Thursday, July 29, 2010

The Regressive Athletics Tax at Wannabe University

By Richard Vedder and Matthew Denhart

There is a growing concern about the costs of maintaining high-cost intercollegiate athletics (hereafter, ICA) programs. As universities engage in wage freezes, even furloughs and layoffs, the luxury of massively subsidizing sports is coming under real scrutiny. This is in addition to non-financial concerns arising from various cheating scandals, allegations of favored academic treatment of athletes, criminal activity on the part of athletes, etc.

The most unappreciated financial reality, however, is that the burden of subsidizing ICA falls very unevenly, and tends to be greater at schools that are less well off financially, and have students who are similarly less affluent than those at other schools. The big flagship state universities are mostly in major athletic conferences that earn big bucks from their football, and sometimes their basketball programs, and thus are largely self-sustaining. These schools tend to have higher spending per student, more endowment money, etc., than the less well known state schools. Yet these less well known schools in dozens of cases are trying to emulate their "big brothers" who play in the big Bowl Championship Series bowl games, make it to late rounds in the NCAA men's basketball tournament, etc.

Take the Mid-American Conference (MAC). In 2008-09, USA Today data suggest that subsidies comprised fully 72 percent of all ICA revenues, whereas in the Big Ten, serving roughly the same geographic area, the subsidies averaged less than four percent of ICA operating revenues. In the MAC, there was an average "tax" on students of $915 to cover the subsidy, whereas it was only $67 in the Big Ten. In this and some other conferences (the Mountain West, Sunbelt, and Western Athletic Conference), this athletic "tax" equaled 14 percent or more of revenues raised from tuition and fees, compared with less than 3 percent in the Big 10, Big 12, or Southeastern (SEC) conferences.

Nowhere is the comparison more stark than in the Detroit suburbs. The stadium of Eastern Michigan University (EMU) is located 6.3 miles from the Big House at the University of Michigan in Ann Arbor. At EMU, the $21.5-million subsidy of ICA is the equivalent of almost 16 percent of tuition revenues. But at the U of M, six miles away, the subsidy is essentially non-existent. Yet the EMU students are financially far less well off -- nearly 39 percent get Pell Grants, for example, compared with a third that proportion (i.e. 13 percent) at the U of M.

Why does Michigan, a state with a basketcase economy and double-digit unemployment, give millions to schools like EMU to subsidize athletic events that are extremely poorly attended (friends of ours tell us of a football game between EMU and Ohio U. where there were almost certainly fewer than one thousand persons actually in attendance, officially reported attendance numbers notwithstanding). It is time to reform ICA to end this costly and regressive diversion from the academic mission.

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