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State can’t pay for STEM scholarships promised to hundreds of students

January 6, 2017 GMT

Students who were promised a Montana STEM scholarship will not be receiving the spring 2017 portion of their award.

The STEM scholarship program was created by the Legislature in 2015 and was supposed to be funded with revenue from the Montana Lottery. The account didn’t generate enough revenue to give students the scholarships they were promised this spring, however.

In the first week of the legislative session, members of the Montana Lottery and Office of Commission of Higher Education testified before the appropriations committee over an accounting error that diverted funds into the general fund instead of the scholarship fund. During his testimony, Tyler Trevor, OCHE deputy commissioner for planning and analysis, said his office had to notify students they didn’t have the funds for spring, even if the supplemental funding is approved.

For fiscal year 2016, the bill required the STEM scholarship program to receive a one-time payment of $400,000 to fund student scholarships in 2015-2016 from the lottery before any money was sent to the general fund. After that, Montana law directs lottery revenue to the general fund. Once the revenue transferred to the general fund meets its specified cap, the remaining money goes to the Montana STEM scholarship program’s special revenue account.

Angela Wong, director of the Montana Lottery, said there was an accounting error that directed money to the general fund instead of the scholarship fund. The supplemental $358,000 asked for by OCHE will return money from the general fund to the correct account.

While the accounting error can easily be fixed if HB 3 is approved, the entire scholarship program is still facing funding shortages.

The cap for what the lottery must contribute to the general fund was set at their entire revenue for fiscal year 2015. The lottery didn’t experience enough growth in the following year to fund the scholarship program.

Because of a difference in fiscal years, OCHE didn’t know they weren’t receiving sufficient funds until after they awarded a certain number of scholarships to students.

Wong said because revenue into the scholarship fund depends on how many people purchase lottery tickets and payouts, it’s impossible to properly estimate how much revenue they will contribute.

After two years of trying to fund scholarships, both OCHE and the Montana Lottery felt like the program was out of their hands. Wong said “we’re really just the funding source” while Trevor said “all we do is administer the scholarship.” The law says OCHE is responsible for administering the program, but it’s unclear if they were responsible for monitoring the funds coming from Montana Lottery.

Trevor said OCHE thought they would receive $481,000 from the lottery, but they only received $120,000. Because they had to pay out scholarships to students before they received funds from the lottery, the extra 358,000 came out of the OCHE operational budget used to pay staff salaries.

“If we would have known there was $120,000 to fund a million dollar scholarship, we would not have moved forward at all,” Trevor said.

Trevor said his office wasn’t sure if additional funding from the lottery would come in, so they waited until December to notify students they wouldn’t receive spring funding.

To be eligible for a STEM scholarship, a student must graduate from a Montana high school with at least a 3.25 GPA, and meet the rigorous core college preparation program which includes four years of math and three years of science. Once in college, they must enroll in at least 15 credits and have declared a STEM or health care major. If a student meets that criteria, they are awarded $1,000 for the academic year, with half applied to each semester. If they stay in a STEM major and complete 30 credits in the first academic year while maintaining a 3.0 GPA, they are eligible to receive $2,000 in their sophomore year.

The 750 students expecting $500 or $1,000 for spring were notified by email that they wouldn’t receive their scholarship. Students who are eligible for fall 2017 scholarships shouldn’t expect funding either.

“It doesn’t look good for next year,” Trevor said. “What we’re learning is that the revenue that comes in from the lottery is coming in a timing manner that is far too late for us to responsibly fund students.”

Trevor suggested putting the scholarship program on hiatus for a few years to build up funds. That way, they will be able to award the scholarships with money already in their account.

Montana law does not specify what happens when there isn’t enough money in the revenue account to fund all of the awarded scholarships. Rep. Steve Lavin, R-Kalispell, who sponsored the legislation in 2015, said he needs to do research to address the issues before introducing amendments to the program.