Many of the issues currently facing big-time college sports result from its incredible popularity. Universities are in the success business, so the fact that campus athletics are thriving is good news, but with success comes challenges.
The most visible consequence of success is money. The attraction of college sports — mainly football and men's basketball at the top 60 or so schools — has resulted in bigger and bigger television deals. Last year Forbes estimated that the five biggest athletic conferences (including the PAC-12) brought in almost $1 billion in TV revenue. That doesn't even count another $1.5 billion brought in annually by the NCAA March Madness basketball tournament and the college football playoff. Much of this money is distributed among university athletics programs.
The resulting trickle-down effect has seen athletic department budgets swell, with corresponding increases in coaches' salaries and facilities upgrades. Some see the increasing budgets and worry that a crisis is just around the corner. For instance, earlier this year USA Today warned that "college sports may be facing a bubble ... the kind that goes — pop!"
Budgets are increasing, but college sports are not facing a financial bubble. Let's take a look at some data to understand why.
On the first day of class in Introduction to Sports Governance, I ask students to guess what proportion of the $1.3 billion CU-Boulder campus budget is devoted to CU athletics. The answers I get vary, but they are all large — 25 percent, 40 percent, even 80 percent. The real number is more like 5 percent (about $70 million in 2015) which is pretty close to average across the 200 or so state universities with NCAA Division I athletics, according to data collected by the Chronicle of Higher Education. My students express further surprise when then learn that of that $70 million, the vast majority (85 percent in 2015) comes from donations and other program revenue, not tuition, student fees or state funds.
There is a big difference between big universities, like CU, and their smaller counterparts who want big-time athletics programs. The $150-plus million athletics budget of Ohio State University in the context of its budget of more than $5.5 billion is relatively small. In contrast, at Louisiana-Monroe University which has a Division I football team, its athletics budget of almost $13 million is large in the context of its overall $75 million campus budget.
In smaller universities, college athletics can be a financial drain. The University of Alabama-Birmingham terminated its football program in 2014, citing a need for the university to subsidize almost $50 million in costs over the following five years. But the demise of football was short-lived. After a public outcry, the university is bringing football back in 2017, after $27 million had been raised by outside supporters of the program.
The spending patterns of college athletics department are pretty much the same as any academic department, as explained by economist Andy Schwarz: "Revenue and expenses are basically locked together like you'd expect of a department that spends its budget and a budget that's set based on expected revenue."
At CU-Boulder, in round numbers, using current accounting practices and based on publicly available information on the CU Athletics website, the campus transfers about $9 million to the athletics department, with student athletic fees ($57 per student per year) adding another $1.5 million. At the same time, the CU athletics transfers back about $7.5 million in tuition, for its 250 or so scholarship athletes that receive some sort of financial assistance, plus additional transfers of about $2.4 million. These various transfers to and from Athletics basically cancel out.
It wasn't long ago that CU athletics was not in such a strong budget position. There are many other universities that transfer large sums to athletics from other parts of campus. For example, according to the Chronicle of Higher Education, in 2014 Rutgers University transferred more than $36 million to its athletic department, representing almost half of its athletics budget.
That universities have lower cost units that subsidize of some higher cost units is not surprising, and represent choices about priorities. For instance, in 2012, the Daily Camera reported that CU's College of Arts & Sciences, the 800-pound gorilla on campus, had a budget surplus of almost $14 million, while the Colleges of Engineering and Music, together with the Schools of Business and Law, lost a combined $13.5 million.
University athletics programs are a choice, just like choices to support business and law programs. One unique aspect of athletics programs on campus is that we know far more about their budgets than we do about academic units, due to the extra scrutiny that athletics receive. Not everyone agrees that athletics should be valued as they are, but we do have (much of) the data needed to make those judgments.
The bottom line on university athletics department budgets was well summarized by University of Michigan economist Rodney Fort, "little seems to threaten the sustainability of [top] athletic departments." They spend what they get, and they keep getting more.
Across the country we see different campuses adopting different ways to financially support sport, from Louisiana-Monroe to Rutgers to Ohio State to Colorado. Despite these differences, a few conclusions are shared everywhere: college sports are deeply valued, people are willing to pay for them in various ways, and at the biggest schools, television revenues in particular are helping to drive expenses that are going up and up.
Such growth means that college sports are thriving, and there is no bubble to go — pop! But other challenges remain. The influx of money has reinvigorated debate over the compensation of college athletes, the subject of next month's column.