Even if one ignored issues relating to the declining purchasing power of KEES, a
tremendous irony exists that is shared with several lottery-funded merit
scholarships: the more successful the program is at attaining its goals, the greater
the strains placed on funding sources. In the specific case of Kentucky, the
Legislative Research Commission has projected a shortfall in funds available for
KEES (LRC, 2003). Obviously, declines in revenue or increased utilization would
exacerbate the shortfall. Concerns over a projected shortfall have already led some
Kentucky legislators to consider lowering award size or raising the GPA
requirements necessary to earn an award. In any circumstance, there is no
indication that there are resources available to increase award size to keep pace with
tuition or even inflation.
Evidence of the diminishing ability for KEES to achieve its long-term goals
already exists. For example, the utilization rate has declined by 9 percent since 1999.
There is also evidence that the current awards structure is somewhat limited in its
ability to keep the most talented students in the state. Over 15 percent of Kentucky
schools have higher utilization rates for students with GPAs between 3.50-3.99 than
for students with a 4.00 GPA.
Findings and Implications
The aggregate data presented here support the hypothesis that the KEES program
is regressive in its distribution of benefits. The percentage of students who receive
an award as well as the size of the average award earned at schools where a higher
percentage of students receive free or reduced-price lunches is lower than for
schools where fewer students receive subsidized lunches. Our finding of
regressivity is consistent with the majority of studies that investigate the
distributive effects of broad-based merit scholarship programs.
Our findings also suggest that not only is the distribution of KEES awards
regressive, but that the source funding for the program is as well. Like many other
broad-based scholarship programs, KEES is funded by a statewide lottery. The
general consensus of research on lotteries as governmental funding mechanisms is
that most lotteries are regressive (Clotfelter, 1979; Clotfelter & Cook 1991; Hansen
et al., 2000). The regressivity stems from who bears the costs and who receives the
benefits of the program. The literature consistently concludes that lottery games
are played disproportionately by groups from middle and lower socioeconomic
segments of society while the benefits of the programs go to higher level
socioeconomic groups.
Although lottery-funded merit scholarships generally have proven to be political
winners (Nelson & Mason, 2003), their regressive nature is a major source of
criticism. Many studies look broadly at the distribution of lottery proceeds but only
a few address how the structure of the distributions affects the regressivity. Our
findings show that the definition of merit and the structure of the award
significantly affect the distribution of benefits. Awards based on ACT scores are
more regressive than awards based on high school GPA. More importantly, a
graduated awards structure like the one used by KEES compounds the regressivity
of the awards. In addition, the findings suggest that the distribution of KEES award
is not neutral along racial and gender dimensions. A greater number of students
earn awards at schools with a higher percentage of Caucasian students, and their
average awards tend to be larger. Schools with a higher percentage of female
students also have a greater percentage of students earning KEES awards.
The relationship between the distribution of KEES’s scholarships and the
program’s ability to address policy goals is consistent with effects found in studies
3. Correlation analysis also reinforces the patterns found in the results for difference of means tests.
38 Journal of Student Financial Aid Volume 39 Number 1 2009
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