Saturday Millionaires: Excerpt and Contest

Satuday-Millionaires-Final-CoverKristi Dosh, known as @SportsBizMiss on Twitter and an ESPN sports business reporter, has a book coming out next month on the business of college football, called “Saturday Millionaires: How Winning Football Builds Winning Colleges.” Kristi has been nice enough to share an excerpt from Chapter 1 that discusses direct institutional support vs. governmental support for college sports programs.

As a bonus, Kristi is going to give away 3 advanced copies of her book to some lucky readers. You have two ways to enter:

  • Option 1: Tweet this blog post with the hashtag #saturdaymillionaires (the tweet button should already be set up with the hashtag)
  • Option 2: Leave a business of college sports question for Kristi in the comments (she’ll try to answer them over the next few days)

On Friday morning at 10AM, I’ll select two random tweets and one random blog comment as winners. And of course, I encourage you all to pre-order her book. Click here for more information on ordering from Amazon or Barnes & Noble and listen to an interview with Kristi about the book.

Excerpt from Chapter 1 of Saturday Millionaires

Direct Institutional Support

Since out-of-state tuition is largely an up-charge, and not indicative of additional costs to the university, some universities provide tuition waivers to allow out-of-state student-athletes to be treated as in-state students. This can show up in a couple of different ways on athletic department financials: as a payment (a sort of refund) to the athletic department from the university or as a reduction in expense for the athletic department if the money is deducted before payment is sent to the university. Almost all athletic departments who receive these waivers use the former method, showing it as revenue categorized as direct institutional support.

For example, the University of Illinois planned to provide $920,000 in tuition waivers to the athletic department to ensure Title IX compliance for the 2011-2012 school year. Rather than a reduction in the athletic department’s scholarship expenses, these monies are reported as revenue into the athletic department from the university under the direct institutional support category.

As mentioned at the start of the book, Georgia Tech is in a similar situation. The athletic association’s audited financial report shows $1,667,213 in institutional support for fiscal year 2011. Nearly $1.3 million of that reflects out-of-state tuition not charged to the athletic department – shown as revenue instead of a reduction in expenses. The remainder is the University’s share of the athletic director’s salary, as he is part of the University’s senior management team and reports directly to the University president.

Many commentators simply see monies attributed to direct institutional support and go no further. As you’ve seen, that money isn’t always a transfer of funds from the university to the athletic department. Is institutional support in this manner, especially given Goff’s “list price” theory, a negative reflection on an athletic department’s financial situation?

Government Support

Similarly, athletic departments which report government support are criticized without discussion of the funding being received.

Title IX presents additional complications when it comes to evaluating athletic departments. In the instance of University of Illinois, detailed above, tuition waivers are provided for female athletes and reported as direct institutional support. In addition, some state legislatures have decided to support Title IX by providing funding to athletic departments earmarked for women’s athletics programs. This can show up on a school’s NCAA disclosure as government support.

One of the most comprehensive state laws regarding Title IX compliance was enacted by the State of Washington. Under state law, institutions can grant tuition waivers amounting to up to a specified percent of total operating income.[i] One percent of those tuition waivers can be dedicated to gender equity initiatives in the athletic department.

The specified percentage for University of Washington is 21 percent. Based on fiscal year operating revenue of $3.39 billion, the university could provide discounts and waivers of up to $711.9 million, $7.1 million of which could be for athletics. The total amount provided for athletics in fiscal year 2011 was $2.5 million.

Many other states have similar laws. In Illinois, state law allows for up to one percent of total tuition revenue at a public university to be used to support tuition waivers for female student-athletes. In Louisiana, state law allows for 50 tuition waivers per year for female student-athletes at public universities.

University of Oregon showed $959,779 in direct state/government support for fiscal year 2011 on its NCAA disclosure document. Over half of that represents funds forwarded to the athletic department from the state lottery. Under Oregon law, a portion of state lottery proceeds are allocated to the athletic departments at the seven public universities in an effort to reduce the need for athletic departments to be supported by the university’s general fund.

The athletic department cannot simply refuse these funds, and the university has no discretion to reallocate these funds. Is it the athletic department then that should be criticized for using state funds in its budget?

Florida A&M University recorded $263,036 in government support on its 2010 NCAA disclosure document. The athletic department confirmed those were funds received from the State of Florida for Title IX purposes. As is the case at Oregon, these funds cannot be reallocated by the University to other areas; these are funds directly appropriated by the State of Florida to the athletic department for a specific use.

Both Title IX and the NCAA’s requirement that Division I schools sponsor 16 sports force athletic departments to operate at a minimum level. No matter how well-run or efficient an athletic department is, these two realities create a certain cost of doing business.

A study mentioned at the beginning of the chapter found athletic spending represents six percent of total higher education spending. However, the percentage of total higher education spending attributed to athletics varies greatly depending on the size of the institution. Smaller schools generally spend 5-10 percent of total spending on athletics, but some go so high as 15 percent. Meanwhile, a school with total spending over $1 billion only spends five percent on athletics on average, and a school with total spending over $2 billion allocates less than three percent to athletics.[ii]

The authors of the study conclude the variance in these numbers reflects the minimum cost of doing business for athletic departments, largely due to NCAA and Title IX requirements.

[i] RCW 28B.15.910
[ii] Orszag and Israel, op.cit.

10 thoughts on “Saturday Millionaires: Excerpt and Contest

  • August 26, 2013 at 9:24 pm
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    Does NCAA Division 2 athletics play any role at all in the impact of the college sports as a business?

  • Pingback: College Football and Sports Business | The Business of Sports

  • August 27, 2013 at 5:58 pm
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    Many people think when tuition rises at a major D1 school, it’s because of extravagant facilities or other athletic expenses.

  • August 28, 2013 at 6:41 am
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    We are all aware of the growth and success of Divison I basketball and football. However, college baseball offers as much tradition and storied programs in a sport that is considered “America’s Passtime”. Despite a lot of the challenges that exist for college baseball, how can the sport continue to leverage the interest in collegiate athletics to become more of a mainstream sport?

  • August 30, 2013 at 6:12 am
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    Janine,

    The best way I know to answer this question is from a financial standpoint. I was at a presentation the NCAA CFO made at a conference this summer. I don’t recall Division II bringing in any real revenue. Most of the NCAA’s revenue comes from television (primarily the March Madness tv deal), with a small portion coming from championship events (again, mostly from March Madness in the form of ticket sales). Many Division I sports don’t make money for the NCAA, so it’s not really surprising Division II isn’t a real source of revenue. – Kristi

  • August 30, 2013 at 6:15 am
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    John,

    I’ve never seen any real evidence that athletics spending impacts tuition. It does, however, increase student fees added into tuition at some schools. For those schools, the processes vary from school to school as to whether students vote on those fees or not. – Kristi

  • August 30, 2013 at 6:17 am
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    Chris G,

    Personally, I think college baseball will always suffer because of Minor League Baseball. So many of the good players end up there instead of in the college ranks. That being said, I think there are efforts to improve college baseball, such as the NCAA’s changes to RPI this past season to account for the cold weather up north at the beginning of the season. Check out this article Mackenzie Thirkill wrote on my BusinessofCollegeSports.com site: http://businessofcollegesports.com/2013/07/10/why-isnt-college-baseball-more-popular/. – Kristi

  • August 30, 2013 at 7:39 am
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    If the NCAA were to start paying its players do you think that would cause a lot of the non revenue sports to fold and be taken away at some of the smaller schools? That could be a major problem I think since it will eliminate a lot of deserving scholarships.

  • August 30, 2013 at 8:26 am
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    The big talk that I’ve heard recently is for 4 super conferences to break away and start their own league. This would provide more money for these schools-and that is what these schools are all about-so what incentives are for them to stay with the NCAA?

  • August 30, 2013 at 9:29 am
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    Congrats to our winners:

    Blog Commenter Paul
    Tweeters @DiscountCleric and @Paulsch55

Comments are closed.