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Exposing Institutional Subsidies for Athletics

May 21, 2008 - 12:13pm

With all of the talk about the commercialization of college sports, there is a common assumption that university athletics programs pay for themselves. A new report from the National Collegiate Athletic Association (NCAA) reveals, however, that most Division I schools are actually footing a significant part of the bill for their sports teams. The report also shows the amount colleges are spending on athletics has been rising rapidly, raising questions for students, faculty members, and taxpayers about colleges' priorities (hint, hint: we're talking about extravagant athletics facilities and sky-rocketing coaching salaries here).

In its new spending report, the NCAA, for the first time, provides a break down of the revenue that intercollegiate athletics programs receive -- distinguishing between those earned by the sports teams themselves ("generated revenue") and those that the colleges provide to the programs ("allocated revenue"). The NCAA's decision to provide these breakdowns represents an important step forward for athletic spending transparency in that it allows us to see the extent to which colleges are subsidizing their sports programs.

However, the usefulness of the report is limited as it discloses only aggregate numbers. As a result, we are left in the dark about how this is playing out institution by institution. At Higher Ed Watch, we believe that the federal government needs to strengthen its institutional reporting requirements on athletics spending, because it doesn't appear that the NCAA is willing to expose its members to that type of scrutiny anytime soon.

Institutional Subsidies for Athletics

Of the 119 schools that participate in Division I-A football, only 19 have athletic programs that generated enough revenue to exceed expenses in 2006. At the other 100 schools, the athletics programs recorded a net loss, meaning that the colleges had to step in and help make up the difference. The median loss for those programs reached $8.9 million in 2006, up from $7.1 million in 2004.

This growing gap between generated revenues and expenses translates into rising institutional subsidies. Median expenses for all Division I teams increased 23 percent between 2004 and 2006, but the median amount of revenue that the athletic programs earned for themselves increased by only 16 percent.

Where's the Money Going?

Spending institutional money on athletics programs isn't necessarily a bad thing. Most sports outside of football and basketball would never be able to support themselves financially without colleges giving them a helping hand. If money on athletics is spent prudently and economically, and the athletics program is run responsibly, then institutional subsidies could be justified.

But unfortunately, at many Division I schools, spending is out of control. The commercialization of college sports has fueled a race among colleges to compete with big-time sports schools, resulting in intense competition for recruits and coaches, and in turn excessive spending on facilities and salaries.

The NCAA report documents the meteoric rise of coaching salaries. At the 119 Division I-A schools, the median head football coach salary rose to $855,500 in 2006 from $582,000 in 2004, a 47 percent increase. The median head basketball coach salary rose 15 percent during that time period to $611,000. The third highest median salary was for men's ice hockey coaches, at a shocking $252,000 (this for a sport that generates revenues of only $689,700, with a median expense of $1.7 million). Regrettably for us, and conveniently for schools, the NCAA report does not track capital spending on facilities -- a gaping hole in the NCAA's efforts at athletics spending transparency.

Budget Transparency at the Institutional Level

Because the NCAA report includes only median spending figures, either aggregated at the division level or by sport, there is no way to see what is actually happening on the ground at a particular institution. Your school may be the one whose athletics program spent a whopping $100 million in 2006, the highest expense level in the NCAA report. But how are you to know?

Under the Equity in Athletics Disclosure Act, the federal government requires colleges that receive federal student aid and have intercollegiate sports programs to submit an annual report on athletic participation, staffing, and revenue and expenses. However, the spending disclosure requirements are vague, allowing each school to craft its own definition of what's included in aggregate revenue and expenses. Because accounting is different at each school, the federal athletics spending data is not comparable and therefore is essentially useless.

The federal government should require athletics programs to use consistent accounting definitions when calculating revenue and expenses. In addition, it should require schools to disaggregate this data into designated categories, such as generated vs. allocated revenue and spending on coaching salaries, facilities, scholarships etc. Colleges are already collecting this data for the NCAA, so adding this requirement shouldn't create a significant reporting burden for them.

Athletics spending on many campuses is out of control and not in line with the educational mission of their institutions. Unless college athletics is converted into a for-profit enterprise, the federal government has a right to require budget transparency at the institutional level. You certainly have the right to know whether your tax or tuition dollars are being used to pay the hockey coach a six-figure salary.


Clearer link to report needed

Right now the first link ("new report from...")just leads to the (not very helpful or on point) graphic displayed in the post, though a 2d one ("The NCAA report documents...") leads to the report itself.

We talked about this over Thanksgiving; thanks for an informative post about the topic!

It would be helpful to put these budgets in some context, e.g., the overall budget of the schools -- is this comparable to US "defense spending" (ie, significant) or US "earmark" spending (ie, not really significant)? The NCAA report shows that the answer is arguably "in between", but closer to "earmark" levels -- around 5% of total institutional budget (p.19), regardless of school type (big time football powerhouse or not). The shortfalls described might also be compared to athletic budgets as a whole. That's probably in the report somewhere, too, but I don't have more time to find it right now!

Thanks again.