Storyline: Athletic costs far outrun sports-generated revenues at most public mid-major universities. Public money makes up the difference. How much? Read more.
Late last month I shared my assessment of financial issues facing major college sports. It’s the third year I’ve written on the topic.
In this article I focus attention on one issue that I believe is most onerous: the public costs being borne by taxpayers and students to support athletics at America’s public universities. USA Today Sports estimates the amount at $2.6 billion dollars nationally last year. It was $2.6 billion the year before. That’s a total of over $5 billion dollars in two academic years.
The problem is what’s called subsidies to athletics. Subsidies include allocations to athletics via university general funds and revenues for athletics generated from student fees. Revenues from those sources supplement money that comes from athletic ticket sales, TV revenue, conference allocations, merchandising, donor contributions, and other athletic-related avenues.
Michigan Stadium, “The”Big House,” at the University of Michigan (photo, priceonomics.com)
What’s causing the problem? The widespread belief is that football (primarily) and men’s basketball (secondarily) pay the bills for non-revenue sports, programs like tennis, swimming, golf, and other non-revenue producing sports. That’s true at most flagship public universities — the ones we see play on TV regularly— like UCLA, Michigan, and LSU. Those schools generate a lot of revenue from athletic sources.
But that portrait doesn’t hold at the majority of America’s 230 major public universities. Most schools can’t balance athletic books without relying heavily on subsidies. In 2014-15 subsidies accounted for at least 65% of athletic budgets at over 120 public universities. The percentage was 80% or more at 40 of those schools.
The epicenter of the problem is the so-called “mid-major” programs, schools that compete in lesser known and followed athletic conferences, like the Mid-America, Big West, and Sun Belt conferences. The problem is that athletic revenues (without subsidies) don’t always cover costs for football and men’s basketball let alone for non-revenue sports.
Rynearson Stadium, Eastern Michigan University (photo, academeblog.org)
It’s not as though we should expect sports to be financially self-sufficient at America’s public universities. That would be unrealistic. It’s the amount of subsidies that mid-majors need to make things work.
Consider these examples. Subsidies are critical at Coastal Carolina (83% subsidy), but not at Clemson (5%). Balancing the athletic budget with subsidies is fundamental at South Alabama (71%), but not at Alabama (2%). Portland State (75%) has the same need, but not Oregon (10%). And for every Florida (1%), there’s a Florida International (83%) … for every UCLA (3%) there’s a Cal-Davis (78%). The comparisons go on and on, state after state.
I’ve studied five states—California, Florida, Michigan, Virginia, and Ohio—and the pattern is the same across the country: low or no subsidies at flagship schools and significant subsidies at mid-major schools.
California: The aggregate amount of subsidies at California’s 15 major sports-playing public universities totaled over $210 million last year. The subsidy percent was as high as 90% at one school (Cal-Riverside) and subsidies constituted at least 60% of athletic revenues at almost all of the state’s 13 mid-majors. (Comparison—subsidies are 1.5% of revenues at Cal-Berkeley.)
Florida: Public subsidies at Florida’s mid-majors amounted to almost a quarter of a billion dollars over the last two years. (Comparison—subsidies are 6% of revenues at Florida State.)
Michigan: Subsidies equaled over $80 million last year at four mid-majors. 70% of budget was the lowest subsidy percent at any of those schools. (Comparison—subsidies are .17% of revenues at Michigan.)
Virginia: The Commonwealth might serve as the poster child of athletic subsidies. Two mid-majors are at the top of the subsidy percent list (nearly 90%) and three others are over 80%. Aggregate subsidies totaled about $180 dollars last year. (Comparison—subsidies are 10% of revenues at Virginia Tech.)
Ohio. And if Virginia has a rival, Ohio is it. Subsidies increased over 300% in 10 years at one school (University of Cincinnati). In 2013-14, subsidies added up to $135 million at seven Ohio-based mid-majors. (Comparison—there are zero subsidies at Ohio State).
Courtesy: Forbes.com
While I support the right of universities to make financial decisions, there are other issues to be considered, especially the broader financial environment associated with higher education today. State allocations to public universities have been under pressure for years and college costs are at historic highs.
USA Today (May 8) reported that the average cost of attending a public university in America has increased 130% over the past 30 years (adjusted for inflation, +135% in unadjusted dollars since 2000), even though median household income has increased only about 15%. And, since 2010, the aggregated student debt in America has increased from about $830 million to $1.3 trillion dollars. Student debt, which averaged $35k per student in 2015, ranks second nationally (in total amount of dollars owed) among categories of personal debt–second only to home mortgages.
In today’s environment it makes no sense–from a public good perspective–to add costs by subsidizing athletics at the level we have in America today. That’s why America’s public universities need to do a better job managing subsidies to athletics.
How? I recommend two approaches.
First, I endorse an approach being taken by one mid-major university I studied in preparation for writing this article—Florida Gulf Coast University. With a $15 million dollar athletic budget and 65% subsidy rate, the intent at FGCU is clear: 1) reduce university allocations to athletics, 2) increase donor support for athletics, and 3) increase revenue from student fees via enrollment increases only. The recipe? Replace as much public money as possible with private dollars. Don’t increase student athletic fees.
Courtesy: revolutionarypaideia.com
Second, I applaud university presidents and trustees that “right size” college athletic programs. But, at the same time, I recognize challenges in doing so. Consider the cases of two mid-majors. The president at Alabama-Birmingham terminated the football program only to have boosters raise funds to reinstate the sport. And the president of the University of Idaho decided recently to downscale football participation. The response, hailed by some, was also met with widespread concern, especially from alumni and other boosters.
These examples show that presidents, athletic directors, and trustees need political cover to make change in athletics. That’s why the NCAA needs to show leadership by working with its mid-major membership to develop a plan for funding college athletics more responsibly. If that doesn’t happen, then don’t be surprised if state legislatures and/or Congress takes charge. That may happen anyway.
What’s the take-away message? An enormous amount of money is being spent on athletic subsidies and there’s no reason to believe that amount will decline without intervention. There may be public outrage. Some schools may lead with others following. The NCAA may develop new policies. States and/or the Feds may take charge.
The bottom line is that something significant needs to be done, done firmly, and done soon.
