When most of us hear the phrase “education lottery” we think of Georgia's HOPE scholarship program. It's been wildly successful and has made it possible for thousands kids to attend college – many of whom wouldn't have had the chance otherwise. Or has it? Academic studies and statistics show that merit-based scholarships fund the educations of students who would have attended college anyway – mostly white, middle and upper-middle class students.
UCLA's Civil Rights Project didn't pull any punches in a 2002 report on merit scholarships: Who Should We Help? The negative social consequences of merit scholarships:
Imagine someone reacting to higher education's current situation by saying that what we needed were large new programs to subsidize white and middle- to upper-income students to attend college, and that it was not necessary to raise need-based aid even enough to cover new tuition increases. We would give some minority students entering awards because of their relatively high grade point averages from inferior segregated schools. However, we will take their aid away when they cannot get a “B” average in a vastly more competitive college setting and blame them for not being up to the task.
A huge amount of money would go into this new program, far more than was spent for the need-based scholarships in some states. We would get the money from an extremely regressive tax-a state lottery that drew money disproportionately from poor and minority players. In other words, poor blacks and Latinos would end up paying a substantial part of the cost of educating more affluent white students, who would have gone to college even if they had not had the additional financial incentive.
The single most accurate predictor of whether a child will attend college is household income. The higher a family's income, the greater the likelihood of college. Researchers W. Hansen and B. Weisbrod found this in their landmark 1969 study of California's educational system (“The Distribution of Costs and Direct Benefits of Public Higher Education: The Case of California.” The Journal of Human Resources, IV, 2 (1969): 177-193.)
Assuming that two children are identical in every way, including high school grade point averages and SAT scores, if one child resides in a household where the parents’ income is $25,000 and the other resides in a household where the parents’ income is $50,000. The child in the $50,000 household will complete 80% more schooling than the child in the $25,000 household.
On the flip, we'll look at the actual statistics of how education scholarship lotteries affected college attendance in Florida, Georgia, and Tennessee – and talk about how Tennessee structured its program to benefit more low-income students. It's a model worth considering in Alabama.
“Bright Futures” For Florida's Wealthy & White
Borg and Stranahan, professors of Economics at the University of North Florida in Jacksonville studied Florida's “Bright Futures” merit scholarships (24 page PDF) and found that families receiving them:
“…are more likely to be white, urban, and highly educated, and have higher incomes than the population as a whole. Further, they are more likely to live in households where the parents are married and have at least one parent who is employed.”
The two studied the various lottery games offered in Florida and the demographics of who prefers which games. They found that higher income, higher education residents preferred Lotto, which offers big jackpots, and play Lotto in higher numbers compared to other income and education levels. This makes Lotto less regressive than the daily numbers games and scratch off tickets – which are favored by those with lower incomes and educational levels. (page 11-12)
They took these findings (and other numbers too) and used the data to estimate the present and future value of a “lottery tax” on residents. What they call a lottery tax is actually the household's estimated annual expenditures on lottery games.
The authors note dryly: “In other words, Lotto seems to be the lesser of two evils from a public finance standpoint” because the “burden” of the Lotto game falls heavier on higher income households.
While lower income households are statistically more likely to play lottery games (see yesterday's post for charts and graphs), in Florida, they're far less likely to see benefits from the Bright Futures merit scholarships, Borg and Stranahan found. They compared two “average” households to determine how likely they were to benefit from scholarships (page 14):
Once again, the typical households represent the sample average, a lower SES household and a higher SES household. The sample average household has the mean value of each of the independent variables as its profile. The lower socioeconomic status (SES) household has a 48 year-old, African American, and single household head, rural residence, blue collar occupation, high school graduate, household size of three, and household income in the lowest category. The high SES household has a 48 year-old, Caucasian and married household head, suburban residence, professional occupation for the male household head, female head stays at home, both household heads are college graduates, household size of four, and household income in the highest category. The high SES household has a 42% probability of receiving the 100% scholarship. In contrast, the low SES household has only a 10% probability of receiving the 100% scholarship.
Taking those numbers, here are the expected value each household can expect to receive in the first year of a Bright Futures scholarship:
And here are the benefits for the 2nd, 3rd, and 4th years:
The authors are blunt in their assessment of the lottery's impact on many Florida residents:
How can almost all of the households with children who receive the Bright Futures Scholarship receive more monetary benefit from the scholarship program than they pay in lifetime lottery taxes?
The answer is obvious: the difference is made up by the lottery taxes paid by other households who will never receive an FBF scholarship. Those other households contain the bulk of lottery players who tend to be less-educated, lower income and non-white.
Essentially, the Florida Bright Futures Scholarship Program and other lottery-funded merit scholarship programs like it, are tantamount to an income redistribution program from non-white, low-income, uneducated households to white, rich, well-educated households.
Is it the same in Georgia? Pretty much.
HOPE Scholarships: “Welfare for the Rich?”
Education Week reported on the financial troubles with the Georgia Lottery in August:
In its first year, the program spent $21 million helping about 43,000 students. By 2009, its costs had soared to $639 million to cover college expenses for 248,000 students. If the sheer growth weren’t enough, program costs have increased at double-digit rates, while lottery proceeds have been flat.
Georgia's HOPE scholarships used to have family income caps, but those were removed when the program was flush with cash (learn more about this in Tuesday's blog post). Now the program is struggling to pay promised benefits, but benefits are devilishly hard to take away – especially if the recipients are well-heeled parents protecting their kids' college educations.
In the years before HOPE, white students were 11% more likely to attend college than African American students (page 5). Since HOPE, that percentage has increased to 26% more likely. Furthermore, the 20 ZIP codes with the most lottery winners had annual family incomes below the state's median – which mirrors studies that show low income people tend to play the lottery more. Meanwhile, the 20 counties with the most HOPE recipients had incomes 72% higher than the other counties.
Critics of the current program's structure point to other factors that limit participation of many Georgia students:
- Students who receive the maximum Pell Grants are not eligible for HOPE scholarships, but can receive a yearly book allowance of $150 per semester – a benefit the legislature is considering removing because of the program's financial troubles.
- Qualifying for the scholarship can be problematic for students from poor and minority households. The HOPE scholarship requires a minimum 3.0 GPA. In 1992, among Georgia high school students intending to go to college, 21% of white students had a GPA of 3.5 or higher. Just 4% of African American students had comparable grades. (page 26)
All this has led to some intense criticism of Georgia's program. This summer, an Atlanta Journal-Constitution columnist termed the HOPE Scholarship program “welfare for the rich” and called on the Legislature to restructure the program to benefit more lower-income, minority students and increase the amount of money going to fund pre-K programs:
Are the HOPE Scholarships and Grants the best way to genuinely advance public education – or would Georgia’s children derive a far greater benefit if the same dollars were used to make high quality pre-k available to all 3 and 4 year olds? Georgia is wasting hundreds of millions of dollars annually in lottery revenues to subsidize the tuition costs for middle and upper-income families who would have sent their children to college on their own expense, without a hand-out from the state.
The HOPE scholarships don't seem encourage students to do well in college: 46% of recipients lose them the first year because they don't maintain a 3.0 GPA and more than 60% lose their scholarships at some point in their college career due to falling GPAs. Some legislators are asking if part of the HOPE scholarship money might be better spent preparing students for college instead of funneling students into colleges where they may not be prepared to perform adequately.
Tennessee Uses Both Merit & Needs-based Aid
Mindful of these facts, Tennessee was more careful in designing its program. There is merit-based aid but also need-based supplements.
Tennessee’s HOPE program, created in 2002, was designed to mitigate that impact. Looked upon as a model program by some experts, it doles out awards on a sliding scale based on both merit and economic need. Students are given a base award of $4,000 if they have either a high school GPA of 3.0 or an ACT score of 19. Supplemental awards are available for students with even higher marks, or for students who come from households with incomes below a certain level. Tennessee also defines merit more broadly than West Virginia now does. Tennessee's eligibility criteria include one carefully chosen word: “or.” When legislators were laying out the plans for the scholarship, they found that giving HOPE to students with a 3.0 GPA “or” a 19 ACT score, instead of the more common GPA “and” ACT qualifications, doubled the percentage of projected eligible students who were African-American.
While Tennessee has worked harder than other states to address problems of income and racial disparities, the program isn't immune (21 page PDF) from problems. In the Fall of 2004, median family income of lottery scholarship recipients was $69,272. Median family income of non-lottery recipients was $56,000.
Researchers have found that students already in school when they receive the Tennessee scholarships are far more likely to obtain degrees than new students. Although every college experiences Freshman dropout rates higher than other students, the rates seem even higher for students on lottery scholarships – particularly those from low income households.
Some programs require full-time student status to receive the scholarship and/or enter college immediately after high school. This could impact low income students more adversely because the scholarships only pay tuition (some also pay a percentage of fees): the students still have to live somewhere, eat, buy books, etc. and full time status hampers students' ability to work at the same time. These are also students who may be farther behind academically as they can't devote as much time to studying.
And, of course, some scholarship students may simply be ill-prepared for college and there are ways to address that problem. But none are cheap and none are easy.
Tomorrow, in our final installment, we'll discuss ways that Alabama can learn from these other states when it starts designing a state education lottery.