Congress Broadens an Investigation of College Sports

A Congressional committee that oversees legislation affecting nonprofit organizations has broadened its inquiry into college sports in recent months, say nearly a dozen college officials who have participated in the investigation.

In July aides to the U.S. House of Representatives Ways and Means Committee spoke with several academic officials at one university about whether athletes there were receiving inflated grades and if the sports program was contributing to the university’s educational mission. This summer the committee interviewed officials from the National Collegiate Athletic Association about its business dealings and whether it deserved to keep its tax-exempt status. Committee aides have also talked to conference officials about their leagues’ activities and educational purpose.

Ways and Means staff members started questioning athletics officials in January about whether certain revenue generated by athletics programs and the NCAA should be taxed as unrelated business income. Lawmakers are concerned that big-time sports programs are evolving into entertainment businesses that are only marginally connected to the tax-exempt purposes of colleges and universities, according to college officials interviewed by the aides.

If the House committee’s inquiry leads to legislation requiring colleges, conferences, or the NCAA to pay taxes on their athletics revenue, it could cost colleges hundreds of millions of dollars.

A spokesman for the Ways and Means Committee declined to comment on the investigation. But during the past two years, the committee has conducted general oversight of nonprofit organizations and held seven hearings on a range of nonprofit taxation issues, including whether nonprofit hospitals and credit unions deserved to keep their tax exemptions. Since 2004, members of Congress have passed several laws curbing tax abuses by nonprofit groups.

Committee staff members have informed several people that they may hold a hearing sometime in the next year to expose what they see as problems in college sports. While two lobbyists familiar with the investigation say they doubt that lawmakers will organize a hearing this year, one higher-education official believes the committee could be preparing for a public discussion about college sports during next year’s college-basketball season.

“This is not a slam-dunk case, but it’s sexy because it’s big-time athletics and big universities,” says Matthew W. Hamill, a senior vice president of the National Association of College and University Business Officers, who has spoken with committee aides about the investigation. “They could do a hearing as a prelude to the NCAA [men’s basketball] tournament.”

Classroom Problems

The committee’s most recent questions center on academic misconduct in college athletics programs and stem from a July New York Times article describing how Auburn University football players allegedly earned easy A’s in independent-study classes.

The day the article was published, committee aides contacted Jim Gundlach, the Auburn University sociology professor who had investigated the purported problems. Mr. Gundlach says the committee’s aides seemed concerned about a former Auburn football player who wanted to major in nursing but whom academic advisers steered into sociology because classes were easier to schedule around football.

Committee staff members asked whether athletes were receiving an academically rigorous education — or just staying eligible to compete, Mr. Gundlach says.

“The committee wanted to see if athletics had reached a point where it is no longer making a positive contribution to the educational experience,” he says.

Ways and Means staff members also spoke with Auburn academic officials about the allegations. The university has since demoted the department chair who supposedly gave out easy high grades and developed a new policy for independent-study classes.

Newspaper articles last spring detailing how dozens of high-school recruits were admitted to some of the most prominent college-sports programs after attending bogus high schools also caught the attention of the committee’s staff members.

In conversations with athletics officials, committee aides questioned the NCAA’s efforts to deal with those and other academic problems of athletes. Since learning about the bogus schools, the NCAA has decertified more than two dozen supposed diploma mills and tightened academic requirements for incoming freshmen.

Over the past few years, the NCAA has also developed a plan to improve athletes’ graduation rates by penalizing teams whose students lag in the classroom. Last spring Ways and Means Committee aides asked a representative from the Knight Foundation Commission on Intercollegiate Athletics how well that plan was working.

The verdict is still out, says Amy P. Perko, executive director of the Knight Commission, whose members have called for stricter academic standards for athletes.

“If the Knight Commission felt that everything was going on as it should be,” she says, “there wouldn’t be a Knight Commission.”

Committee aides also asked if the NCAA was fulfilling one of its basic missions: to ensure that intercollegiate athletics is embedded into the mission and purpose of the university.

“It’s an ongoing process,” Ms. Perko says. “Division I institutions recognize that more needs to be done to make sure that athletes are an integral part of the student body.”

Business Dealings

Over the past nine months, the committee has focused on the finances of intercollegiate athletics. In recent years, many athletics budgets have grown three times as fast as overall university budgets. Some colleges are spending millions of dollars on new arenas, stadium upgrades, and practice facilities. And a handful of coaches earn more than $2-million a year, far more than college presidents.

The NCAA’s finances have been a central focus of the inquiry, according to several people who have spoken to the committee. Committee members want to understand how much revenue the NCAA brings in, where it spends its money, and whether the association’s commercial activities further educational purposes.

In an e-mail message, an NCAA spokesman said that three association officials, including James L. Isch, the group’s chief financial officer, had met with committee staff members and had complied with the committee’s requests for information, but would not specify what they talked about.

Ways and Means aides also have expressed concerns about the commercial revenue that conferences bring in and how much goes toward education. This summer aides spoke with Michael L. Slive, commissioner of the Southeastern Conference, about how the SEC’s activities relate to the educational mission of colleges and universities.

Some conferences have started their own cable-television networks to exploit commercial interests in their games, a move that might have invited government scrutiny, says William C. Friday, former president of the University of North Carolina system and a longtime chairman of the Knight Commission.

“When you see conferences creating their own television networks, how you rationalize that into an educational function with a tax exemption is going to be very difficult to do — because it’s strictly a business,” he says.

The Big Ten Conference, whose Big Ten Network will go on the air next year, has established a for-profit company through which the network’s revenue will flow. The company will pay taxes on any dividends earned by the network, says James E. Delany, the Big Ten’s commissioner.

But the lucrative rights fees the conference receives for its games will not be taxed — nor should that revenue be taxed, Mr. Delany says, because it serves an educational purpose.

Many Big Ten universities plan to funnel their share of the network’s proceeds into academic programs, including scholarships for students who do not participate in intercollegiate athletics.

The channel will also include programming about academic issues, which Mr. Delany says could help universities demonstrate how their athletics programs are integrated into the academic environment.

And if the network is a financial success, he says, it will prove that the league’s universities can raise money in more innovative ways than waiting on government subsidies.

“The federal government and states say they want universities to be more entrepreneurial in the way they develop resources,” Mr. Delany says. “We’re trying not to be a burden on the taxpayer. Why shouldn’t we do that?”

http://chronicle.com Section: Athletics Volume 53, Issue 5, Page A36