Chapter 8: Myths and intangibles

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NCAA data from a February 2009 study authored by economists Jonathan Orszag and Mark Israel shows athletics budgets amount to 6 percent of most universities’ total institutional spending (Orszag & Israel, 2009). Despite that relatively thin slice of a campus’ budget, athletics events where thousands of students, faculty, administrators and alums gather are often the visible “front porch” for a university. Contests can be community builders. Logos, nicknames, and television appearances brand institutions locally and nationally. Even if athletics programs do not generate net revenue, they surely stimulate alumni giving and increase prospective student applications. This is known as the “Flutie effect,” on the exaggerated notion that Doug Flutie put Boston College on the map with his Hail Mary pass in a 1984 football game against the University of Miami.

There is no correlation between spending more on athletics and winning more . . . [and] increased spending on coaches’ salaries has no significant relationship to success or increased revenue.

Rigorous studies of the subject, however, suggest that there is no significant institutional benefit to athletic success. In a 2004 report for the Knight Commission, Cornell University economist Robert H. Frank, after reviewing the extant scholarly literature, concluded any links to football and men’s basketball victories and increased applications and the SAT scores of the applicants “is small and not significantly different from zero” (Frank, 2004). A 2009 study by Devin G. Pope of the University of Pennsylvania’s Wharton School and Jaren C. Pope of Virginia Tech finds applications do rise from two to eight percent after football and men’s basketball success, but “the impact is often short-lived” (Pope & Pope, 2008).

As for donations, while winning records do not necessarily increase gifts, football bowl game appearances do, Frank wrote, to the tune of $6.50 per alumnus at public universities and $40 per year per alumnus at private schools. “The empirical literature seems to say that if the overall net effect of athletic success on alumni giving is positive, it is likely to be small,” wrote Frank (2004).

Indeed, donations to athletics departments may cannibalize contributions to academic programs. As an April 2007 study in the Journal of Sport Management revealed, athletics departments between 1998 and 2003 received an increased share of gifts – from 14.7 percent to 26 percent - from university supporters even as overall giving to institutions was flat (Humphreys & Mondello, 2007). Even so, a Knight Commission survey of university presidents finds that they “do not view fundraising for athletics and academics a zero-sum game, in which financial gains for athletics programs are made at the expense of the academic side of the house.”

There are two other myths to be dispelled. First, there is no correlation between spending more on athletics and winning more, according to an NCAA report titled, “The Empirical Effects of Collegiate Athletics: An Interim Report" (Litan, Orszag, & Orszag, 2005). Second, increased spending on coaches’ salaries has no significant relationship to success or increased revenue, according to a follow-up study.

Given increased expenses demanded by elite programs, the question is: At what cost would a winning athletic program increase the size and quality of applicants and the donations of boosters? Frank wrote: “A big-time athletic program might be a cost-effective means of expanding the applicant pool if a highly visible winning program could be launched at moderate expense. But . . . even the cost of fielding a losing program is extremely high and growing rapidly” (Frank, 2004).

Another trend has been for athletics programs to reclassify from the Football Championship Subdivision to the Football Bowl Subdivision or from Division II to Division I. Division II sports programs offer fewer athletic grants-in-aid, fewer teams, and little media exposure for their athletes, teams and institutions. When Division II schools jump to Division I and, for some, eventually, to the highest FBS status, there is an educational aspiration component to it. “You are who you play,” one official said.

“Our alumni tell us, ‘We look at the ticker at the bottom of CNN and [our scores] aren't there,’ ” Joseph Chapman, president of North Dakota State University, told the Minneapolis Star Tribune before NDSU’s program leaped to Division I in 2004. “Your athletic status is wrapped in your image and visibility as an institution.”

However, elevation to the higher competitive classification rarely lifts net revenue. In a report on about 50 university programs that reclassified from Division II to some subset of Division I, the authors found that that:

  • Programs that stepped up from Division II to Division I spent more than they took in, experiencing “an average deterioration in net operating revenue” of more than $1 million each;
  • Schools that switched divisions did not generally tend to experience a significant increase in enrollment, although some did;
  • Student fees – and, so, institutional subsidies - increased considerably as programs moved from Division II to Division I;
  • Switching to Division I increased alumni giving earmarked for athletics, but there was no evidence it helped general alumni donations (Orszag & Orszag, 2005).