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Introduction

UPDATED FINANCIAL DATA


At the nation's most prominent universities, intercollegiate athletics have always played a dual role in campus life. On the one hand, they are managed for the benefit of student-athletes. On the other, they inspire the interest and passions of thousands, if not millions, of fans. For most teams at most institutions, these roles can be reconciled. But in high-profile sports, tensions often surface between the core mission of universities and commercial values.

These tensions have grown significantly over the past two decades. The pursuit of television contracts and slots in football bowl games, together with the quest to win championship tournaments in basketball, have had a destabilizing influence on athletics programs. Among other worrisome developments, the intensely competitive environment at the top levels of college sports has prompted four rounds of realignment among athletic conferences since 1994; a bidding war for prominent coaches; and accelerating expenses across the board.

The growing emphasis on winning games and increasing television market share feeds the spending escalation because of the unfounded yet persistent belief that devoting more dollars to sports programs leads to greater athletic success and thus to greater revenues.

In fact, only a tiny number of college athletics programs actually reap the financial rewards that come from selling high-priced tickets and winning championships. According to a USA Today analysis, just seven athletics programs generated enough revenue to finish in the black in each of the past five years. This reality is often obscured by headlines about money in college sports, such as the recent 14-year, $10.8 billion television rights deal for the NCAA men’s basketball tournament, and yet another round of conference realignments and expansions designed to increase television market share.

Nevertheless, the pursuit of those elusive goals by many programs creates a cost spiral that causes athletics spending to rise at rates often exceeding those on academic spending.At many universities, institutional spending on high-profile sports is growing at double or triple the pace of spending on academics. This is due to much more than multimillion dollar salaries for football and basketball coaches. Less-publicized trends also play a significant role, including a steep increase in the number of expensive non-coaching personnel devoted to individual sports (see Figure 1).

Median athletics spending per athlete at institutions in each major athletics conference ranges from 4 to nearly 11 times more than the median spending on education-related activities per student.

In some instances, there are legitimate reasons for athletics spending to outpace education-related spending on a per-student basis. Health insurance for student-athletes is a unique and large expense, for example. But expenses like this cannot account for the lopsided spending patterns seen at some universities. Median athletics spending per athlete at institutions in each major athletics conference ranges from 4 to nearly 11 times more than the median spending on education-related activities per student (see Figure 2).

At most institutions, these expenditures require a redistribution of institutional resources. Because sports revenues so often fall short of meeting the needs of athletics programs, almost all programs must rely on allocations from general university funds, fees imposed on the entire student body, and state appropriations to meet funding gaps (see Figure 3). This is a significant concern at a time when economic woes have devastated state budgets and institutional endowments alike. Conflicts over funding between academics and athletics are growing.

Indeed, reliance on institutional resources to underwrite athletics programs is reaching the point at which some institutions must choose between funding sections of freshman English and funding the football team. And student-athletes in non-revenue sports risk seeing their teams lose funding or be cut entirely. These threats extend well beyond universities with high-budget athletics programs: it is clear that the spending race that too often characterizes major football and basketball programs is creating unacceptable financial pressures for everyone.

In brief, if the business model of intercollegiate athletics persists in its current form, the considerable financial pressures and ever-increasing spending in today’s college sports system could lead to permanent and untenable competition between academics and athletics. More broadly, this model could lead to a loss of credibility not just for intercollegiate sports but for higher education itself.

The current financial downturn should be a wake-up call for all programs. It has significantly refocused academic priorities and even forced some institutions to ratchet back spending on sports—primarily by paring teams in lower-profile sports, thus curtailing opportunities for student-athletes. However, even with this new reality, top programs are expected to have athletics budgets exceeding $250 million by 2020, based on data from the past five years. Even for the largest and best-positioned universities, a $250 million athletics budget serving an average of 600 student-athletes is untenable (see Figure 4).

In the Commission’s view, addressing misplaced spending priorities requires answering some searching questions: Are financial incentives at the national, conference, and institutional levels rewarding behaviors that are aligned with the core values of higher education, institutions’ educational missions, and amateur athletic competition? Or are they creating a “winner take all” market in which there are very few winners? More often we see the latter.

Changing course will not be easy. But we know that some institutions have been able to achieve a healthy balance between academic and athletics spending. We believe that the reforms laid out in this report are achievable and can help all college athletics programs do the same.

Academic reform hit a tipping point when graduation rates were first shared publicly. We believe the same will be true for financial reform when there is far greater openness about spending on college sports.

Presidents of universities with major football programs clearly recognize the need for change. In a 2009 Knight Commission survey, a large majority said that they believe today’s revenue and spending trends are not sustainable for athletics programs as a whole. Nearly half expressed concern about the proportion of institutional resources being used to support athletics programs, and a similar proportion said they feared that economic pressures might force them to discontinue a sport.

Presidents also understand the urgency of acting together. To be sure, some institutions have been able to achieve financial stability, taking advantage of significant revenue opportunities while exercising prudent management. But it is clear that the vast majority of Division I institutions will not be able to do so without a shared structure that provides athletics programs and universities with the information, expectations, and incentives needed to achieve a better balance in their spending priorities.

The Commission believes that the first step among the many actions needed to redress the imbalance in athletics spending is to make financial data in intercollegiate sports, both for public and private institutions, readily available to the general public and to trustees, state legislators, students, parents, and the media. Academic reform hit a tipping point when graduation rates for student-athletes were first shared publicly. We believe the same will be true for financial reform when there is far greater openness about spending on college sports—in absolute dollars, in growth levels, and in comparison to academic budgets.

We applaud the NCAA’s good work over the past five years in improving the accuracy of financial data and organizing that information into a database accessible to all presidents. These valuable efforts provide a solid foundation on which to build. But much more needs to be done.

We believe that more data, better data, and more transparent data will mean greater accountability for college sports, both on campus and in the public eye.

After all, at a time when all of U.S. higher education is under unprecedented pressure to be more transparent to the public and more accountable for the results it achieves, intercollegiate athletics cannot expect to be immune to the same standards. Moreover, as with other parts of higher education, heightened scrutiny of college sports should not be viewed as a threat but as an opportunity. With the spotlight already on intercollegiate athletics, more effective disclosure of finances—and of financial priorities—will enhance the long-term prospects of college athletics by ensuring that they remain part of, not apart from, the central mission of colleges and universities.

Our recent survey of college presidents shows that they are united in their desire for greater transparency in athletics spending. Given the diversity and complexity of the challenges they face, however, they are understandably wary of one-size-fits-all solutions. Backers of constructive change face a considerable practical challenge—marking a path to financial reform in a system characterized by great diversity in resources, funding models, institutional practices, and state laws. These concerns are legitimate, but we believe they can be overcome.

In the recommendations that follow, the Commission outlines in the pages that follow how the influence of big money in high-profile college athletics can and must be reduced. We aim not only to foster much-needed discussion but, above all, to stimulate reform.

With the spotlight already on intercollegiate athletics, more effective disclosure of finances—and of financial priorities—will enhance the long-term prospects of college athletics by ensuring they remain part of, not apart from, the central mission of colleges and universities.