The recently retired Congressman Jim Moran introduced a bill last month with bipartisan support that calls for the formation of a presidential commission to study the future of college sports. Reintroduction and passage of such a bill would be a small but significant step in reining in athletics excesses.
College sports is swimming in money, and most of it comes from football. The median revenue of athletic programs within the Football Bowl Subdivision (FBS) of Division I grew to $61.9-million in 2012-13 from 28.2-million in 2003-4—an inflation-adjusted increase of 76 percent. And it continues to grow. College football’s new playoff system, which held its national championship game last night, yielded a 12-year contract with ESPN worth $7.3-billion.
Despite all the new revenue—most of which flows to the colleges in the big five conferences in the FBS of Division I—all is not well in the world of college football. Even within those conferences—the Atlantic Coast, Big Ten, Big 12, Pacific 12, and Southeastern—it is really only a couple dozen universities that are pulling in the big bucks. According to the NCAA’s most recent figures, out of 128 schools in FBS, only 20 athletic programs have an operating surplus.
Overall, the median operating deficit in FBS athletic departments is approximately $12-million. When capital costs (e.g., building new stadiums and training facilities) are added in, the number of programs in the black shrinks to a mere handful and the size of the median deficit increases by an additional $10-million or more.
So, what’s going on—how can losses be piling up as revenues soar? First, costs are growing faster than revenues. There are no stockholders in Division I athletics. That is, athletic departments do not have to answer to a board of directors or company owners who are looking for profits to go up each quarter so the company’s stock price will rise.
Athletic departments are not profit maximizers. They are win maximizers. The coaches and the athletic directors, occasional lofty rhetoric to the contrary, get fatter and longer contracts when they win. Above all, that’s what they are all about, even when it means trampling academic integrity and excellence.
Without pressure to maximize profits, when revenues rise, the athletic directors find ways to spend it in pursuit of winning. That means hiring big-name coaches for big-tag salaries comparable to those earned by NFL and NBA coaches, building new or renovating old stadiums and arenas, improving training facilities, lavishing abundant resources on recruiting star high-school athletes, and so on.
Second, college sports have come under increasing legal challenge, rooted in the cartel-like behavior of the NCAA and the limbo status of intercollegiate athletics in between amateur and professional sport. The most frequently cited offense is that, according to NCAA rules, athletes cannot be paid; they can only get a full-ride scholarship, which, depending on the college and the athlete’s residence, is valued at between $25,000 and $50,000. Yet, according to various estimates, the top athletes at FBS schools produce a value well in excess of $1-million. The surplus produced by these players goes in part to the coaches who recruit them and in part to support the “nonrevenue” sports at the school.
As a result of its policies, the NCAA has been the subject of several recent high-profile lawsuits, including one filed by former UCLA basketball star Ed O’Bannon, who wants athletes to have rights to their public image; one by the Northwestern football players, who are seeking to unionize in order to compel the university to provide better benefits and scholarships that cover the full cost of attendance; and a blanket antitrust suit by the renowned antitrust and sports lawyer Jeffrey Kessler challenging the association’s right to limit athlete pay in any form.
The initial response by the NCAA to these suits, other than fighting them in court, has been to loosen some of its restrictions. The NCAA now allows colleges to provide four-year scholarships to players, to increase the value of a full-ride scholarship by several thousand dollars to cover the full cost of attendance, and to provide better benefits. These higher costs will affect not only the 85 male athletes on football scholarships and the 13 on basketball scholarships, but, because of Title IX, will likely mean that 98 female athletes will also receive these richer scholarships.
However, with only a handful of colleges earning a true surplus, these additional costs of $1-million-plus will (a) make it more difficult for the vast majority of colleges—unable to afford the financial burden—to compete effectively on the playing field, (b) force these colleges into larger athletic deficits, robbing funds from the academic budget, or (c) impel some colleges to follow the lead of the University of Alabama at Birmingham and end their football program.
Thus, despite the streams of new money, college sports is faced with increased inequality and greater insolvency. Every extra dollar going to intercollegiate athletics is a dollar lost to academic programming. At the top 24 spenders in college sports between 2005 and 2012, football coaches’ salaries calculated on a per-player basis rose more than 60 percent (several now exceed $5-million and in 41 of 50 states a head coach is the highest-paid public official in the state), while academic spending per student dropped 2 percent.
Meanwhile, the various litigations are pushing college sports toward greater uncertainty, if not chaos. A financially sound and organizationally stable intercollegiate athletics system is in the interests not only of the fans of college sports but also of our country’s system of higher education.
The NCAA functions as a trade association of the athletic directors, conference commissioners, and coaches, especially those from the big five conferences, and has proven time after time that it is incapable of constructively reforming itself. (The College Football Playoff, with its multibillion-dollar television contract, is controlled by the college presidents and conference commissioners of the big five conferences and is outside the purview of the NCAA.)
Congress can stand idly by, as it is wont to do, and refuse to get involved in the business of college sports. Or, it can recognize that it is already involved in that business—via an elaborate network of tax preferences and subsidies—and that the system needs help. In a step toward constructive bipartisan leadership, Congress should pass a bill calling for a presidential commission on college athletics and move it to Barack Obama’s desk.
Andrew Zimbalist is a professor of economics at Smith College. He is the author of Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup (Brookings, 2015), which will be published this month.
