CHEYENNE - College students who lose their Hathaway scholarships because of poor performance won't get any relief from the state Legislature this year.

A House-Senate conference committee Tuesday killed Senate File 21, which would have allowed students to regain their scholarships by taking remedial steps.

The committee also defeated an amendment to the bill that would have provided more Hathaway scholarship money to students who improve their performance once they reach college.

"We all agree to just walk away," said Sen. Hank Coe, R-Cody, chairman of the Senate Education Committee, as the conference committee concluded its work.

Concerns about funding helped defeat the bill. Committee members were worried that the $400 million endowment that funds the program is not performing as well as expected, and expanding scholarship eligibility could lead to a deficit.

One estimate, presented to the committee by Sen. Mike Massie, D-Laramie, shows a possible $2 million deficit by fiscal year 2010 with no changes.

By approving Senate File 21 with the House amendment, the deficit could grow by another $600,000 to $900,000 per year, according to the estimates, which anticipate annual interest earnings of roughly 4 percent.

"We are in the hole," said Sen. Kit Jennings, R-Casper, who served on the conference committee. "It would not be responsible to pass any part of this bill."

The bill also fell victim to an ongoing philosophical debate over who should get Hathaway scholarships.

Some supporters of SF 21 said it represented the culmination of the original goal of Hathaway, which was to pay the full college tuition for hard-working graduates of Wyoming high schools.

The House amendment, supporters said, offers an incentive for students to continue excelling in college.

But others insist the program was intended as a reward for hard-working high school students, and the Legislature should resist attempts to expand the program.

"I view this whole thing as a high school scholarship program based on how you performed in high school," Coe said.

"If we are going to make this work, we are going to have to draw the line somewhere," Jennings added. "If we pass this bill, we haven't drawn the line."

Under the current Hathaway program, students who lose their scholarships can only regain them by appealing directly to the state Department of Education for a hardship exemption.

SF 21 would have allowed students to re-enter the program by repairing their grade point averages or taking additional classes.

The amendment would have allowed students whose high school marks qualified them for small scholarships to earn larger rewards by achieving a 3.4 GPA through 60 credits of study, or about two full academic years.

"We wanted to do something for the kids who really catch fire," Rep. Bernadine Craft, D-Rock Springs, said.

Rep. Sue Wallis, R-Recluse, the sponsor of the SF 21 amendment, said she was "totally disappointed" by the committee's decision, and she "doesn't buy" the members' arguments. She said the argument about the lack of funds seems unreasonable.

"That $400 million corpus was going to be able to comfortably sustain that" program, Wallis said.

Wallis pledged to return next year with similar legislation.

She said she is committed to giving college students an incentive to strive for more Hathaway scholarship dollars, as well as making the program more friendly to students who pursue technical fields.

"Ultimately, I would like to be able to open up the Hathaway and let a kid take that money and apply it to any school in the country that makes sense to them," Wallis said.

Lawmakers created the Hathaway Scholarship program two years ago with surplus mineral wealth. The $400 million endowment is expected to be fully funded this spring.

Lawmakers have added another $50 million in coal bonus money to the endowment, but that money won't be available for two years and will only cover the current expected shortfall, Massie said.

Hathaway scholarships were awarded to around 1,850 students in 2006-07.

Reach capital bureau reporter Jared Miller at (307) 632-1244 or at {M3jared.miller@trib.com.