It turns out, the HOPE scholarship has financial problems in part because Georgians have gotten smarter. How much smarter? We may soon find out.
The smarts I’m talking about aren’t in the classroom, where an increasing number of Georgia students have earned (or sweet-talked their way into) B averages to qualify for the state’s merit-based college money. I’m talking about the way Georgians quickly wised up to the relative odds of playing one kind of lottery game vs. another.
First, a bit of background. Legislators have long bemoaned the Georgia Lottery Corp.’s failure to hit the 35 percent profit margin strongly suggested by state law. Lately, only about a quarter of lottery revenues have gone to HOPE and pre-K programs. For a nearly $4 billion-a-year enterprise, the difference is almost $400 million. That would be more than enough to ensure HOPE fully covered tuition, instead of today’s average of about 87 percent of tuition.
Why 25 percent instead of 35 percent? Lottery president Debbie Alford told legislators Monday it’s because players favor scratch-off tickets, which pay out 71 cents on each dollar gambled, rather than tickets for marquee drawings such as Powerball, which return 52 cents on the dollar and thus are less than half as profitable for the state.
Twenty years ago, people in Georgia spent about $2 on those more-profitable draw tickets for every $1 spent on the better-odds scratchers. By last year they’d wised up, and it was the other way around. (Of course, lottery players also spent almost three times as much on tickets as back then, even though the average ticket is still a money loser, so let’s not get carried away calling ourselves brainiacs.)
Still, because folks are buying a lot more of those scratchers — and it’s better to have a quarter of a $4 billion business than a third of a $1.4 billion one — the lottery works well from that standpoint. But it’s also better to get a full scholarship than a partial one, so legislators are feeling pressure to find more revenue.
That brings us to the new IQ test for Georgia’s voters.
Alford spoke Monday to help set up the main draw for two days of hearings: the possibility of legalizing casino gambling.
HOPE’s shortfall is the stated reason for the new casino push. But if you believe this really is all about the kids, you’re the mark in this game of Three-card Monte.
There have been whispers about expanding gambling here for years. MGM Resorts would want to build a $1 billion casino in Atlanta even if HOPE didn’t exist, because it would make a lot of money.
They could make even more money with Georgia’s proposed tax rate of 12 percent. The need for a low tax rate was underscored by the first two casino-industry witnesses, who warned higher-tax states are losing gambling revenues to others.
That’s a sound economic principle. But the entire point of legalizing casinos, or so we’re told, is to fuel a cash grab to shore up HOPE.
In the meantime, the denominator in this equation, the soaring cost of tuition, has been scarcely scrutinized. Tuition at Georgia Tech and UGA has been growing almost twice as fast as lottery profits, which have barely kept pace with most other state colleges. The proposed casino plan is projected to bring in $280 million for HOPE and pre-K combined, compared to $1 billion now. Given current trends, sooner than later, we’ll be right back where we are now. And then what?
Then, presumably, we’d talk about either cutting costs or finding yet another source of taxes. Why not have that tough conversation now? Here’s betting it’s because some folks want casinos here anyway.
We can have a debate about casinos. But smart Georgians won’t be fooled into thinking we’re really talking about HOPE.