Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR Maestas

ORIGINAL DATE

LAST UPDATED

2/18/2007

3/2/2007 HB 740/a HEC

SHORT TITLE Lottery Scholarship Application Times

SB

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

*($0.1)

Recurring

Lottery Scholarship

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

*($852.0) *($852.0) *($1,704.0) Recurring Lottery

Scholarship

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

*Potential exists that fiscal impact is significantly higher than $1.7 million over three years;

please see narrative.

Relates to Senate Bill (s): 110, 689, 426, 687, and 686

Relates to House Bill (s): 571, 209, 275, and 361

Duplicates Senate Bill 688

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

SUMMARY

Synopsis of HEC Amendment

The amendment proposed by the House Education Committee extends the time window of

eligibility from the original amendment of 12 months to 16 months. This resolves a technical

issue, where as, the original amendment of 12 months would not have accounted for the summer

months. According to HED, the original fiscal impact was based on 16 months.

House Bill 740/a HEC – Page

2

Synopsis of Original Bill

House Bill 740 carries no appropriation. If enacted, House Bill 740 would amend Sections 21-1-

4. 3; 21-13-10; and 21-16-10.1 NMSA 1978. House Bill 740 would extend eligibility for the

New Mexico Lottery Success Scholarship program such that eligibility for scholarship program

would be available for all New Mexico resident high school graduates and those earning general

education development certificates (GEDC). Specifically, the time-window of eligibility would

increase to 12 months from the current 120 days.

FISCAL IMPLICATIONS

*No appropriation. If enacted, House Bill 740 would extend the amount of time that an applicant

retains eligibility to scholarships through the Lottery Success program. Under the current

framework, an individual has until the 120

th

day following the attainment of a GEDC or high

school graduation date to enter and enroll into a program.

There would be an overall negative recurring impact incurred by the Lottery Tuition Fund. A

current projection from the Higher Education department forecasts an additional 322 students

would qualify in FY08, decreasing the Lottery Tuition Fund by $852,100. The forecast is based

on an aggregate 2400 New Mexico high school graduates enrolling later than the first post-

secondary semester following high school graduation. The department’s forecast relies on only

13.4% of these students obtaining a 2.5 GPA in their first college semester to qualify for the

Lottery Success Scholarship.

*If the actual percentage obtaining a 2.5 G.P.A in their first semester is higher than the

department’s forecast, an annual negative impact to the Lottery Tuition fund exists of up

to $6.3 million.

1

TECHNICAL

House Bill 740 amends language throughout Sections 21-1-4.3; 21-16-10.1 and 21-16-10.1

NMSA 1978, clarifying language and making the bill parallel with currently used institution

names and terminology.

RELATIONSHIP

House Bill 740 relates to:

Senate Bill (s): 110, 689, 426, 686, and 687

House Bill (s): 571, 209, 275, 361, and 740

These listed bills create various changes to lottery scholarship eligibility, distributions from the

fund, or otherwise change the Lottery Success program framework.

1

(322/2400) =13.4% =$852 thousand; (($852,000/322) * (2400)) = $6.3 million.

House Bill 740/a HEC – Page

3

2004-2005 New Mexico

Combined State and

Federal Student

Financial Aid, in m illions

$28.3

$14.8

$183.

$142.

NM Lottery Success

Sc holar ship

Fed. & NM Other Grant &

Sc holar ship

Fed. & NM Work Study/Ser vice

Re lat ed

Fed. & NM Loan Programs

S o ur c e: T he C o nd i t i o n o f Hi g he r ed u c t io n in

Ne w M e xi co , HED, v ar io us ye ar s

Lottery S cholarship

Fund Fisca l

Projections

$0 $20 $40 $60

FY12

FY11

FY10

FY09

FY08

FY07

FY06

M ill io ns

So ur c e: HED Ex p en d it ur e Es t . ; LF C/ D F A

C o ns e ns us R ev enue E s t i mat e

Fund Balance

Revenues

Expenditures

ALTERNATIVES, OTHER SIGNIFICANT ISSUES

In the 2005-2006 academic year, approximately $36.9 million in Lottery

Success scholarship funds were distributed to New Mexico students.

Payouts to beneficiaries continue to exceed New Mexico Lottery Authority

disbursements to the scholarship fund. Recent projections show fund

insolvency around 2012-2013. With overall flat high school graduation

rates expected over this period, projected increases in expenditures are

primarily based on tuition inflation. State student aid dollars from the

lottery program comprise an ever larger component of state spending on

higher education, increasing from 38 percent to 42 percent over the 2002-

2003 academic year with subsequent reductions in work-study and service

aid.

Across the country, merit scholarship programs

are undergoing similar solvency issues.

Underestimated and rapidly increasing demand

for merit scholarships and scarce resources have

forced other states to pursue alternatives.

The Lottery program is one component among

many available federal and state student financial

aid sources. Including federal and other state grants, work-study, and

loan programs, the Lottery program comprises just about 7.7 % of

available student financial aid in NM.

Students excluded from the Lottery Success Scholarship have the

option to apply for other state and federal financial aid programs.

DUPLICATION

House Bill 740 duplicates Senate Bill 688

AMENDMENTS, QUESTIONS

House Bill 740 does not specify the requirement of a New Mexico issued GEDC for applicant

eligibility.

PD/mt