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Senate Education Committee adopts amendment to correct Arkansas Lottery accounting, uses $20 million shortfall reserve to clear deficit
Summary
The Senate Education Committee adopted an amendment and approved a bill to adjust how the Arkansas Scholarship Lottery reports net proceeds, moving funds from a $20 million shortfall reserve trust to clear a multi‑million dollar negative balance on the lottery's balance sheet, lawmakers said.
The Senate Education Committee adopted an amendment and approved a bill to adjust longstanding accounting practices for the Arkansas Scholarship Lottery and to use a $20 million shortfall reserve trust account to eliminate a negative position on the lottery's balance sheet, lawmakers said.
Sponsor Senator Hickey, presenting the measure, said the change corrects an accounting mismatch that has existed since the lottery’s creation. “When the lottery was created in 02/2009 … the definition of net proceeds allowed for a modified cash basis instead of an accrual basis. So basically, we've been sending more to the scholarship trust fund than what we what we should have,” Hickey said.
The bill and an accompanying amendment would remove a shortfall reserve trust account from the lottery’s balance sheet and apply those funds to clear an accumulated deficit caused by the previous accounting method. Hickey told the committee the shortfall reserve trust holds $20,000,000 and that the negative balance shown on the books fluctuates; it was “right under $20,000,000” as of June 30, 2024 and was about $16–17 million earlier in the fiscal year, according to his presentation.
Hickey said the change should not affect scholarship awards. “Absolutely none,” he responded when asked whether the adjustment would alter current scholarship allocations. He added that the scholarship trust fund itself holds “300 and something million” in total but cautioned that his figure was approximate.
Committee members were told the Department of Finance and Administration (DFA) and the Legislative Audit office were involved in reviewing the accounting issue. Hickey described the correction as aligning the lottery’s reporting with generally accepted accounting principles and said the amendment was prepared with input from lottery officials and DFA staff.
The committee first voted to adopt the House amendment to the bill by voice vote and subsequently voted to pass the measure in committee; the transcript records voice votes but does not list individual roll-call tallies.
Hickey said the precise dollar impact that will flow back into the scholarship trust fund depends on actuarial calculations and the final fiscal‑year accounting, which will be known after the fiscal year closes. He said the shortfall reserve mechanism was originally created to provide a stopgap if revenues were insufficient to cover scholarships but that the lottery now operates on a one‑year lag in payments, reducing the need for the reserve.
The bill sponsor told the committee that the amendment and bill are intended to “clean that up” on the books so the lottery will not show a negative net position going forward. Implementation and any exact transfers will follow actuarial reporting at fiscal‑year close, Hickey said.
