September 13, 2005

The Honorable Dave Freudenthal

State Capitol Building

Cheyenne, Wyoming

Dear Governor Freudenthal,

The Education Merit Scholarship Committee welcomes and supports your recent recommendation that the Hathaway scholarship program begin in 2006.   However, early implementation has financial and operational implications.

It is imperative that this program be successful if the bill is enacted.  To ensure success, the Committee requests that you immediately provide the funding required to enable the Department of Education to hire the necessary staff to implement the program.  The staff should be charged with the responsibility of developing rules, regulations and procedures required to successfully implement the program in the fall of 2006.  We understand that  the rules and regulations cannot be promulgated unless the bill is enacted; however, an early drafting process will be vital for a successful 2006 implementation and will inform the legislative debate.  We cannot overemphasize that efforts to support this program must begin now.

The 2005 legislation envisions a program that will be fully funded by an endowment.  We believe this funding approach is an important concept.  We are entering into a historic compact with the citizens of this State.  We are promising specific scholarships that students can earn through their performance in school.  Failure to keep these promises would damage the credibility of  Wyoming's citizen government.  Given Wyoming's historically volatile revenue sources, a fully funded endowment is the proper way to ensure that we keep the promises we have made.

The current statutory formula will fund the endowment with unused revenue from the school foundation account.  It is therefore dependent on both mineral prices and the demand for K-12 funding.  Estimates are that it will take six to eight years to fully fund the endowment.  Current high mineral prices may revise these estimates downward, but they are subject to considerable risk and uncertainty.

Given the importance of funding the program with the income from the endowment and the financial risk related to the accumulation of the endowment through the current formula, we recommend 2006 be the implementation date only if there is an appropriation for the endowment to achieve a balance of $400 million dollars.  We also believe that it is important to keep the scholarship endowment in step with the excellence in higher education endowment.  We therefore recommend you include in your budget request general fund appropriations to achieve the following balances as of July 1, 2006:

Hathaway Scholarship Endowment                                                   $400 million

Excellence in Higher Education Endowment                                     $105 million

Scholarship reserve account and operating funds for 2006                  $17 million

                                                                                    TOTAL           $522 million

Without these appropriations and your action to take immediate steps necessary to allow the start of this program in the fall of 2006, we recommend that the start of the program be postponed until the endowment accounts have accumulated at least seventy-five percent of the above amounts.

We look forward to seeing these proposed appropriations in your budget message on

December 1.

With Warm Regards,

The Education Merit Scholarship Committee