A Tennessee State Lottery:  How Will it Benefit Education in Our State?

By

Dr. Angelo Volpe

The efforts to legalize a state lottery in Tennessee began in 1984.  In 2001, after a long and arduous path, the vote to place a lottery referendum on the ballot in November, 2002 passed in the House of Representatives by an overwhelming margin of 80-15 and in the State Senate by a margin of 22-11.  If the majority of the electorate votes in favor of the lottery in November, the Constitutional ban against lotteries would be removed.  The legislature would still have to pass legislation to establish a state lottery.  Presumably it would, since various public opinion polls over the past several years show that 2/3 to ¾ of all Tennesseans favor a state lottery.

Instituting a state lottery in Tennessee will be, by no means, a groundbreaking event since 37 other states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, all of Canada’s provinces, and more than 100 other countries already have lotteries.

The yearly net proceeds of a state lottery, after prizes and administration, and estimated at over 300 million dollars would go first to provide post-secondary scholarships to both public and private institutions (universities, community colleges, technology centers, trade schools) for Tennessee citizens.  Remaining funds would be used for K-12 capital building projects and before and after school programs.  Most importantly, these lottery funds must supplement, not replace, current education funding.  As a result, Tennessee would become one of the only three states that Constitutionally guarantees that all lottery proceeds would be spent on specific education programs.

Any Tennessee citizen would be eligible to receive a scholarship.  Upon passage of the referendum, the Tennessee General Assembly would set the eligibility standards.  In Georgia, for example, lottery proceeds fund HOPE (Helping Outstanding Pupils Educationally) Scholarships for all students who graduate from high school with a B average and funding continue for the scholarship as long as the student maintains a B average in college.  If the referendum passes, the amount of such scholarship would also be set by the General Assembly.  Using the Georgia HOPE program as a model, the scholarships in Tennessee would pay the full cost of tuition, fees, and books for all eligible students attending public higher education institutions.  Those students choosing to attend in-state private colleges and universities would receive a $3,000 annual stipend.

 Now that we have outlined what a Tennessee state lottery would look like and how it would work, the question remains as to how it would benefit education in Tennessee.  Rather than dealing in projections and hypothetical outcomes, let us use the Georgia HOPE scholarship model and look at what has actually occurred in Georgia to benefit education as a consequence of the state lottery.

 In a 2001 study of Georgia’s HOPE Scholarship by Ross Rubenstein of Georgia State University1, it was shown that the incentive of a HOPE scholarship increased effort and performance in high school.  The scholarship program provided greater access to higher education for Georgia’s economically disadvantaged citizens, it increased persistence to graduation, it kept the best and brightest students in Georgia’s higher education institutions, and it ultimately provided for a more educated workforce in the state.

 Let us get more specific about what has occurred in Georgia to benefit education and what would also occur in Tennessee if a state lottery is implemented.

• Since its inception the Georgia Lottery provided over 1.5 billion dollars for scholarships to nearly more than 600,000 Georgia residents.
• The percentage of high school graduates eligible for HOPE scholarships increased from 49% in 1993 to 60% in 1998.
• Average SAT scores for Georgia high school graduates enrolling in Georgia institutions have risen from 976 in 1988 to 1008 in 1998.
• More college-bound high school seniors are now more prepared for college.  More took four years of math, including calculus, and more took physics in 1997 than in 1992, before the HOPE program began.
• Enrollment in higher education institutions of first year African-American students increased 33% since the HOPE program began.
• African-American students with HOPE scholarships have higher college grade point averages, take more college credits, and are less likely to drop out than African-American students who do not have HOPE scholarships.  The dramatic effect of the Georgia Lottery upon the minority community can be seen from the fact that one hundred percent of the freshman class at historically black Spellman College in 1999 were HOPE scholarship recipients.
• All students receiving HOPE scholarships remained at higher education institutions for longer periods of time than those not receiving the scholarships and they earned more credit hours.
• More than 188,000 students who attended post-secondary institutions other than colleges or universities have benefited from the program since 1993.  This has been an added benefit since the scholarship program is not solely for those students who want to attend traditional higher education institutions and it has done much to improve the quality of the state’s workforce.
• Through 1999, more than 250,000 children participated in a meaningful pre-school program funded with Georgia Lottery proceeds.  The results have been improved academic achievement by Georgia children in their elementary school experience.
• Very importantly, the best and brightest students are now staying home to go to school as a direct consequence of the econoic incentive provided by the HOPE scholarships.  Students who scored 1500 or higher on the SAT college entrance exam and remained in state to attend college increased from 25% to 75% since HOPE’s inception.  These best and brightest will also, in large measure, make their homes and careers in-state.  What a positive impact that will have both on the state’s economic well-being and its quality of life.

In an article in a recent edition of the Tennessean2, staff writer John Shiffman wrote that one of the fears that lottery opponents in Tennessee have expressed is that a lottery-funded scholarship program may put a strain on an already heavily strained state education budget.  They reason that the scholarships may lead to enrollment increases which would trigger added expenses to cover the needs for more teachers and facilities.

 Several Georgia education officials say that these fears are unwarranted.  They not that enrollment in public universities has increased about 8% since 1993.  This is less than 1% per year since the HOPE program began and are not attributed to the program.

 The benefits to education that a state lottery has brought to Georgia certainly provide compelling evidence that such a lottery in Tennessee, while certainly not a cure-all for our state’s budget woes, would be a win-win situation for prospective students, for their families, for K-12 education, for higher education, and for the economic welfare of our state.  Of the estimated 300 million dollars that would be generated annually for education from a Tennessee Lottery, approximately one-half to two-thirds would go to fund student scholarships.  The state of Tennessee spent 26 million dollars on scholarships in 1999.  If a figure of 175 million dollars is estimated to be generated from a lottery which would go to scholarships each year, then it can be seen that a nearly seven-fold increase in dollars will be available for student scholarships in the first year of a lottery and in each subsequent year.

 Perhaps almost as important as the increase in the money available for scholarships will be the increase in the academic quality of the students who will be able to attend colleges and universities in Tennessee.  The best and the brightest will now have economic incentives to stay in Tennessee to further their education and those academically talented students who come from economically disadvantaged families will now have the opportunity to reach for and attain their educational dreams.  This may be the greatest benefit that a lottery scholarship program may offer, the hope to be able to attend college that will provide to first generation students and to students from lower economic circumstances, a hope that is beyond their reach in the current fiscal climate in Tennessee.  Anytime that we in Tennessee can increase the academic level of those going to college, we will subsequently improve the quality of the workforce in our state.  Consequently, our citizens will be more qualified for the kinds of jobs that exist and will come into existence in our increasingly knowledge-based society.  The implications of this for attracting new and beneficial industry to Tennessee and the implication for the economic future of Tennessee are enormous.

There is no doubt that Tennessee has a de facto state lottery right now.  The problem, however, is that the several hundred million dollars that are currently being spent each year by Tennesseans crossing our borders to buy lottery tickets are enriching the coffers of our sister states of Georgia, Kentucky, Virginia, and Missouri.  There is also no doubt that it is past time to bring these dollars back to Tennessee so that our citizens may also enjoy the educational benefits of a lottery.