more wisely than the ticket-buyers did. Our older son is working hard and doing beautifully. The younger boy is well prepared for college, but 41 percent of "traditional" students fresh out of high school lost their lottery scholarships after the first year, and he could certainly become a statistic.

It's those statistics that bother me most these days. The academic requirements for the lottery scholarship aren't rigorous: A 2.5 GPA in high school or a 19 on the ACT, then a 2.5 GPA while completing at least 27 credit hours in the first year of college and 30 per year thereafter.

Last week, Shane Broadway, the interim head of the Arkansas Department of Higher Education, noted that $27 million in scholarships had been awarded to students who then failed to maintain their eligibility. That's more than twice the $12 million available each year for older "nontraditional" students, who are far more likely (74.3 percent) to make the grades and keep the scholarships. And they are often the closest to completing a degree, which was the goal of the lottery scholarship in the first place.

Because the lottery now pays $4,500 a year for eligible students who enroll at a four-year university and $2,250 for those who enroll in a two-year college, the share of kids who have enrolled in four-year schools has skyrocketed to 80 percent at the expense of the more cost-effective two-year schools.

The idea of removing the financial barrier to entering college is noble, but early trends suggest that our scholarship program gets as many kids into college as possible and enables them to fail at the highest possible cost. Even $4,500 won't pay for a year at a university, so these kids are combining lottery money and their own money - much of it likely borrowed.

Legislators seem concerned about making sure all eligible high school students are aware of the lottery scholarships, but more applicants under the current system will result in more waste. Since lawmakers seem open to tweaking the program during the 2013 legislative session, here are some ideas - not mine originally, but collected from various sources - they should consider:

• Incent preparation. Raise the standards for receiving a lottery scholarship in the first place, or limit the money going to students with minimal ACT scores and GPAs. Encourage those most likely to fail to do so at two-year colleges, where they will waste less money, from the lottery and from their own pockets.

• Invest for the highest rate of return. Instead of capping the lottery dollars available for nontraditional students - which has left 5,800 nontraditional students on a waiting list - move them to the front of the line. (This could eventually serve as a second chance for those kids who blew it the first time around.)

• Reward effort. Return to the old Arkansas Challenge Scholarship formula of giving bigger scholarships as the students successfully complete another year of school.

• Encourage thrift. Not all students need to start at two-year schools, but the current formula has a perverse "use it or lose it" quality that encourages students to spend more in order to get the biggest scholarship. A better system would guarantee all eligible students up to $18,000 over four years. Those who use only $2,250 per year at a two-year school would then have as much as $6,750 per year left to spend on their last two years at a four-year university. The cost to the state would be the same, those students who fail will have done so at half the cost, and successful students will have to earn or borrow less in order to complete their degrees. Win, win, win.

Gwen Moritz, a big winner, thanks to the Arkansas Scholarship Lottery.

(Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.)



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