Subsidies are the Name of the Game in D-1 College Sports

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Storyline: Athletic subsidies at D-1 public universities amounted to over $2.5 billion dollars last year


“College sports welfare” is what Patrick Hruby calls it. It’s how D-1 athletic programs are bolstering revenues in major college sports. (Read Hruby’s article on college sports welfare at VICESports: “How taxpayers subsidize bowls, tickets, coaches, NCAA and more.”)

I’ve used a gentler term: “public policy issue.” But both labels refer to an underlying issue: revenues from college sports (e.g., tickets, TV, merchandising) don’t pay all the athletic bills at most public D-1 universities. To cover costs, schools  “enhance” revenues.

Courtesy: pressconnections.com

Courtesy: pressconnections.com

USA Today uses that broadened concept of revenues to capture the amount and percentage of sports subsidies at America’s major sport-playing public universities. USA Today defines subsidies this way:

The sum of students’ fees, direct and indirect institutional support and state money. The NCAA and others consider such funds “allocated” or everything not generated by the department’s athletics functions.” (Bolding added)

Each year the newspaper releases an assessment of the financial balance sheet in D-1 public-college sports (private schools aren’t required to make public their financial records). The most recent analysis, for 230 schools during the ’13-14 academic year, was released on May 26.

Numbers from year-to-year stay generally constant because most trends remain intact. And perhaps the most remarkable trend is this: the majority of public universities need subsidies to balance athletic budgets. 

Just how much is staggering by any accounting method.

Courtesy: leastthing.blogspot.com

Courtesy: leastthing.blogspot.com

Only 7 of 230 schools (3%) generate sufficient sports revenues to cover expenses without the addition of subsidy dollars. Four schools are in The Big Ten—Ohio State, Penn State, Purdue, and Nebraska. The others are Oklahoma and Texas (Big 12) and LSU (SEC). Revenues and expenses pretty much balance out at those schools, except at OSU, which reported a sizeable “profit.”

In aggregateUSA Today reports, the 230 public D-1 schools had athletic revenues of about $8.6 billion dollars during the ’13-14 school year. Subsidies accounted for over $2.5 billion of total revenue (29%).

But 29% doesn’t give you an accurate profile of America’s D-1 sports system. That’s because the lion’s share of revenues is generated by schools in the Power 5 Conferences that don’t have high subsidies. On the other hand, high subsidies are needed to keep many of the other schools afloat.

At the top of the subsidies list is Rutgers (an exception to the assertion just made about schools in the Power 5 conferences). The Scarlet Knights needed over $36 million in subsidies last year to cover costs. That translates into a whopping 47% of revenues coming from subsidies. Other major players in the high-subsidies category are Air Force, UConn, and Cincinnati. Each school needed in the neighborhood of $30 million in subsidies to make things work budget-wise.

Schools that don’t make national headlines also need large cash infusions to make ends meet. James Madison, Old Dominion, and Cal-Davis each added at least $25 million in subsidies last year. JMU needed almost $36 million.

Those schools, and others, in the Subsidies Top 20 (by dollar amount) paint an important financial portrait of college sports today. These schools “play at a cost,” literally.

Courtesy: article.wn.com

Courtesy: article.wn.com

Half of the twenty schools are affiliated with two conferences: the American Athletic Conference and the Mid-America Conference. The AAC schools—UConn, Cincinnati, Central Florida, South Florida, and Houston—each required from $20-30 million in subsidies during the ’13-14 year. The MAC schools—Eastern Michigan, Central Michigan, Buffalo, Akron and Miami (OH)—needed about $20 million each in subsidies.

Five schools in the Subsidies Top 20 (by dollar amount) are located in two U.S. States—Florida and Michigan. Total athletic subsidies last year for those five schools were about $66 million in Florida and $46 million in Michigan. You can amplify that amount by adding subsidies from two other Subsidies Top 50 schools (by dollar amount)—Western Michigan (#27 at $20 million) and Florida Atlantic (#50 at $16 million).

The financial picture gets really bleak when you analyze schools by percentage of athletic revenues coming from subsidies.

Subsidies comprise at least 50% of total athletic revenues at 150 schools (65% of 230 D-1 public universities).

Subsidies account for 75% of athletic budgets at 66 schools (29% of universities).

And close to 40 D-1 schools—about 1 in 5—need subsidies of 80% or more to balance budgets.

Courtesy: nj.com

Courtesy: nj.com

Who tops the list? Mid-major schools dominate the list, including schools from the Big West, Big South, and Atlantic Sun. Topping the list is independent, New Jersey Tech, at 91%.

What’s the take-away message? USA Today offers an interpretation: “By the NCAA’s benchmark for self-sufficiency, just 24 of 230 public schools in Division I (10.4%) stand on their own, up from 20 a year earlier, according to an analysis of the 2013-14 school year by USA TODAY Sports, based on data gathered in conjunction with Indiana University’s National Sports Journalism Center. By NCAA definition, self-sufficiency means an athletic department’s generated operating revenues — not counting money from student fees, university funding or direct government support — are at least equal to its total operating expenses, which is legalese for taking in more money than you spend.”

Here’s my take. I understand that America is sports-crazy and that college sports are bigger than ever. Fans want to cheer for their college teams. How much? If nothing else, the UAB story tells what can happen when an academic executive tries to cut athletic programs for financial reasons: all hell breaks loose.

But, even in that instance, UAB football program wouldn’t have been re-established had it not been for the large infusion of donor dollars. College sports philanthropy has become “the next big thing” in the management of college athletics. I’ve discussed the implications, which I believe are serious, elsewhere.

Subsidies cartoon

Courtesy: Change magazine

Bottom line: Would the majority of American citizens support the practice of big-money athletic subsidies IF they knew what was going on? I think not.

There are good reasons, politically, why they don’t know much about this issue. That’s why articles like this are important. The first step in change is awareness.

Universities need to figure out ways to live within athletic budgets. That includes doing a better job of aligning aspirations and reality. Too many “wanna’ be” schools have migrated to D-1. That move is costing taxpayers, students, and parents a bundle.

Forget the argument that most academic departments don’t pay their way. Academics are the cornerstone of higher education. What we really have here is Northern Panhandle wanting to be like Ohio State.

We really need to get serious about reforming college athletics. Bounding athletic subsidies is one way.


Summary categories (Definitions from methodology used by USA Today)

Total Revenue: Includes all sources of operating revenue.

Total Expenses: Includes all operating expenses.

Total Subsidy: The sum of students’ fees, direct and indirect institutional support and state money. The NCAA and others consider such funds “allocated” or everything not generated by the department’s athletics functions.

Percent subsidy: Percent of revenues from allocated sources.

Revenue categories

Ticket sales: Sales of admissions to athletics events. Include ticket sales to the public, faculty and students, and money received for shipping and handling of tickets. Does not include amounts in excess of face value (such as preferential seating) or sales for conference and national tournaments that are pass-through transactions.

Contributions: Includes amounts received directly from individuals, corporations, associations, foundations, clubs or other organizations by the donor for the operation of the athletics program. Amounts paid in excess of a ticket’s value. Contributions include cash, marketable securities and in-kind contributions such as dealer-provided cars, apparel and drink products for team and staff use. Also includes revenue from preferential seating.

Rights/Licensing: Includes revenue for athletics from radio and television broadcasts, Internet and e-commerce rights received from institution-negotiated contracts, the NCAA and conference revenue sharing arrangements; and revenue from corporate sponsorships, licensing, sales of advertisements, trademarks and royalties. Includes the value of in-kind products and services provided as part of the sponsorship (e.g., equipment, apparel, soft drinks, water and isotonic products).

Student fees: Fees assessed to support athletics.

School funds: Includes both direct and indirect support from the university, including state funds, tuition, tuition waivers etc. as well as federal Work Study amounts for athletes. It also includes university-provided support such as administrative costs, facilities and grounds maintenance, security, risk management, utilities, depreciation and debt service.

Other: All other sources of revenue including game guarantees, support from third-parties guaranteed by the school such as TV income, housing allowances, camp income, etc.; tournament/bowl game revenues from conferences; endowments and investments; revenue from game programs, novelties, food or other concessions; and parking revenues and other sources.

Expense categories

Coaching/staff: All salaries, bonuses and benefits reported on the university’s tax forms for coaches and staff, as well as third-party contributions.

Scholarships: Athletically related student aid, including summer school and tuition discounts and waivers (including aid given to student-athletes who have exhausted their eligibility or who are inactive due to medical reasons), and aid for non-athletes such as student managers.

Buildings/grounds: Facilities costs charged to the athletics program, including debt service, maintenance, utilities and rental fees.

Other: Includes guarantees paid to other schools, severance payments to past coaches and staff, recruiting, team travel, equipment and uniforms, game day and camp expenses, fundraising and marketing costs, spirit group support, medical expense/insurance and conference dues. It also includes expenses charged to athletics by the university, such as building maintenance.

 

 

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About Frank Fear

I’m a Columnist at The Sports Column. My specialty is sports commentary with emphasis on sports reform. I also serve as TSC’s Chief Operating Officer and Managing Editor. In that role I coordinate the daily flow of submissions from across the country and around the world, including overseeing editing and posting articles. I’m especially interested in enabling the development of young, aspiring writers. I can relate to them. I began covering sports in high school for my local newspaper. In college I served as sports editor of the campus newspaper and worked in the Sports Information Director’s Office at St. John Fisher College. After finishing grad degrees at West Virginia and Iowa State I had a 35-year academic career at Michigan State. Now retired, it’s time to write again about sports. I strongly support TSC’s philosophy–democratizing voice by giving everybody a chance to write.



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