Education Funding

Scholarship Programs Spared The Budget Ax—for Now

By Michelle Galley — November 21, 2001 4 min read

When state leaders in Kentucky designed a scholarship program to help more high school students pursue a postsecondary education, they never expected the massive influx of recipients they have received in recent years.

Some 18,200 students participated in the Kentucky Educational Excellence Scholarship program, or KEES, in 1999-2000. That number is expected to nearly triple to 54,000 students by the 2003-04 academic year, dramatically raising the program’s price tag.

That has left Kentucky legislators wondering how they will keep paying the tab if the program continues to grow at such a phenomenal rate, especially in light of the current economic pinch.

“Financial-aid programs are costing more than anyone planned,” said Gordon Davies, the president of the Kentucky Council on Postsecondary Education.

Kentucky is not alone. State merit-scholarship programs nationwide have been growing at fast rates, as more and more students become eligible for and receive such grants. But even though the programs are growing more expensive, the scholarships so far are being spared the budget ax.

Thirteen states now have some sort of merit-based scholarship program.

Because of their cost, scholarships could become tempting targets for cuts, said Travis Reindl, the director of state policy for the American Association of State Colleges and Universities, based in Washington. “These are ripe for a lot of ax-wielding appropriations chairs,” he said.

But, Mr. Reindl said, it is politically risky for legislators to cut scholarship programs because they are wildly popular and serve very vocal constituencies—most notably, middle-class parents. “Politicians have practically had their heads handed to them on a platter” for suggesting such cuts, he said.

Most states will determine their budgets for the next fiscal year in early 2002, which is when they will be looking at what programs to cut if they need to make up shortfalls. Legislators could take money from the scholarships either by tightening eligibility requirements or by lowering award amounts.

Georgia, Kentucky, and South Carolina all have managed to spare their state scholarship programs, even though they are experiencing budget shortfalls.

In some cases, those programs have turned into entitlement programs, akin to Social Security on the federal level, Mr. Reindl said. “People count on this,” he said. “They are doing their college planning for Johnny and Susie based on this.”

Hope for HOPE

That certainly holds true in Georgia, said William Flook, the division director of scholarships and grants for the Georgia Student Finance Commission, which administers the nation’s largest state scholarship program, Helping Outstanding Pupils Educationally, or HOPE.

The program has cost the state nearly $1 billion since it started in 1993. And the state spent $277 million on HOPE for the 2000-01 academic year, when 169,000 students participated in the program.

Every student in the state who earns 3.0 grade point average or better out of a possible 4.0 is eligible for the scholarships, which cover the full cost of tuition and mandatory fees at any state public college or university and provide each recipient with a stipend to cover the cost of books.

Even though Gov. Roy Barnes, a Democrat, recently ordered all state agencies, including the education department, to cut their budgets for fiscal 2002 by 2.5 percent, HOPE was not affected by the directive because the money for the program comes from state lottery funds.

State lottery proceeds in Kentucky have been stable as well, but enrollment in the Bluegrass State’s colleges and universities has risen in recent years, said Mr. Davies of the state council on postsecondary education.

In fiscal 2001, the state made $156 million from the state lottery, an amount that has remained nearly constant for the past several years. Thirty-two percent of lottery proceeds goes to KEES, 32 percent goes to a need-based college-scholarship program, and the rest goes into the state’s general fund.

Mr. Davies said that KEES will cost slightly more than $70 million in fiscal 2003, meaning less money for the state’s general fund if the scholarship program is fully funded.

But Governor Paul E. Patton, a Democrat, has made a firm commitment to the program, Mr. Davies said, so it has not been cut even though state officials have forecasted a roughly $467 million shortfall in fiscal 2002 revenues.

Planning Ahead

In 1998, when state officials in South Carolina designed a new state scholarship program, called the Legislative Incentive for Future Excellence, or LIFE, scholarship, legislators built a safeguard into the law to protect it from midyear budget cuts. Although the state recently cut government programs by 4 percent across the board, lawmakers restored that same amount of funding into the scholarship program.

Currently, 17,000 students receive $3,000 a year toward tuition at state colleges and universities, said Charles Fitz Simmons, a spokesman for the South Carolina Commission on Higher Education. Beginning in fall 2002, the LIFE scholarship will cover the full cost of tuition at public institutions.

Last summer, the state established a lottery, and it plans to use some of the projected $130 million in annual proceeds to help pay for the LIFE scholarship program’s expansion.

Previously, students had to post a combined score of 1100 or better, out of a possible 1600, on the SAT and earn at least a 3.0 grade point average to qualify for the scholarships. Now, they must meet two out of these three requirements: score at least 1100 on the SAT, earn a 3.0 or better GPA, and graduate in the top 30 percent of their classes.

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A version of this article appeared in the November 21, 2001 edition of Education Week as Scholarship Programs Spared The Budget Ax—for Now

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