Do a Google search for “coaching endowments.” You’ll get about 500k hits. Surprised? You shouldn’t. Nothing is a surprise when it comes to money in college sports. And this is big money, too, coming from wealthy people —philanthropists — donors who have names on the side of buildings.
Courtesy: acsm.org
Philanthropy is big, $335 billion dollars big, during the 2013 tax year (USA Today, 4/12/15). And over $50 billion of the total went to America’s colleges and universities. That’s a lot of cash for alma mater.
Where’s the money going? There was a day (it wasn’t long ago) when almost all of it went for academic purposes—things like starting new programs, endowing professorships, and constructing academic buildings. That work continues. But there’s a newer and growing strand of philanthropy—targeting athletics by soliciting endowments. Endowments (vs. one-time gifts) are important to institutions. Endowments generate interest income, which can be spent annually in perpetuity.
Athletic philanthropists at public institutions in America’s top six athletic conferences contributed almost $1 billion dollars to collegiate athletic programs during fiscal year 2010. But that figure is the tip of the iceberg. It doesn’t include athletic donations made to private institutions. That’s important for two reasons. First, private institutions don’t have to follow the same reporting requirements as do public universities. Second, private universities are places where athletic endowments gained traction initially and now thrive. Public institutions are following suit.
Athletic philanthropy is especially big in the Ivy League and at other prestigious academic addresses—schools that occupy the top echelon in American higher education. Athletic investments are being made across the board, including sports that don’t draw crowds and make many headlines, such as swimming & diving and gymnastics.
There’s a common storyline. A student-athlete’s life is influenced significantly by a coach, school, and sport. Following graduation the student-athlete has a successful career outside of sports. Later in life he or she decides “to give back” to the place and people that made it possible. Athletic endowments follow.
Courtesy: thenewyorktimes.com
That’s exactly what happened recently when Karen Keyes and her husband, Kevin, gave the University of Notre Dame $5 million to endow the head coaching position in women’s basketball. Karen played on Muffet McGraw’s first Irish team and, later, served as a grad assistant. Husband Kevin, who went on to have a career on Wall Street, played tennis at ND. “Out of all the people in my life, besides Kevin’s parents and my parents, (McGraw) had an incredible impact on who I am as a person,” Karen Keyes said at the announcement (NYT, 4/17/15).
What happened at ND isn’t an isolated case. Seven of eight head football coaching positions in The Ivy League are endowed. (The 8th was dropped at Brown—named after Joe Paterno, an alum—following the Penn State scandal.) Head football coaching positions are also endowed at other prominent academic schools, including Stanford, Northwestern, and Michigan. Northwestern even endows its athletic directorship.
The list goes on. And so does the trend.
About a year ago ESPN’s Ted Miller wrote an article entitled, “Endowed Titles New Trend in Coaching.” His take is that the concept is spreading across the country. And it’s not just about endowing head jobs; assistant positions are being endowed, too. The business of endowing coaches is priced in a market: so much will buy you this and that amount “plus” will buy you more.
Here’s an example from Duke:
$1,000,000 will establish an endowment supporting an associate or assistant coach.
$2,000,000 will establish an endowment supporting a head coach in a sport other than football or basketball.
$5,000,000 will establish an endowment supporting the head coach of football, men’s basketball, or women’s basketball.
$5,000,000 will establish an endowment supporting the athletic director.
Do a Google search and you’ll see one solicitation after another, colleges and universities reaching out, encouraging donors to give to athletics.
Courtesy: friars.com
But athletic giving isn’t a choice for fans at many schools—at least for those who purchase season tickets in major sports. That’s because “giving to athletics” is baked into ticket prices in the form of seat license fees. You can’t qualify for a prime season’s ticket in major sports (football or basketball in particular) unless you pay an upfront fee. The fee goes to an “athletic fund.” At many major institutions the seat license costs as much, if not more, per seat vis-a-vis the seat ticket.
What’s more—and this feature (among others) has been widely criticized—a portion of that license fee is categorized as a charitable contribution. Why? It’s made to a non-profit organization (i.e., a college or university).
Is all of this good for college sports? It depends. Endowing coaching positions can add immeasurably at schools that don’t have revenue sports to enhance athletic budgets. But it’s a different story when athletic philanthropy is targeted at major sports at major schools at major conferences, that is, in football and basketball at the national powers. That’s because athletic philanthropy fuels the arms race in collegiate sports.
It’s about winning. Winning means competing. Competing means keeping up, and exceeding, what peers do. All of that costs money, lots of it. The consequence? It adds up to an insatiable appetite for money: more money means more money and, then, even more money.
It’s a conundrum, though. Philanthropists have the right to invest money as they see fit—athletically or otherwise. That observation seems to resonate with the public, too. That preference was expressed clearly in Facebook comments made in response to a school’s announcement (Top 10 in football) that it had received a gift to endow a football coach.
To tell donors how much they can give, and to what they can give, seems misguided and unworkable. But it’s not outlandish to consider bounding athletic philanthropy in conjunction with the reform of big-time college sports.
Courtesy: thesportsquotient.com
An analogue to athletic philanthropy in pro sports is players’ salaries. Pro leagues have salary caps. It’s hard to imagine pro sports functioning without caps. Colleges—the 65 schools in the Power 5 conferences—could initiate a similar program for athletic philanthropy. That would be one way to regulate the money flow in big-time college sports.
The cap could be operationalized in percentage terms—either based on the overall athletic budget or the 3-5 year average of donor contributions to athletics. For example, a school with $100 million-dollar athletic budget might be restricted to no greater than a 15-20% annual increase in its athletic philanthropy.
But there’s something even larger here. Athletic philanthropy is a manifestation of an underlying matter: the need for more transparency, and more engagement, in the financial management of college athletics. Colleges do pretty much what they want, how they want, and when they want. As with seat license fees, decisions are imposed as administrative actions.
Courtesy: amazon.com
There’s another reason to open-up the dialogue. I’ve written previously that many issues in college sports, including the subsidization of athletic budgets, are ripe for public policy oversight. Federal and state officials are considering regulating college sports, and that option has appeal in some corners, even in higher education.
Here’s what I prefer. I’d like to see significant reform–coming from within the system–to precede any other type of action. Bold change, change that addresses problems at the core, is needed. And one issue at the core is accelerated spending in college revenue sports.
Boundaries need to be put in place…for the good of our games….
