How Financial Pressures Can Lead to Athletic Scandals

There is no shortage of bad news coming out of intercollegiate athletics these days. Among the most exasperating and depressing stories has been the June death of Jordan McNair, an offensive lineman on the University of Maryland football team. Nineteen-year-old McNair showed signs of extreme exhaustion, had trouble standing upright while running 110-yard sprints, and had convulsions and a seizure on the field. More than an hour later he was taken to a hospital; he died two weeks later. His family said the cause of his death was heatstroke.

Although McNair’s death was the most tragic and reprehensible incident, it was hardly an isolated example of gross mistreatment of Maryland team members. A report to the university identified graphic videos depicting animal deaths being shown to players during meals, physical abuse of players by coaches, verbal assaults including homophobic slurs, punitive exercise requirements, among other things. The previous year, the school’s athletic director was dismissed because, without approval, he used university funds to pay lawyers who were hired to defend two football players accused by a fellow student of sexual misconduct.

Now, there’s a debate at Maryland about how toxic the football culture was, whether the coach should have been fired against the wishes of the Board of Regents, and whether the president should have been pushed to resign. There are better questions to debate: Why did the Board of Regents defend the coach, and how did the football culture at Maryland develop in the first place?

Consider first that the Maryland athletics department ran annual operating deficits of between $13.7 million and $18.1 million every year during the 2009 to 2014 fiscal years. In 2015 after Maryland moved from the Atlantic Coast Conference to the more lucrative Big Ten Conference, the university’s revenue jumped $19 million. However, expenses increased by a similar amount and the operating deficit was $14.5 million in the 2015 fiscal year. The department’s deficit averaged $15 million in the 2016 and 2017 fiscal years.

Even though Maryland looks forward to receiving a full share of Big Ten television revenue by the 2022 fiscal year, the outlook is not bright. While it is true that Big Ten institutions receive far more TV revenue than do ACC schools (an average of more than $10 million per year per institution more), playing football in the Big Ten is more competitive and more demanding. Thus, Maryland’s football record since 2014 is a mediocre 25 wins and 34 losses.

With such an unalluring performance, Maryland’s attendance is lagging: Its ticket sales in the 2017 fiscal year were just $15.3 million, compared with the Big Ten average of $27.9 million. Its recently fired coach, D.J. Durkin, was earning $2.5 million annually, before potential bonuses and perquisites, and is owed about $5 million in buyout pay. As pricey as it is, Durkin’s salary ranked just 53rd among the 65 programs in the Power Five conferences. Maryland athletics received $12.3 million in donations in the 2017 fiscal year, less than half of the Big Ten average of $25.1 million. Meanwhile, Maryland’s stadium has a capacity of 52,000, while it competes against schools like Michigan with stadium capacity of 108,000.

So, how is Maryland supposed to be able to compete? Obviously, the program needs more money, but it is already at least $15 million in the red each year. One answer appears to be to squeeze as much as possible out of the existing resources. Or more than is possible; hence, the brutality and fear at football practices, and the genuflecting Board of Regents at the altar of the football coach.

And Maryland’s situation is likely to grow worse before it grows better. The December 2017 tax reduction actually hits college sports programs quite hard: Donations in order to purchase good seats at football or basketball games are no longer deductible, and salaries over $1 million are now subject to a 21 percent excise tax. Antitrust suits and challenges to Fair Labor Practice Standards threaten to spike labor costs.

On top of these new financial drains, Maryland still has Title IX work to do before gender equity is achieved (47 percent of its student body, yet only 43.7 percent of its athletes, is female.) And structural changes along with audience fragmentation are likely to deflate the Big Ten television bonanza in coming years.

While Maryland’s case might be the most egregious this year, the financial pressures it faces are commonplace in big-time college sports. In the Football Bowl Subdivision, the most commercialized NCAA grouping, with 130 institutions, only about 20 programs annually show an operating surplus — a surplus that usually disappears when full capital costs and other indirect costs are counted.

Unlike private-sector companies, college athletic departments have stakeholders who want wins, not stockholders who want profits. Accordingly, rather than falling to the bottom line, new revenues are put at the service of attracting top high-school players via hiring fancy coaches with exorbitant compensation packages, building elaborate stadiums and training facilities, engaging in lavish recruiting practices, and maintaining accommodating tutoring programs.

So the transgressions at Maryland and at other recently upgraded programs are perhaps more extreme, but the general pattern of mismanagement, abuse, and waste is widespread in intercollegiate athletics. The NCAA has proven itself incapable of meaningful self-reform, and judicial challenges are slow, costly, erratic, and ultimately rest with an unreliable U.S. Supreme Court. The path to true reform lies either in Congress or an awakening at the Association of Governing Boards of Universities and Colleges and the American Council on Education. Without swift action, the next athletic scandal will soon be upon us.

Andrew Zimbalist is a professor of economics at Smith College and the co-author of Unwinding Madness: What Went Wrong With College Sports and How to Fix It (Brookings Institution Press, 2017).