Indiana Governor Proposes Higher Ed Initiatives to Stem 'Brain Drain'

State lottery would be leased to private company to finance fund, scholarships

Two initiatives recently proposed by Gov. Mitch Daniels would keep graduating college students in-state and lure world-class researchers to Indiana's public universities. However, a lottery lease plan that would, in part, finance the initiatives may be more the center of attention with Indiana legislators.



The initiatives: (1) a forgivable loan of up to $20,000 for students who attend four-year colleges or universities in Indiana and stay in the state for three years, else repay the loans, and (2) a fund that would create endowments to cover salary and start-up costs to draw the aforementioned researchers and scholars from outside of Indiana.



The financing: Lease the Hoosier Lottery for a fixed term to a contractor that would operate the lottery and continue an annual payment of $200 million to the state. The state would then license and regulate the operator, which would provide an up-front payment to support the education initiatives, and possibly receive an ongoing percentage of the operator's revenue that is above a certain amount.



If the state achieved up-front proceeds of $1 billion, for example, 60 percent or $600 million would be directed to the Hoosier Hope Scholarships. That amount would enable some 1,700 Indiana high school graduates to receive financial assistance each year. The other 40 percent, or $400 million, would be used for the World Class Scholars Fund. Each year, $50 million would be available and leveraged to at least double that amount through required university matching funds and federal grants. Each awarded grant, which universities would place into an permanent endowment, could range from $500,000 to $3 million.



The annual payment amount of $200 million is just above the average of the last four years of lottery returns. It would continue to fund police, fire and teachers pensions; local motor vehicle excise tax replacement; and state and local capital projects, as it does in Indiana's current lottery earnings stream.



Students attending two-year colleges and universities such as Ivy Tech Community College also would be eligible under Gov. Daniels' plan, but for a lesser amount -- $5,000 total, with the opportunity to receive an additional two years of funding at a four-year institution.



"This proposal is vital as we focus on the workforce needs of Indiana," said Gerald Lamkin, president of Ivy Tech, which has 23 campuses throughout the state. "Specifically, this franchise concept will allow us to address the immediate life science and bio science workforce needs in Bloomington and central Indiana, where we need more than 2,000 trained workers in the next five years."



Forty-five percent of all Indiana public postsecondary graduates leave Indiana after graduating, according to the governor's press statement. Indiana also is said to rank 44th among states for its share of population over the age of 25 with a bachelor's degree, behind such states as South Carolina, Georgia, Tennessee and New Mexico.



The goal of the higher education initiatives, as touted by the governor's office, is to transform higher education in Indiana and to enhance the state's key knowledge-based industries, yet Indiana lawmakers are skeptical. A Dec. 14 Associated Press article cites the concerns of those who feel Gov. Daniels' proposal "pushes" privatization and allows the private company running the lottery "to expand gambling to make a bigger profit."



The State Student Assistance Commission of Indiana would administer the Hoosier Hope Scholarships, which would be based on merit. Scores on the SAT or ACT exam, cumulative grade point average (GPA) and class rank would be key award criteria. Once awarded, students would be required to maintain a 3.0 GPA and complete studies in the time specified by their degree program, to continue to receive awards each year.



The number of scholarships awarded annually would be based on the endowment's annual earnings, but a specified number would be reserved for those who enroll in a two-year degree program.



Though the faculty grants could be accessed only by public colleges and universities, Indiana's private colleges could participate through collaborative proposals. The World Class Scholars Fund would be amortized over 10 years, and all grants would require matching contributions from the institutions that receive them.



The state's Public Finance Office soon will issue a request for qualifications to begin to identify interest in the transaction. Gov. Daniels also will seek legislation to franchise the lottery operation and to specify the uses of the two trust funds.



The governor's press release is available at: http://www.in.gov/apps/utils/calendar/presscal?PF=gov2&Clist=1_3_4_6_11_16_61&Elist=87845