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Roger Lewis: State of Arkansas college scholarships

Posted: July 18, 2014 - 3:36pm

A college education in Conway used to be cheap. In 1960, a year’s tuition at ASTC (now UCA) was $150. At Hendrix the figure was about $430. A summer job at minimum wage ($1/hour) could provide funds for a year’s tuition. Not so today.

This fall, tuition and fees for undergraduates at UCA amount to $7,889 per year, a figure that is in line with other public four-year universities in the state.

It now costs approximately $20,000 per year for tuition, fees, room and board, books and other expenses for an instate undergraduate student to attend and live on campus at UCA.

Several factors have contributed to this escalated cost to students, including lack of state support, increased security measures, Internet and computer services, competition for quality faculty and amenities that must be offered to attract students. To finance their education, most students rely on a combination of scholarships, student loans, family resources and work.

In the old days the budget of Arkansas’ public universities and colleges was funded approximately 20% from tuition and 80% from state appropriations. But today this ratio is flipped.

UCA’s 2013-14 general education budget of $131 million was funded 55.1% from student tuition and fees and 43.6% from state appropriations (and 1.3% from other sources). Thus, the main factor in the astronomical increase in tuition is the failure of the State Legislature to adequately fund higher education.

While tuition has escalated, financial aid in the form of scholarships has waned. In 1991, the state instituted Academic Challenge Scholarships, which were funded entirely by state appropriations. The state legislature continues to fund the program at $20 million per year, a figure that has not changed for more than a decade.

Instead, the state has come to rely almost entirely on the Arkansas Scholarship Lottery as the major funding source of scholarships. In its nearly five years of operation, the Arkansas Scholarship Lottery has produced $2.2 billion in sales. Approximately 20%, ($430 million) of that revenue funded the bulk of the Academic Challenge Scholarships.

However, beginning in 2012, sales started to decline by approximately 7% each year as shown on the graph. This trend is not unlike that in many states where lottery sales have declined over time. If the decline continues, sales will be less than $400 million for fiscal 2015 and the funding of scholarships may be reduced for the third time.

An educated work force should be a very high priority of state government; it is essential to the economy of Arkansas. Unfortunately, among the 25- to 34-year-olds in the nation, Arkansas has the second lowest percentage of college graduates (28.6%), edging out only Nevada. The national average is 38.8%.

It is time to consider other revenue sources to fund scholarships and to finance public colleges and universities. Taxes of one sort or another are the source of all state revenue. When revenues are reduced or do not grow, invariably it is higher education that gets short changed. Other agencies such as K-12 education, Medicare/Medicaid and prisons are mandatory funding. They account for the bulk of the states’ general budget, leaving higher education to the will of the legislature.

The most regressive tax is a sales tax, but it is the easiest to pass in Arkansas because it requires only a simple majority, whereas other taxes require a 75% majority. Replacing the lottery funding of scholarships with a sales tax would require approximately a 3/10 of one-cent rate, raising the state sales tax from 6.5% to 6.8%. A dedicated sales tax would be expected to produce more revenue each year, unlike the declining lottery revenue.

Unfortunately, Arkansas already has one of the highest sales tax rates in the nation. It is unlikely that the current legislature would consider increasing it. Some consider the lottery a voluntary tax and some say it is a regressive tax since a disproportional number of low-income people play it. I look at it as a tax on hope.

I believe that we are boxed in to the lottery as a revenue source, but legislators need to find additional sources. An excellent source of revenue is for the US Congress to pass the Market Place Fairness Act, providing a means for states to collect sales tax on Internet sale of goods. Another possibility is to review all of the exemptions that exist for sales tax, income tax and property tax. Certainly a few tens of millions can be recaptured there.

More information on Arkansas Scholarship Lottery can be found at Pulse of Conway website, pulseofconway.com

I thank my friend Chris Spatz for editing and helping me with this article.

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