NCAA Subsidies Public Policy Issue

Courtesy: Washington Monthly

The American public isn’t keen on paying subsidies. One public subsidy last year totaled $2.4 billion dollars. That’s the amount needed to pay the full cost of competitive sports at America’s public universities. Subsidies are the sum of student fees generated, institutional funds spent, and state monies allocated.

Each year USA Today reports data on athletic revenues, expenses, and subsidies at public sports-playing universities. This year’s report—covering 230 schools—was just published. Let’s break down the numbers. (The complete data set can be found at http://www.usatoday.com/sports/college/schools/finances/).

America’s public universities spent over $7.8 billion dollars on competitive athletics last year. About $1 in $3 revenue dollars nationally came by way of subsidies— about $2.4 billion dollars. But the picture is uneven across institutions. Two scenarios are at play—the situation at schools in the Top 50 (as measured by athletic revenues) and the picture at most of the other 180 schools.

All but a few schools in the Top 50 are from the “Power 5″ conferences—the Southeastern, Atlantic Coast, Big 12, Big Ten, and Pacific 12 conferences—schools with high name recognition (e.g., Alabama, UCLA). Those schools generate a lot of money, manage expenses generally well, and receive modest if any subsidies.

No subsidies were taken at seven of the country’s top revenue producers: Texas, Ohio State, Oklahoma, LSU, Penn State, Nebraska, and Purdue. Subsidies taken by others in the Top 50 (about $315 million dollars) represent a fraction of gross revenues—$4.6 billion dollars in 2013. The bottom line: in 2013 top schools generated about 60% of total revenues nationally and accounted for about 13% of the subsidies. 

Scenario 2 is a different story. It applies to about 80% of America’s sports-playing public universities. For these schools athletic revenues totaled about $3.4 billion dollars in 2013—but $2.1 billion dollars (62%) came by way of subsidies. Here’s a more detailed picture:

• Over 80 schools had subsidy rates of 70% or higher.
• A majority of schools needed a 50% subsidy to make budget.
• Subsidies can run as high as 95% of revenue (Chicago State).
• Big subsidies can be found at nationally prominent schools (e.g., 81% at UMass).

Courtesy: insidehighered.com

Subsidies function like a golf handicap: they level the competitive playing field. Subsidies are needed because many schools can’t support athletic programs—as Top 50 programs do—with gate fees and other sports-related revenues alone.

Schools in the Top 50 generally have larger fan bases, play in larger stadiums-arenas with higher attendance, appear on TV regularly, generate more money from donors, reap bigger paydays from football bowl games and basketball tournaments, and secure more income through ancillary sources, such as merchandise sales. They use these funds to pay bills in revenue-producing and other sports (e.g., swimming). But many other schools need subsidies to support both revenue-producing sports and non-revenue sports.

That circumstance produces an uneven financial landscape between the Top 50 and the rest. Schools located just miles apart can have radically different balance sheets. Take the State of Michigan as an example.

Sports subsidies are low at the University of Michigan and Michigan State—Top 50 schools. These two schools generated about $240 million in revenues in 2013 and only about $2 million dollars were in subsidy form—.18% (of revenues) at Michigan and 1.8% at MSU. The picture is radically different at the state’s three Mid-American Conference (MAC) schools. Subsidies at Western Michigan University totaled $21 million dollars in 2013 (74% of revenues). Subsidies at Central Michigan University and Eastern Michigan University were 67% and 80% of revenues last year, respectively. Aggregate subsidies

at the three Michigan-based MAC schools totaled $62 million dollars… and just for one year, 2013. 

Courtesy: Amazon.com

The State of Michigan doesn’t have a state governing board of higher education. That means state universities in Michigan make independent decisions—within broad limits—about how much to spend money and on what items. Schools with different circumstances make different decisions regarding how to fund their competitive athletic budgets.

The USA Today report confirms what many have suspected: at many schools intercollegiate sports aren’t run like a true business because programs can’t function (as they are organized currently) without subsidies. Subsidies come in the form of higher tuition costs, added student fees, and state allocations to university general funds that are channeled to athletics. 

Does it make sense to spend billions of dollars in subsidies each year to keep public university sports program afloat? The question comes at a time when Americans are grappling with the high cost of higher education and when many students are graduating from college with considerable debt. 

It also comes at a time when there’s public debate and court suits about the best ways to acknowledge students’ athletic contributions—such as covering the real cost of college (beyond what’s paid for by athletic scholarships) and providing athletes with extended medical and health benefits. How much will these items cost? From what source(s) will the money come?

While the American public likes college sports at issue is at what cost? While it’s unreasonable to expect athletic revenues to bear the full cost of athletics at most schools, the fact remains that a huge amount of money is being spent nationally on sports subsidies.

That makes this matter too important for public universities and its governing body—the NCAA—to decide alone. This is a public policy matter. The public needs to be informed and weigh in. State legislators need to get involved.

Courtesy: Changemag.org

The public’s best interest needs to be the core consideration. The dialogue can’t be about balancing university and athletic budgets.

Let the public policy process—not institutional decision making alone—decide the future of subsidies for public university athletics.    

ENDNOTE: An abbreviated version of this article appeared in The Lansing State Journal on June 15 2014.