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.

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

SPONSOR Carraro

ORIGINAL DATE

LAST UPDATED

2-18-2007

HB

SHORT TITLE Lottery Scholarship Eligibility Times

SB 686

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

*($0.1)

Recurring

Lottery Scholarship

Fund

*Please see narrative

(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, 686, 687, and 688

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

SOURCES OF INFORMATION

LFC Files

Responses Received From

No agency responses received as of 2-18-2007; response received for Senate Bill 688, a similar

legislative proposal.

SUMMARY

Synopsis of Bill

Senate Bill 686 carries no appropriation. If enacted, Senate Bill 686 would amend Sections 21-

1-4. 3; 21-13-10; and 21-16-10.1 NMSA 1978. Senate Bill 686 would extend eligibility for the

Senate Bill 686 – Page

2

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, there would no longer be a time-

window of eligibility, the scholarships would be available indefinitely for these groups.

Additionally, the amendment strikes current language limiting returning military members’

eligibility; it is inferred that eligibility for these individuals would fall under the indefinite

extension of eligibility as provided to graduates and general education development certificate

holders, provided the veterans fall into one of these two groups as well.

1

FISCAL IMPLICATIONS

*No appropriation. If enacted, Senate Bill 686 would indefinitely 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.

In current statute, in the case of those entering the military, provided they have entered a branch

of service prior to 120

th

day following the attainment of a GEDC or high school graduation date,

and enter and enroll into a program within the 120

th

day of exiting the military, the veteran is

eligible for the program. In the Senate Bill 686 proposal, a NM graduate or GEDC holder would

remain indefinitely eligible, provided that they maintain state residency.

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, a potential negative impact to the Lottery Tuition fund exists of up

to $6.3 million.

2

TECHNICAL

Senate Bill 686 strikes Section 21-1-4.3 (c) NMSA 1978 (re. 4-Year Schools). The subsection

specified applicability of the Lottery program to students transferring from 2-year to 4-year

schools, and provided for a two year lottery eligibility upon transferring to one of the 6 large

four-year institutions.

The bill does not alter or strike similar transfer language in Section 21-16-10.1 (re. tech & voc.)

Section 21-13-10 (re comm. colleges) is not amended significantly, however, 21-13-10 does not

originally contain language specifying scholarship eligibility upon transfer to a 4-year school,

whereas 21-16-10.1 does. Because the general transfer language in Section 21-1-4.3 (c) NMSA

1

In the existing legislation, the veteran must have entered into service within 120 days of graduation from a New Mexico high school or

acquisition of general equivalency degree certificate.

2

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

Senate Bill 686 – 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

1978 is stricken, it is unknown whether students transferring from a community college to a 4-

year institution would remain eligible under Senate Bill 686.

RELATIONSHIP

Senate Bill 686 relates to:

Senate Bill (s): 110, 689, 426, 686, 687, and 688

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.

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.

Senate Bill 686 – Page

4

AMENDMENTS, QUESTIONS

Senate Bill does not specify whether the proposed provisions shall apply only to future graduates

or GED receivers, or whether it will apply to current diploma and GEDC holders. Are these

provisions applicable for all

past NM high school graduates.

Senate Bill 686 does not specify the requirement of a New Mexico issued GEDC for applicant

eligibility.

PD/csd