Susan Montoya Bryan

The Associated Press

ALBUQUERQUE - The ticket-buying frenzy that erupted over January’s $1.6 billion Powerball jackpot wasn’t enough to reverse a long-running trend: Proceeds from lottery games aren’t keeping pace with the higher education costs they were supposed to help pay.

Now lawmakers in at least eight states have made or are considering making dramatic cuts to scholarship programs funded by lotteries. The programs, aimed at opening access to college by providing nearly free tuition, including at the University of New Mexico and New Mexico State University.

College administrators and students alike are bracing for a blow if more money isn’t found.

“This would force students to pay about $1,700 more out of their pockets annually, and most likely, it would mean borrowing more in student loans,” said Terry Babbitt, an associate vice president at UNM, where the lottery scholarship helps nearly half of all first-time, full-time students.

New Mexico has one of the nation’s most generous programs, paying more than 90 percent of tuition for eligible students. Without any new money, the benefit will have to be reduced to about 60 percent, according to the state Department of Higher Education.

The problem begins with declining ticket sales. When a state establishes a lottery, excitement typically builds and consumers rush to buy tickets. As the games mature, sales level off. After 20 years, New Mexico’s lottery sales have plateaued, as have sales for multi-state games such as Powerball.

Changing spending habits play a role too. Millennial consumers, according to some experts, are moving away from lotteries. And many Americans never go inside a convenience store to buy gas anymore, choosing instead to swipe a credit card at the pump. That means fewer opportunities to sell lotto tickets.

The rising cost of tuition and tight state budgets add to the strain.

Tough choices

Affected states have been forced to make painful changes in recent years, tightening eligibility requirements or reducing the amount of aid a student receives.

In New Mexico, lawmakers introduced dozens of measures over the last decade to shore up their program, including making one-time appropriations to prop up the scholarships and shifting $19 million in liquor excise tax revenue.

During the legislative session that ended last month, Senate Majority Leader Michael Sanchez pushed through a bill allowing for unclaimed prize money to be transferred to the lottery tuition fund. Experts said that’s a step in the right direction but not enough to close the growing gap.

Other ideas include raising the bar for eligibility. To qualify, New Mexico students must maintain a 2.5 grade-point average and complete at least 15 credit hours a semester at a four-year school.

Students are frustrated at the prospect of cuts.

Guadalupe Rubio, a government student and member of the Associated Students of NMSU student advocacy board, said the lottery scholarship once paid 100 percent of tuition. Rubio, who has a lottery scholarship herself, said she's opposed to further cuts.

"That's not something I'd want to see, especially if you want to keep New Mexicans here," said Rubio, who's originally from Columbus. "That's why I'm here. Without that help from the lottery, I wouldn't be able to continue. It helps everyone, not just the lower class. It helps the middle class, too."

Other students agreed.

“The reason we were pushing so hard for solvency this year was because we don’t want to reach the point where we’re looking at a cliff, where we either have to make a decision or students are looking at a 30 percent decrease in funding,” said Jenna Hagengruber, a college senior and president of Associated Students of the University of New Mexico. “That’s an incredibly large drop.”

Awaiting decisions

Dacia Sedillo, NMSU associate vice president for enrollment management, said the lottery scholarship wasn't a prominent topic in the state legislative session that ended in February. It's likely to gain attention in a 60-day session of early 2017. The decisions that are made about the scholarship's future will determine how NMSU reacts, she said.

"We know something is coming, but we're looking forward to next spring and the Legislature before we start solidifying our plan," she said.

NMSU offers merit scholarships to a certain number of lottery scholarship awardees to help cover the costs of the 10 percent not paid by the lottery funds, according to Sedillo. If the percentage of tuition that's paid by the lotto scholarship shrinks, the number of students receiving merit scholarships also would shrink because it would mean NMSU would have to pay a larger share of tuition costs.

If eligibility requirements are tightened, it's likely that fewer high school students would qualify for the scholarship. They could be deterred from seeking higher education with the knowledge they'd pay the full cost out of pocket.

Sedillo said very low-income students can qualify for another source of financial aid. But middle-income students don't have an alternative beyond the lottery scholarship.

"It could impact enrollment trends," she said.

NMSU is notified by June each year what percentage of tuition the lottery scholarship will pay per student for the following school year. The rate is 90 percent now, but "we don't know what it will be for '16-'17," Sedillo said, referring to the school year that starts in fall 2016.

Looking back

The scholarships were created two decades ago, shortly after Georgia established a lottery scholarship that became a model for similar programs throughout the South. Georgia was forced to make changes in 2011 that resulted in a nearly 25 percent cut in the number of students who qualified.

Tennessee has tried to buffer its program from the volatility of lottery sales by establishing an endowment that can fund scholarships through interest and earnings. The move could provide a cushion over the short term, experts said.

The other five states with lottery scholarships are Arkansas, Florida, Kentucky, South Carolina and West Virginia. More than two dozen states earmark lottery proceeds for education in general.

New Mexico already leads the nation with the highest student loan default rate, federal data show. And even if new funding could be tapped, the problem is expected to linger.

Annual revenue from lottery ticket sales has plateaued at about $40 million. Tuition costs for eligible students are expected to top $65 million a year.

Legislators have floated some three dozen ideas in recent years.

One Republican lawmaker said New Mexico’s four-year research colleges regarded the lottery scholarship “as a blank check from Santa Fe” and rapidly raised tuition over the past 15 years.

State Rep. Jason Harper, who has been working on the issue since his election in 2013, suggests that the scholarships serve as a bridge for students after all other financial aid is exhausted.

Sun-News reporter Diana Alba Soular contributed to this article. She may be reached at 575-541-5443, dalba@lcsun-news.com or @AlbaSoular on Twitter.