Daniels’ lottery plan fails Hoosiers
Last week Republican Governor Mitch Daniels proposed privatizing the state lottery to pay for his proposed Hoosier College Promise scholarship program. The program offers Indiana residents two years free tution at Ivy Tech Community College or $6,000 to attend another college. Of course, we can’t afford to give this offer to everyone so the program will only be available to those who earn less than $60,000. Sounds great, right?
I’m all for helping people who are on the lower rung of the economic spectrum get ahead and become highly successful individuals (not saying success is measured by an income lesser or greater than $60,000, but I think you get my point). However, Daniels program of privatizing the lottery to pay for the $6,000 scholarship actually costs Hoosiers more than they reap.
Case in point, it has long been argued that the lottery is an additional tax on the poor. Avoiding any political incorrectness here, lower income areas have a tendency to play the lottery more than the more affluent zones. You don’t make money playing the lottery.
So lets take the Mr. and Mrs. Johnson here. They both work very hard and bring in $52,000 a year. Mr. Johnson drops $10 a week on lottery tickets in hope that one day he will hit the jackpot and his family will be fine. The Johnson’s daughter, Christi, was born last year. Over the course of her growth to adulthood (that would be 18 years), Mr. Johnson will spend $9,360 on lottery tickets.
Governor Daniels is proposing we give Christi a $6,000 scholarship to head to college when she is 18 years old - it seems to me like the Johnson’s just paid $3,360 processing fee to Indiana.
But things don’t stop there, it gets even worse. Let’s assume for a moment that the Johnson family invested $520 a year into an educational savings account for Christi. With a rather conservative return of 8% annually (any financial adviser can easily beat that), Christi would have a nice $20,222. That’s an awful lot more than $6,000. Even if her parents just piled up the money in their checking account, they would have nearly $10,000.
So which should we give Kristi? $20,222 or $6,000?
Daniels’ plan fails the very middle class hoosiers he is vouching to protect. Whether you like the plan to privatize the lottery or not, funding the Hoosier College Promise program with lottery funds just doesn’t meet the test.
Tags: educational savings, financial, governor mitch daniels, hoosier, ivy tech community college, Middle Class, money, promise scholarship, republican, republican governor, scholarship program, state lottery, tution
