The College Athletic Cost Explosion Spreads to Divisions II & III

By Richard Vedder*

As we, at last, come to the end of the 35 college football bowl games, I would note that part of the expense of producing these ball throwing contests was incurred by the students and their parents currently attending college through tuition or activity fees. I always knew intercollegiate athletics was a huge financial activity at the top football/basketball schools like Texas, Ohio State, USC, and even Duke (see this recent report on the topic), but not at the generally smaller, lower athletic budget schools such as the non-flagship state universities and even private liberal arts colleges. New NCAA data suggests this is flatly wrong.

A new NCAA report on revenues and expenses of Division II schools (of which there are 309) reveals the following:

• Division II athletics spending for schools with football rose 10.6 percent a year from 2004 to 2009, not much less than the 11.49 percent annual increase for top Football Bowl Subdivision teams;

• Even Division III (of which there are 444) schools with football saw spending rise nearly 45 percent even after adjusting for inflation;

• Division III teams without football saw total athletic spending more than double in five years;

• Athletics spending in Division II now constitutes nearly 6 percent of the total institutional budget at a typical school;

• The share of athletic expenses coming from generated revenues fell from 17 to 12 percent at Division II schools with football from 2004 to 2009.

The NCAA would have one believe that Division II athletic spending is rising no more than total institutional expenditures, which seems dubious to me as I read the data, although admittedly there was a spending spree in all of higher education in most of the period under discussion. An argument for athletic spending at Division 3 (and to some extent, Division 2) schools is that it is an important student recruiting device: at some liberal arts schools, 30-40 percent of students are on some intercollegiate team, and the figure is 10 percent or so at some Division 2 schools (as opposed to well under 5 percent at most FBS powerhouses). But the data suggest the cost of all of this has been very high, contributing to the tuition fee explosion at many schools.

The numbers in the information given out about the NCAA report are a bit sketchy, and no doubt there are accounting issues in assessing revenues and expenditures. For example, the data provided seem to be median figures instead of means (averages). I suspect because of skewness in spending, the means are greater than the medians. It would appear, however, that total athletic spending at the Division 2 schools well exceeds one billion dollars a year, and probably two billion dollars annually for Division II and III combined. I am wondering if our obsession with promoting sports is having a dual undesirable effect of downplaying the academic purpose of schools while all the while adding importantly to the cost explosion. There are schools that have recently announced they are adding football, which strikes me as an incredibly dubious move in these times of budget stringency. Perhaps it is time for the federal government to remove tax exempt status for donations to the non-academic activities of colleges and universities.

*This post originally appeared on CCAP's "Higher Education and the Economy" blog at Forbes.com on January 11, 2010.