Thursday, January 04, 2007

Abomination in Alabama

By Richard Vedder

I am a moderately enthusiastic sports fan. I enjoy a good football or basketball game, and will be watching both my university play in a bowl game Sunday night and the national championship match between Ohio State and Florida on Monday night. Yet the Nick Saban contract at the University of Alabama shows with renewed intensity the problem with intercollegiate athletics. It is reported that Saban will earn roughly $4 million a year, about 50 percent more than any other college coach. He will be paid the better part of one percent of the revenue of the entire university, and at least 20 times as much as any professor, I suspect. I expect his salary will be perhaps 10 or 15 times as great as Alabama's legendary Bear Bryant ever received.

My concerns are not anger generated by resentment over high salaries -- I am an economist and know that one has to pay what is necessary to obtain talent. I am concerned about two things. First, and most important, the original and noble mission of universities is being overshadowed and subordinated by the entertainment dimension. The fact that tax policy works to provide taxpayer subsidies of this trend is particularly reprehensible. Second, this cost escalation is going to have a far reaching impact that is going to ultimately cost less exalted football powers some money, adding to pressures to raise tuition fees.

For example, suppose Ohio State beats USC Monday. There is a clause in Coach Jim Tressel's contract that allows him to reopen salary compensation issues if he wins another national championship. He can legitimately say, "You are paying me a paltry $2.5 million a year, and I have won two national championships in five years. I insist on $4 million like Nick Saban is getting." I can assure you that OSU will pay up. Then my school 75 miles down the road, Ohio University (OU), which loses $10 million or so a year on intercollegiate athletics, will see an impact if its coach (Frank Solich) comes and says, "I won a bowl game (assuming that happens), and deserve at least $750,000 a year” (perhaps triple his current salary). Another $25 per student increase in tuition will be needed to cover the salary increase. And OU would pay it as well.

As Jim Duderstadt (former Michigan president and one of the soundest minds in higher education) has said on countless occasions, there is no way in hell an individual university president can reform the system. All of them, collectively, might be able to do so if they collectively agreed on a plan and put their foot down. But university presidents are timid souls, not political risk-takers, and it will not happen. Another approach that would modestly help: the government could say that sky boxes and other athletic department contributions are taxable. Indeed, the athletic departments of universities should be subject to income, property and sales taxes, since they are in the entertainment business, not higher education.

The irony of it is that much of the $$$ flowing into coaches salaries comes because players are paid far less than their marginal financial contribution, at least that is the case of the big time teams. Troy Smith added perhaps $1-$10 million to Ohio State's revenue this year, and got about $15,000 or so in compensation. The coach that recruited him (Trussel) gets money that ordinarily would go to the so-called "student athlete." This "exploitation" is quantitatively greater than who occurred under slavery (I know: in my academic life I have estimated slave exploitation rates). The system stinks, is morally dubious, and hurts American higher education. It is time for radical change.


A. G. Rud said...

This is a hard hitting and incisive commentary. I particularly appreciate being reminded about what Tressel could argue for. Great job.

Superdestroyer said...

A couple of comments on our post

You stated:

Another $25 per student increase in tuition will be needed to cover the salary increase.

I think you mean that student fees (or whatever is the appropriate name) would go up such as mentioned in the recent long article in the Indianapolis Star article of the subject.

You also stated that

Troy Smith added perhaps $1-$10 million to Ohio State's revenue this year

I doubt if the football team added one dollar to the general operating funds of the University. A better way to way it is Troy Smith added millions to the budget of the semi-independent Athletic Department and that most of the funds came in the form of 80% tax deductible contributions to the sports foundations not the university.

I looked up some information on the University of Alabama. Over 20% of the students belong to a fraternity or soroity. For many people, it is hard to feel comparsion for students paying additional fees when they obviously have enough money to spends $100's per month on their social life.

Bbeard said...

I would be soooo embarrassed if I were a U Alabama faculty member, student, or alum. A college outbidding the NFL for a coach!

It is incredibly unfair and hypocritical to pay college coaches $2-4 million a year, while limiting the athletes to a fixed in-kind payment that may have very little value to them.

Why isn't the Justice Department investigating the NCAA for collusion and wage-fixing?