Big Spenders: College Sports Programs Need to Trim the Fat

As a student at the University of Southern California, I enjoy the tremendous success of the numerous athletic programs. I am able to attend games in venues that bear the names generous donors who have made the multitude of staff and training centers a reality. It almost seems like the athletic department has been given a blank check with the expressed purpose of creating the most competitive and successful college sports program in the nation. Yet at the same time the nation and the world are suffering through one of the worst financial crises in recent history, if not all time. The conflict arises when these two worlds collide and college athletic programs are not longer sheltered from the demands and unfortunate events of the larger economic system. With a large part colleges’ reputations deriving from the relative success of their performance on the court rather than in the classroom, a culture arose that rewarded reckless spending. This problem has manifested itself in a number of ways, especially in the hyper inflated budgets of top college sports programs, the financial structure that rewards investments in athletics over academics, and the growing disparity between top-tier and lesser athletic programs. I will unpack these different issues and show the possibilities for change that must occur in order for college athletics programs to attain stability and increase their aid to their educational institutions.

What is becoming increasingly obvious is that schools no longer have the ability to spend without limits the way they might have been able to in the past. Some schools have started to break bad habits and are taking measures to reduce their athletic program’s budgets, even if the decrease is not representative of a large percentage of the budget. The University of Miami Hurricanes football team decided to travel by bus to two in-state games next season. This move will save the university $140,000 of their annual athletic department budget of $60 million. This action is especially important given their decision to slash football season ticket prices in an effort to maintain and expand their fan base despite the tumultuous economy. Ultimately it shows an understanding that the economics of college athletics have to change, and to cope with reduced revenue from lower consumer spending athletic budgets that were once sky high must be grounded. What it also reflects is a new endeavor to move beyond the achievement and fall in line with the more modest tone established by leaders like Barack Obama. Even worse perhaps is that Stanford University spent $100 million renovating its football stadium, has enjoyed an increase in the program’s success, yet finds attendance and thus revenue dropping sharply. What both these examples reflect is the inflated budgets of athletics programs, especially at major institutions, and the reality of their value to the schools and the community that support them. These programs were driven to adopt an attitude of unceasing growth backed by funding that no longer exists in the quantities necessary to sustain this outlook.

More troubling is the fact that college athletics maintain a tax-exempt status, and that donations to the programs are tax deductible. The current law allows 80% of donations made to receive premium seating and 100% of all other donations to college athletic programs to be deducted. The National Collegiate Athletic Association (NCAA) reported that in 2004-2005 major college athletic programs received a total of $845 million from boosters. The Chronicle of Higher Education found this number to be $1.2 billion from 2006-2007, and found this increase came at the expense of academic donations. One of the best ways to promote recovery during an economic downturn is to tax the wealthiest citizens and use that money to generate new opportunities for the less fortunate members of the economy. A simple solution would be to tax donations above a certain amount, or simply remove protections for deductions where the individual receives a tangible benefit for their charity, such as mandatory donations for the right to purchase premium tickets. This issue seems even more pressing as more students are struggling to secure the financial aid necessary to continue their education. This would in effect supplement the funds the federal government is injecting into the economy and could be targeted towards the individuals and communities that colleges and universities are struggling to serve.

So the question now becomes one of solutions, the need presents itself to find ways to counteract the effects economic downturn and years of bad habits. Given that this money being given to schools, even those that receive aid from the state and federal government, will not be available as tax revenue, the question becomes one of how best to utilize surpluses. Another effect of the fundraising power of top programs is the growing disparity between the top programs and the rest of the competition (see figure on left). If one of the achievements of a successful athletics program is to increase the overall quality of the college or university and the student experience, it follows that greater distribution of wealth would enable a greater number of institutions to achieve this goal. I admit that a plan like this would discourage individuals from contributing at all if they feel their money is going to help the school’s competitors, but that is an acceptable loss. Simple removing from the budgets of the top end of the system forces those programs to scale back to more reasonable levels and by decreasing the disparity will ultimately foster greater competition. In essence the NCAA can impose a flexible salary cap on programs that is dependent on factors such as size of the program, number of participants, and market size among other factors.

Many colleges and universities and their athletic departments operate under separate financial umbrellas. However, the result is that most of the exchange between the two flows towards the athletics programs. The academic institution must maintain a commitment to developing the student part of the “student-athlete” moniker. It seems to me that because the NCAA places such a high emphasis on the intellectual development of these young people, it should promote the practice of an athletic program returning its profits to the academic institution it draws talent from. While the recently passed American Recovery and Reinvestment Act provisions several million dollars to promote accessibility of higher education to more individuals, several billion intended for higher education construction was stricken from the final version of the act. The schools and their athletic programs are in essence Siamese twins, joined together intricately so that each helps sustain the other. So it is crucial that athletic programs seize upon this opportunity to reform their own poor practices while helping develop and further the academic world by picking up the ball and running with it.