Framed by a who's who of Indiana's university presidents, Gov. Mitch Daniels today proposed stimulating higher education by spending $1 billion in money that could be generated by a 30-year lease of the
Hoosier Lottery.
At a news conference in his Statehouse office, Daniels outlined details of a major program to combat Indiana's "brain drain" of college graduates leaving the state. To bankroll it, Daniels proposes negotiating a three-decade contract with a private company to manage the lottery.
As news of the proposal leaked in media reports this week, some critics immediately raised doubts about the merits of lottery privatization.
"I would say to opponents, 'What's your plan for the brain drain? What's your plan to lift us where we need to be?'" Daniels asked. "We can't afford not to do this."
The company leasing the lottery would pay at least $1 billion up front, Daniels said, and would be required to continue making payments of at least $200 million to the state annually for the duration of the contract.
The company also would be obligated to pay the state 5 percent of any revenue over $700 million. In 2005, the Hoosier Lottery generated $739.6 million in revenue and profits of $189 million, nearly all of which went straight to state coffers.
Daniels would direct proceeds from the lease to two new higher education initiatives.
Sixty percent of the cash would underwrite "Hoosier Hope" scholarships for top high school graduates who agree to stay in Indiana after finishing college. Daniels would place $600 million of the expected immediate cash in a permanent endowment.
Endowment earnings would underwrite an estimated 1,700 merit scholarships annually in perpetuity, Daniels said. Formed as student loans, the scholarships would be forgiven for graduates who join the Indiana work force for at least three years.
The other 40 percent of proceeds would fund a program to attract world-class faculty to Indiana's universities over the next 10 years. Using an estimated $400 million, Daniels would spend $50 million annually for the next decade to create endowments for outstanding researchers and scholars in the science and technology fields.
Wearing a bold, red tie, Indiana University President Adam Herbert praised Daniels' proposal. The presidents of Indiana's other largest universities, including Purdue and Ball State, joined Herbert at Daniels' side.
"History has proven marginal investments will not yield transformational results," Herbert said. "We need to think big and act accordingly, and Gov. Daniels has done that."