Scholar dollars

“I had planned to go to Willamette,” Sherry said, referring to a college in Salem, Ore. “We actually toured the campus in 2007. But the recession came along, and my parents took some bad hits. We knew in ’08 that I had to change my plans. The Millennium Scholarships turned out to be a terrific option for us.” She said her brother may also use the program next year.

Sherry is a first-year student at the University of Nevada, Reno. She expects to graduate from UNR and then live in Reno. If so, she will have fulfilled one of the functions of the Millennium Scholarships—keeping students in the state.

The program has been one of the notable successes of government in a state that is not in love with government programs. It provides $10,000 over four years to students who graduate from Nevada high schools and meet a grade requirement.

Sherry doesn’t smoke, though she did when she was a high school senior, something her parents never knew. (“I used to have a toothbrush and mouthwash in my locker at school, and always gum in my purse.”) She’s aware of the paradox. The Millennium Scholarships were established by the Nevada Legislature in 1999 at Gov. Kenny Guinn’s recommendation, using money from the lawsuit settlement with major tobacco companies. The purpose of the lawsuit was to recover public moneys expended on tobacco-related diseases.

The lawsuit settlement was tied to the amount of smoking, and smoking in Nevada has been in decline. It’s like a good news/bad news joke: Fewer people are smoking, and it’s hurting the scholarship program that smoking created.

But that’s not the only reason for a crisis facing the program. The legislature had already started finding other sources of funding for the scholarships, notably unclaimed property funds. But recession-driven shrinkage of state revenues forced lawmakers to withdraw the unclaimed property money. The legislature has used almost $30 million in three years from the scholarship money to keep the state budget in balance. And now the program may be becoming entangled in a political dispute.

On April 29 at a meeting of the Interim Finance Committee (a legislative panel that handles money matters when the full legislature is not in session), legislators raised questions about the solvency of the scholarship program and specifically seemed upset that money from a separate program—the prepaid College Savings Program—had not been transferred into the Millennium Scholarships program. Legislators said they were told at the February special session of the legislature that about $4 million over two years would be transferred.

“I can tell you that it was represented during the special session that we were going to have that money transferred, and that’s why many of us agreed because we thought the Millennium Scholarship would be solvent, that it was represented by the treasurer’s office that there was the ability to move the money and that it would be solvent,” said Assemblymember Heidi Gansert.

The problem is that the legislature did not give the state treasurer the authority to make that transfer. That authority rests with the College Savings Program Board, which balked at making the transfer. The board allowed only a $200,000 transfer, though that is enough to keep the scholarship program in the black until next year’s legislature, though the legislators had hoped it would be solvent until the end of the fiscal year, after the 2011 legislative session.

After there were news reports of that exchange in the IFC, State Treasurer Kate Marshall’s election opponent, Republican Steve Martin, put out a statement headlined “Marshall Mismanagement & Hypocrisy Grows” that blamed his Democratic opponent for the problem.

“Kate Marshall has put the Millennium Scholarship at risk and has been delaying properly informing the public and state officials throughout the process. The recent special legislative session to ensure that all state budgets were solvent through June 30, 2011, including the Millennium Scholarship, just ended March 1, 2010. Yet, days later, on March 18, Marshall requested a $200,000 transfer from the Nevada College Savings Plan Trust Fund in order make the Millennium Scholarship fund solvent. In a March 22, 2010, letter to the Legislature, Marshall explained that this was “to make the program whole through Fiscal Year 2011” (June 30, 2011). Treasurer Marshall goes on to state or imply three different times in her letter that this action of moving $200,000 from the Nevada College Savings Plan will keep the Millennium Scholarship solvent for over a year. Unfortunately, this is not likely to be the case.”

Martin seemed not to understand the complaint of the IFC legislators, including GOP legislators. They wanted the transfer of several million dollars into the scholarship fund so it would be stable, yet the money had not been transferred. Martin was attacking Marshall for arranging the transfer even of $200,000 to keep the fund solvent until the 2011 legislative session. Neither the $4 million figure or the $200,000 figure was chosen by Marshall. The legislators wanted the $4 million transfer, and the prepaid college program board allowed $200,000 because that was the figure needed until the next legislature. And the $200,000 did not come from parent deposits, but from fees paid by contractors who service the prepaid program.

Although Martin is faulting Marshall for not keeping the legislators fully informed about the scholarship program, the state treasurer is not the official the lawmakers rely on for that kind of information. At the 2009 legislative session, when a bill removing unclaimed property money from the Millennium Scholarship fund was being processed, there were five legislative hearings on the bill and the legislators were briefed in those hearings exclusively by officials of the governor’s budget office (Andrew Clinger and Stephanie Day) and of the legislative budget office (Mark Stevens). The legislators did not receive or invite information from the treasurer. Even so, Marshall has said that during the 2010 special session, she did warn legislators privately that she doubted the College Savings board would allow the transfer of funds. It’s not known why Marshall did not make that warning public, given the wide public interest in the scholarship program.

As it is, parents and students are apparently becoming anxious, and not just about the Millennium Scholarships. Marshall’s chief of staff on May 6 asked journalists for help in calming the public’s fears that money deposited in the prepaid college fund had been diverted to the scholarship program.

Backers of the scholarships are concerned about one of the few public programs that enjoys popular support becoming a political issue. Former governor Kenny Guinn, who recommended creation of the Millennium Scholarship program to the 1999 legislature, said he is working with Marshall to make sure the fund is shored up and that he will be at the 2011 legislature for the same purpose.

“I know that it’s very difficult times and they had to make some cuts,” Guinn said. “But I was hopeful that they would be able to leave enough money in that account to get through this year and then take them through this legislative session. … Because that program has been a magnificent one for the people of Nevada and their children. And it’s just been so successful that it’ll just break my heart … to see it go away. And hopefully it will not. There are a lot of people working to see if they can make sure it survives.”

He added, “We are all talking about economic diversification. Well, if you don’t have an educated workforce, you can’t diversify your economy.”

When Sherry heard about the wrangling, she asked, “Will the money be there next year?”