Revenue-strapped mid-major schools are especially at risk. Increasing athletic subsidies isn’t the answer.
The cancellation of ‘March Madness’ is having a major impact on the NCAA’s pocketbook. USA Today reported that the NCAA “depends on the basketball tournament for nearly all of its roughly $1.1 billion in normal annual revenue.” Without a tournament this year, the NCAA has had to tighten its belt and, so too, will member universities. How so? The universities get a good slice of ‘Madness’ revenues.
The NCAA announced last week that it will cut a planned $600 million distribution to schools by more than half–to $225 million.
And if that wasn’t bad enough, COVID-19 could put a huge crimp in college sport’s second major revenue stream–major college football. Last Thursday, Big 12 Commissioner Bob Bowlsby said that the college football season may launch without fans in the stands or, perhaps, might even be delayed.
Bob Bowlsby: It’s a whole new ballgame if we find ourselves not playing football because it affects everything we do.
Unexpected financial blows–a one-two punch to put it mildly–will affect all major sports-playing universities. But it will have the most effect on major schools that play outside of the Power 5 conferences, that is, the Atlantic Coast, Big Ten, Big 12, Pacific-12, and Southeastern conferences. Hundreds of lower-profile schools–often called ‘mid-major’ programs athletically–don’t attract large crowds, high-profile media attention, or deep-pocket athletic boosters in the thousands. To make ends meet, schools like Middle Tennessee, Eastern Michigan, and Delaware rely on athletic subsidizes, that is, non-athletic revenue streams that come by way university budget transfers and student fees.
Using the most recent data available (for 2017-18), USAToday reported that 230 public universities needed a total of $3 billion in subsidies to balance athletic budgets. The median contribution of subsidies to total athletic revenues was about 73%. For 165 programs, then, subsidies accounted for almost three of every four dollars in athletic revenues. While almost all of the ‘big-time’ programs (e.g., Ohio State, Oklahoma, and Alabama) operate with few, if any, subsidies, almost all mid-major programs do.
Athletic subsidies at Cleveland OH area public universities from cleveland.com (March 2019)
Most of the big-time programs will have to cut costs and some may even add or increase subsidies. But heavily subsidized programs face a much steeper challenge–especially if the football season is curtailed, delayed, or in a worst-case scenario, canceled. With college sports subsidies already as high as they are, adding more seems wrongheaded, especially during a time of national economic distress.
State taxpayers, students, and their families are already bearing a significant burden for college sports. More is not the answer.
University executives and athletic directors should use this fiscal crunch to figure out a more responsible and palatable way to fund college athletics. More of the same won’t do. But I don’t trust that will happen. The reasons are legion, including this: athletics is the way many of these schools get press, air time, and publicity. Presidents see it as ‘a good investment’ and athletic directors want their programs to mimic what people see, and what athletes have, at ‘big time’ schools.
Here’s what I recommend. Take the decision out of the schools’ hands. Legislators in states where athletic subsidies are especially large in the aggregate–Virginia, Ohio, Michigan, New York, North Carolina, Florida, and California–should pass legislation that will phase-in subsidy caps for Division 1 sports programs. With 73% the norm today, reduce that level over 3-5 years to no more than 40%. That’s still high, but it’s better than what we have in today’s unregulated environment.
If there’s one thing we know for sure, it’s that universities spend lots of money on athletics. The record is clear–the more money that’s collected, the more money that’s spent. In 2017-2018, it was about $11 billion collected and about $11 billion spent at those 230 public universities, according to USA Today.
Pro sports have caps for a variety of financial matters. But financial caps have been anathema for the NCAA, conferences, and schools.
Legislators, it’s now up to you.
_____________
You can listen to this article at ‘Under the Radar‘ on Anchor.FM.
