SANTA FE (KRQE) – Eight years ago, Fred Nathan spotted a problem with New Mexico’s lottery system. Of the money being spent on tickets, only about 22 or 23 cents on the dollar was going to lottery scholarships.

“There wasn’t enough money going in for the scholarships,” said Nathan, head of Think New Mexico, a prominent think tank.

In 2007, Nathan convinced a bipartisan group of lawmakers to institute a new requirement that 30 percent of revenues raised would have to go to that scholarship fund.

It resulted in an immediate boost to the amount of money going into that fund. In the fiscal year before the requirement went into effect, the lottery raised $34.8 million for scholarships.Three years later, that number had jumped to $43.6 million.

But something else has changed too.

Lottery ticket sales peaked in fiscal year 2006 at $150.6 million, before the requirement went into effect. Last fiscal year, that number was down to $136 million, a dwindling source of cash for the already squeezed scholarship fund.

Senate Finance Chair John Arthur Smith blames that 30 percent requirement for the decline, saying it’s handcuffed lottery administrators.

He’s introduced Senate Bill 355, which would eliminate the 30 percent scholarship requirement. Smith reasons that, without the requirement, lottery officials could put more money into the prize pool and draw more players. Those increased sales could then be used to fund more scholarships.

“We’ve got to get additional dollars from customers,” Smith said. “We’re wanting to bring more scholarship money to the bottom line for students.”

Smith’s idea is one the lottery itself has been a strong backer of.

Nathan points out that, technically speaking, Smith’s bill wouldn’t require the lottery to pay a single cent into the scholarship fund.

“There’d be no requirement,” Nathan said. “They could put in theoretically a very small percentage.”

Student leaders at the University of New Mexico are skeptical too. The ASUNM senate voted in favor of a resolution opposing the change in the fall.

“It’s a gamble,” said Gabriela Eldredge, an ASUNM senator.

“I’m hesitant,” said Alex Herring, a former ASUNM senator. “I’d like to keep guaranteed funds for higher education.”

Smith’s bill would also allow lottery players to pay for tickets with a credit or debit card, something that is currently not allowed under state law.