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In an effort to prevent more recipients of Tennessee鈥檚 state-lottery-funded scholarship from losing their awards because their grades fell short of the program鈥檚 minimum requirements, the legislature has agreed to a plan to ease the rules.

Currently, students who receive Tennessee Education Lottery Scholarship awards to attend colleges and universities in the state need to have a 2.75 grade point average by the end of freshman year, and then raise it to at least a 3.0 in their sophomore, junior, and senior years.

The new plan鈥攁pproved by lawmakers in their legislative session that concluded May 21 and awaiting Democratic Gov. Phil Bredesen鈥檚 expected signature鈥攚ould extend the 2.75 requirement through a student鈥檚 junior year. For the remainder of college, however, a scholarship recipient would need to raise his or her GPA to a 3.0 to keep the award.

鈥淭his will allow more students to remain eligible across award years,鈥� said Robert Biggers, the director of the lottery-scholarship program at the Tennessee Student Assistance Corp., a state agency that administers a variety of state-funded student-aid programs.

This academic year, about 78,000 students are expected to receive lottery scholarships鈥攃ommonly known as HOPE scholarships, after a similar program in Georgia鈥攁t a cost of about $233 million. Students attending four-year institutions receive awards of $4,000 each, and those at two-year colleges receive $2,000 scholarships. The change to the GPA requirement would be expected to increase the number of recipients in 2008-09 by about 3,600.

Earlier this year, the Tennessee Higher Education Commission, the state coordinating body for public colleges and universities, released a report showing that about half the freshmen who receive the scholarships fail to retain them for sophomore year. And only about 30 percent of students who received the scholarships as freshmen were still meeting the requirement as seniors. (鈥淭ennessee Scholarship Seen Tough to Keep,鈥� Jan. 31, 2007.)

The loss of those scholarships has caused some political headaches by helping to balloon what is now a lottery surplus of more than $450 million, setting off a sometimes-fierce debate over how to use that money at a time of fiscal austerity elsewhere in the state budget.

Mr. Biggers noted, however, that since voters approved the lottery in 2002, Tennessee鈥檚 experience has been fairly similar to that of other states with merit scholarships financed by lottery receipts.

鈥淎bout 50 percent keep it; about 50 lose it,鈥� he said. There are similar scholarship programs in Florida, Georgia, Kentucky, New Mexico, South Carolina, and West Virginia.

Other changes to Tennessee鈥檚 program include full scholarships to public or private colleges in Tennessee for foster children, as well as HOPE scholarship-level awards for veterans who have served in Iraq or Afghanistan.

Budget Concerns

Variations on the scholarship plan were debated before the legislature reached a compromise. One proposal would have allowed a 2.75 GPA for all four years, an option favored by some lawmakers in light of expected tuition increases because of state budget cuts.

Gov. Bredesen has been supportive of easing the GPA requirement to help more students retain the awards, but he wanted to do it gradually.

The House version, allowing a 2.75 GPA throughout the life of the scholarship, would have cost more than $17 million in additional spending for the program. The governor indicated he wasn鈥檛 ready to support that amount at a time when lottery revenues are projected to be less than previously expected, and when Tennessee, like many other states, is facing a deficit in fiscal 2009. The compromise reached will cost about $14 million in added spending.

The economic outlook, meanwhile, meant that Mr. Bredesen was unable to secure funding to add 250 more pre-K classrooms in the state, at a projected cost of about $22 million. Such expansion had been a top priority of his this year.

鈥淲e can handle this fine; our state is in excellent shape with good reserves,鈥� the governor told lawmakers May 12. 鈥淏ut now that the magnitude of the problem is becoming clear, we need to act decisively and conservatively.鈥�

The legislature still needed to make budget cuts totaling about $470 million. Steps for achieving the reductions included eliminating about 2,000 jobs and allowing no raises for state employees.

The governor had said he would work toward voluntary 鈥渂uyouts鈥� in parts of the state where state agencies can permanently operate with fewer employees. The fiscal 2009 budget includes $50 million for such buyouts, but the staff reductions are expected to save $64 million a year in future years.

While Gov. Bredesen won鈥檛 be able to follow through with some of his education priorities, K-12 funding was spared from major cuts.

The $27.7 billion budget approved by the legislature includes $67 million more for schools, bringing total precollegiate education spending for fiscal 2009 to $3.86 billion, a 1.7 percent increase. Of the increase, $59 million would cover the costs of inflation in both the 鈥渂asic education program鈥� school finance formula and the pre-K program.

鈥淚t has been an article of faith for me to always protect education,鈥� Gov. Bredesen told lawmakers.

Lottery Surplus

In addition to debating how to help more students retain their HOPE scholarships, Tennessee legislators wrangled over the more than $450 million lottery surplus, which has accumulated in part because so many students have been unable to retain their scholarships.

State law requires at least $50 million in lottery proceeds to remain in reserve, but also allows some of the money to be used for K-12 school facilities. That, however, has yet to happen.

Other proposals, including one by the governor, called for using excess lottery money to set up an endowment, the interest from which would be used to pay for future expansions of the scholarship program.

In a final compromise, lawmakers agreed to spend $90 million from the surplus on grants and loans to school districts for facility improvements that would save schools money in energy costs. As part of the legislation, a council would be created to approve proposals submitted by districts.

鈥淭here definitely was a call from school districts for construction money,鈥� said Stephen Smith, the assistant executive director of the Tennessee School Boards Association. But he added that districts would have preferred funds with fewer strings attached.

Still, he said, 鈥渙ver the long term, it will be a benefit to school districts. We鈥檙e certainly supportive of whatever we can get.鈥�