Nashville, TN (WOKI / WVLT) – A new report from ThinkTennessee is highlighting potential long-term financial challenges for Tennessee’s lottery-funded scholarship programs, as lottery revenue declines while scholarship costs continue to increase.
The report found that net lottery proceeds have fallen nearly 22 percent over the past four years, even as more students depend on lottery-funded financial aid programs to help pay for college and other post-secondary education expenses.
According to the report, the Tennessee Lottery Scholarship Program currently funds 13 separate scholarship initiatives, including the widely used HOPE Scholarship, and serves more than 169,000 students statewide. Over the last decade, the program has delivered nearly $4.7 billion in scholarship funding.
Researchers project scholarship expenditures will continue to grow faster than lottery revenues through at least 2030, creating concerns about the long-term sustainability of the funding model.
ThinkTennessee Research Director Chris Candelaria said the findings should not be interpreted as a sign that scholarship programs are in immediate danger.
“It’s just really a call to highlight that we’re kind of at a crossroads,” Candelaria said. “We need to think strategically about how we’re funding our scholarship programs.”
Candelaria noted that the HOPE Scholarship alone accounts for roughly 76 percent of direct spending from the Tennessee Education Lottery Scholarship Fund, making it the program’s largest financial commitment.
One factor cited in the report is the growing popularity of sports betting. Candelaria suggested that Tennesseans who participate in sports wagering may be less likely to purchase lottery tickets, potentially reducing lottery sales.
He also pointed to unregulated prediction markets as another possible source of competition for gaming dollars.
“One might think about just the growth of sports wagering itself,” Candelaria said. “If you’re engaging more in sports wagering, you might be less likely to engage in buying a lottery ticket.”
The Tennessee Education Lottery acknowledged that revenue fluctuations are common and can be influenced by several factors, including jackpot sizes, fuel prices and growing competition from other gaming options.
Lottery officials said sales have recently shown signs of improvement. According to the lottery, sales are up 3.5 percent in fiscal year 2027 compared to the same period last year.
In a statement, the Tennessee Education Lottery said it remains committed to responsibly generating revenue for educational programs through innovative strategies and continued modernization efforts.
The ThinkTennessee report suggests several possible approaches for lawmakers and state officials to consider. Among them are lottery modernization initiatives, including expanded digital options and allowing debit card purchases for lottery products.
Supporters argue such changes could help increase participation and boost revenues without reducing scholarship benefits.
For students, however, the report does not signal any immediate changes.
University of Tennessee freshman Beckett Simmons said students should continue searching for every available scholarship opportunity regardless of future funding discussions.
“The biggest thing is always just trying to find as many different ways that you can,” Simmons said. “Because college is expensive.”
Candelaria emphasized that students currently receiving lottery-funded scholarships should not expect impacts this year. Instead, he said the report is intended to encourage policymakers to begin discussing solutions before funding pressures become more significant.
“This report’s not making any blanket statements that these scholarships are going to be cut or things are going to be reduced,” Candelaria said. “It’s really, here are the facts, here’s the landscape, these are the issues that we need to grapple with in the coming years.”
The report suggests Tennessee still has time to address the challenge, but warns that long-term planning will be necessary to ensure lottery-funded scholarships remain available for future generations of students.
