South Carolina Schools Could Reap Benefit of $152M Surplus Lottery Goof

The budget would send half the funds to K-12 education for school buses and classroom materials.

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COLUMBIA —South Carolina’s K-12 schools, technical colleges and hospitals that employ medical students would see the greatest windfall from $152 million in unspent lottery profits under a House budget proposal.

The money, originally intended for college scholarships, came to light in December, when the inspector general found the state’s higher education agency had allowed it to pile up over six years. It’s a blunder that would lead to the agency director’s resignation months later.

The report angered a number of lawmakers who said the funds could have been spent in other ways. Now they get to decide where to redirect it.

The budget approved by the House this week would send half the funds to K-12 education — $35 million for school busses and $40 million for classroom materials.

The rest remains focused on higher education:

$30 million spread among the state’s technical colleges for equipment used in classes preparing students for high-demand careers$9 million in grants spread among eight colleges in the state with a high percentage of low-income, Pell Grant recipients$8 million split between Clemson University ($3.5 million) and the University of South Carolina system ($4.5 million) for internship programs$30 million to increase the state match for Medicaid payments to hospitals employing medical school students as residents. The money is meant to pass more dollars to hospitals so they can increase the number of residency training slots and incentivize those residents to remain once they complete their program.

While the $152 million now being doled out by lawmakers went untouched for years, no eligible student was denied scholarship funding, according to officials at the Commission on Higher Education.

The error came in the formula for predicting how much was needed to fully cover the state’s three largest scholarship programs — HOPE, LIFE and Palmetto Fellows — awarded to eligible South Carolina students who go to college within the state. Awards range from $2,800 for students’ freshman year only to $10,000 yearly for students pursuing math and science degrees. Criteria include at least a 3.0 grade point average for HOPE and LIFE scholarships and 3.5 GPA for Palmetto Fellows.

Voters approved the lottery in 2000 as a way to make a degree affordable for South Carolina students, who can put it toward costs at the private or public college of their choice.

Awards had been growing each year before peaking in 2021 at $302 million, the inspector general’s report said. Instead of continuing to rise, though, scholarship totals declined. Still, the commission kept asking for money as if nothing had changed.

The agency said it has since adjusted its prediction methods, so the problem won’t happen again.

This year the House is proposing $336 million for the state’s merit-based scholarships, about $4 million less than what was doled out to students in fall 2022. Budget writers also set aside $80 million in grants for low-income students and $95 million for technical college students pursuing careers in high-demand fields.

At the root of the decline in scholarships is the number of South Carolina high school graduates going on to attend colleges in the state.

During the fall semester of 2017, more than 34,000 South Carolinians enrolled as freshmen at state colleges. That was roughly 75% of the public high school students who graduated months earlier, according to Commission on Higher Education and state Department of Education data analyzed by the SC Daily Gazette.

By fall 2020, a semester after the onset of COVID-19 pandemic, that rate had sunk to 62% — about 4,000 fewer students. The rate has since rebounded slightly to 66% as of fall 2022 but is still behind the annual increases seen in the early 2010s.

So, while the percentage of students qualifying for scholarships each year has held steady — at about 50% of students who stay in state for college — there are fewer students to give them to.

This phenomenon is part of what led Gov. Henry McMaster to propose a study of South Carolina’s two- and four-year public colleges. The study will assess whether the state should consolidate some of its colleges or whether there’s too much overlap in certain degree programs.

“We have 33 institutions in the state,” said Rep. Nathan Ballentine, R-Chapin, who heads the House budget-writing subcommittee for higher education. “We want to make sure they’re all working to their strengths.”

House budget writers have agreed to go along, setting aside $3 million to fund it.

Other big-ticket items in the House budget proposal for colleges include:

$60 million split among South Carolina’s public colleges, including all USC satellite campuses, in exchange for a sixth consecutive year of not raising tuition for in-state students. The amounts to each range from $513,000 for USC-Salkehatchie to $12.1 million for USC’s main Columbia campus.$22 million to each of the state’s research universities toward major projects: A vet school at Clemson University, a new medical school at the University of South Carolina and an academic building at the Medical University of South College$11.5 million to USC Beaufort for a new sports and event center$12.3 million to USC Sumter for a student success center and facilities management center

With the state’s growing focus on the electric vehicle industry, Midlands Technical College is up for $6.5 million as it seeks to build a workforce for Scout Motors’ assembly plant in Blythewood. And Trident Technical College could receive $2.3 million for an electric vehicle institute.

The House sent its $13.2 billion spending package for the fiscal year starting July 1 to the Senate on Wednesday. Now it’s the Senate’s turn to decide how to spend the lottery money. A final budget is still months away.

SC Daily Gazette is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. SC Daily Gazette maintains editorial independence. Contact Editor Seanna Adcox for questions: info@scdailygazette.com. Follow SC Daily Gazette on Facebook and Twitter.

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