Ignorance Is Not Bliss Regarding Spending on Athletics

By Richard Vedder*

Amidst fiscal problems requiring growing austerity in higher education, intercollegiate athletic programs still continue to grow, despite increasing subsidies coming from college/university general funding. What do students think about this?

To answer this question, my colleagues Matt Denhart and David Ridpath (also a professor at Ohio University) surveyed about 1,000 students at Ohio University, which is a member of the Mid-American Conference and is a fairly typical mid-quality state university. Their results, just published by the Center for College Affordability and Productivity (which I direct) in Ending the Arms Race: A Case Study of Student Athletic Fees, are very revealing. They find that:

• Most students severely underestimate the amount that their fee payments to the university subsidizes intercollegiate athletics (ICA);
• a majority felt that their were other sorts of extracurricular activities deserving of subsidy support more than ICA (but which, in fact, receive far less support);
• Fewer than 7 percent of respondents felts ICA reputation was “important” or “extremely important” in their enrollment decision—a majority thought it was “extremely unimportant;”
• Over 35 percent of students attend no sporting events, despite having to pay $765 in fees to support ICA, about 8 percent of their total charges;
• On average, each surveyed student paid indirectly well over $150 for each athletic event attended.

In short, most students are relatively indifferent about sporting events, are ignorant of the costs, and not in favor of as high athletic subsidies as they are being charged. I would suspect if the same questionnaire were given to their parents, the preference to scale down ICA subsidies would be even more pronounced.

The CCAP study will be criticized on two major grounds. First, it is not representative of students at Ohio University, and second, Ohio University is not representative of American higher education in general. The first criticism is largely bogus, I suspect, while the second one may be correct, but the CCAP study points to the need for more research.

My reading of the study suggests the sample selected, while clearly is not random (although all students were invite to participate—not all did), was probably pretty representative of the student body. For example, the typical number of sporting events attended annually for the sample (the mean was about five) seems to be pretty close to that for the student body as a whole. Looking more broadly, the Denhart/Ridpath results are quite consistent with those reported on a similar survey at the University of Toledo, suggesting the findings are probably representative of a broader body of schools than just Ohio U. Still, the study points out the need to explore this at schools where the subsidization of athletics is less (Ohio U. is well above average regarding subsidization of ICA). Denhart and Ridpath want to do this, and I hope funding is secured to allow that to happen.

Two questions arise. Why is this university, and probably others, spending far more on ICA than its customers (and almost certainly their parents, not to mention the school’s faculty) want? Two, what can and should be done about it?

Successful university presidents (in the sense of being popular with high job security) stay in office by raising lots of money and bribing various interest groups—by giving students a low workload and access to booze and sex; giving faculty low teaching loads and the freedom to teach what they want (more or less) for decent pay; and giving alums good success in ICA, along with nice new facilities to visit while on campus. Unfortunately, in their zeal to satisfy one group (alumni and perhaps trustees) with fairly high quality ICA (although ironically, Ohio U.’s success can at best be termed “modest” in recent years), presidents have created increasing unrest with other constituent groups angry about the continued high ICA budgets amidst falling budgets elsewhere in the university and rising costs to students.

With respect to solutions, this is like the arms race during the Cold War. One side is not going to unilaterally disarm. All parties need to sit down and impose limits—maximum size budgets (with accounting procedures uniformly defined), for example. “All parties” could be a grouping as small as the university presidents of a single athletic conference, but more likely would require even bigger disarmament deals—say, involving presidents of all BCS schools, all Division II schools, etc. (The cost explosion is present at Division II and III schools as well as the Division I institutions, if NCAA statistics are to be believed.)

The worst part of all of this the lack of transparency. Often students, faculty, major donors, etc., are in the dark as to the finances of ICA, and even what they are paying. Often this is accompanied by misleading statements by administrators on the alleged benefits of ICA, almost always grossly exaggerated. Increasingly universities are spending large parts of their budgets on things unrelated to the core academic mission. Whether universities should be in the entertainment business (e.g., ICA), food and lodging business, etc., is highly dubious to me. Institutions that focus with a laser beam on one or at most two tasks are more successful, I think, than those trying to be all things to all people. The new CCAP study needs to be replicated by others to strengthen the hand of those wanting athletics disarmament.

*This post originally appeared on the "Innovations" blog of The Chronicle of Higher Education on January 31, 2011.

The Cam Newton "Scandal"

by: Matthew Denhart

Rumors have swirled furiously that Auburn University's standout quarterback, Cam Newton, and his family solicited money from Mississippi State University during the recruiting battle between the two schools for his services. Accepting payments (beyond allowable tuition and room/board scholarship money) is of course prohibited by the NCAA, which is conducting an investigation and has even brought in the FBI to help.

This whole saga has missed the wider issue, namely to what extent rules baring players from being paid are themselves justified. As I argued in an Op Ed for the Wall Street Journal with Richard Vedder in 2009, athletes like Newton are grossly exploited by their colleges and should be allowed payment in the first place.

Sandy Baum and Michael McPherson, writing for the Chronicle's Innovations blog, are spot-on in their commentary on the contradictions surrounding the student athlete payment question. They point out that the NCAA's practice of setting salary caps for student athletes across member institutions should be an antitrust violation. Their criticism of Congress's free pass to the NCAA is sharp, saying:

"After considerable thought, we have been able to come up with only one persuasive explanation of the favoritism shown in allowing colleges to agree on limits to athletic merit awards, in contrast to non-athletic merit awards, where the free market is supposed to reign: the people who make, interpret, and enforce the laws in the U.S. really, really like high-end (dare we say semi-pro) college athletics."

Baum and McPherson continue and argue that the rules put in place by the NBA and NFL that place age restrictions on athletes to enter their drafts are "conspiracies in the restraint of trade." They are correct to suggest that these restrictions should be eliminated, giving athletes the decision whether college attendance is in their best interest. Doing so would be:

"unambiguously bad for university athletic departments’ bottom lines and coaches’ salaries, and unambiguously bad for professional teams (who might find themselves creating their own minor leagues and actually paying the players in training to learn the game)."

All the commotion over Cam Newton misses the larger point that the rule he has allegedly violated is unfair to student-athletes and potentially arguably illegal. The real scandal here is that the NCAA is allowed to violate anti-trust law to exploit the labors of young athletic talents, and that point needs more attention.

MAC vs. Big 10

By: Matthew Denhart

Early in the college football season, it is common for teams to play non-conference games. This past weekend featured four games that pitted Mid-American Conference (MAC) schools against counterparts in the Big 10 Conference.

The Big 10 teams swept these contests. Ohio State University defeated Ohio University 43-7, Penn State blanked Kent State 24-0, Purdue topped Ball State 24-13 and Illinois squeaked out a victory over Northern Illinois 28-22.

This domination is largely to be expected. After all, the Big 10 schools have athletic budgets that are as much as five times larger than those at MAC schools. However, the ironic part is that the students and schools at MAC institutions actually pay a much heftier fee to subsidize their intercollegiate athletics (ICA) departments than do those in the Big 10 (see this CCAP report). Since the Big 10 teams regularly dominate their MAC opponents, in essence students at MAC schools are paying more and getting less (in terms of wins).

How is this possible? The simple answer is that the demand for MAC sports is too low for these athletic departments to generate revenues great enough to offset their expenses. Yet, rather than down-scaling their operations, they simply rely on subsidies to pick up the bill.

On average in 2008, ICA departments at MAC schools were subsidized to the tune of nearly $15.7 million, while Big 10 schools only required an average of $2.7 million in outside funds to balance their budgets. The figures below represent the ICA subsidies for seven of the eight institutions mentioned above (Penn State does not report to USA Today's database):

Ohio University: $15.05 million
Ohio State University: $0.00

Ball State University: $15.14 million
Purdue University: $0.00

Northern Illinois University: $15.15 million
University of Illinois: $4.51 million

Kent State University: $13.60 million
Penn State University: N/A (does not report to database)

As you can see, two of the four Big 10 schools have a subsidy equal to zero. Yet, all MAC schools require substantial subsidies. These monies come from student fees, government support, and the wider institution's budget and thus act as a tax on resources that could have been used in other ways to promote student learning. This tax is highly regressive since it falls much more heavily on poorer schools. In 2009, MAC schools had an average endowment of $159 million while Big-10 schools (even excluding the private Northwestern University) had an average endowment more than 11 times larger at almost $1.8 billion.

Such large subsidization of ICA is madness. Given the regressive nature in which it falls on different institutions, schools in the major conferences are very unlikely to ever pursue reforms. Thus, it is up to the institutions in conferences like the MAC to lead the way to reform through conference-wide agreements to curb athletic expenditures and end the futile arms race.

More Evidence of the Regressive Athletics Tax

by: Matthew Denhart

The much anticipated college football season begins this week, and surprise, the opening games will be on a weeknight.

Yesterday's Insidehighered featured a revealing article by David Moltz detailing the increasing prevalence of weeknight football games. As his article points out, schools in lesser conferences play much more frequently on weeknights than schools in power conferences. In fact, the Mid American Conference (MAC) has 8 teams with multiple weeknight games scheduled this season, while the geographically similar Big 1o conference only has 3.

Why do they do it? As Moltz asserts, the reason is a quest to appear on national television, and the smaller schools find they can generally only do this on weeknights. While this may provide some national exposure, the athletic departments may lose out on money from lost ticket sales since fewer people are able to attend weeknight games.This lost income contributes (admittedly the effect is very small) to the larger subsidies required for these smaller programs.

In June, CCAP released "Intercollegiate Athletic Subsidies: A Regressive Tax." In this white-paper report, we argued that the subsidies required to fund the growing intercollegiate athletics (ICA) complex, hit schools disproportionately and in a regressive nature. However, it is important to note that the subsidies reported in the CCAP report are a conservative estimate of the true cost of ICA on the host school. Another type of cost associated with ICA that does not appear in financial reports (and thus our calculations), is the distraction such games impose on the campus, and especially its student athletes.

It is clear that weeknight games are a distraction, and thus more costly. Since lesser conferences are much more prone to schedule these games, this cost likely hits them disproportionately.

Yet it does even affect the larger schools.We criticized the University of Alabama previously when they canceled classes due to their participation in last season's National Championship game. This seems to be becoming a pattern. They're at it again, only this time for a Thursday night home game against Georgia State University. Provost Judy Bonner claimed that with thousands of fans pouring onto campus, it would not be "logistically possible for the campus to continue to operate in a 'business as usual' manner." It seems that at Alabama, football is king, academics be damned.

It is a shame that schools willingly sign contracts that jeopardize the academic integrity of their students, and especially "student" athletes. This is more evidence of the growing commercialization of college athletics and the exploitation of college kids. What's more, it's another indication of ICA's regressive nature.

CCAP on Youtube: Intercollegiate Athletics

In this Youtube video, CCAP is joined by a special guest, Joshua Hall, in discussing intercollegiate athletics.

Student Fees and the Regressive Athletics Tax

By: Matthew Denhart and Andrew Cadamagnani

A few weeks ago, Steve Burkowitz from USA Today pointed us to a great Master's thesis written by Katherine Ott. Ms. Ott's thesis explores the interesting, and often overlooked, topic of student fees. She rightly notes that even amidst tuition freezes, schools have often turned to fee increases as a type of "backdoor" tuition increase.

Using U.S. Department of Education data for 2000 and 2008, we examined the growth in student fees relative to tuition at four-year public research institutions (165 in total). The numbers show that average real inflation adjusted tuition increased almost 53 percent from $3,480 to $5,320. Meanwhile, over this same period, required fees rose 36.5 percent from $1,261 to $1,721.

Although the fee increase was somewhat less severe, student fees as a percentage of tuition increased. In 2000, the ratio of fees to tuition was around 35 percent, but by 2008, this had jumped to almost 43 percent.

However, the most interesting dimension of the thesis involves students' knowledge of fees and whether fees are allocated according to students' preferences. To analyze these questions, Ms. Ott surveyed students at the University of Toledo (a four-year public school in northwestern Ohio).

Her research found that roughly 91% of respondents knew they paid a student fee, but only 43% could correctly identify the amount. Furthermore, 43% believed the fee was less than it actually was, while only 14% thought it was more, meaning that as a whole these students underestimated the fee amount.

As their three most important uses of student fee dollars, the students listed: (1) the student recreation center, (2) the student medical center and (3) the student union.

Yet, in 2008, intercollegiate athletics (ICA) and cheerleading received nearly $10 million in student fees, more than any other unit. Interestingly, only 25% of surveyed students believed athletics and cheerleading received any general fee funding and 39% responded that ICA and cheerleading were not important to them.

Ott's thesis does much to shed light on this growing scandal. Students are increasingly being charged in back-handed ways to fund the ICA "Arms Race." In 2007-08, the 101 public FBS institutions for which we have data, reported spending $338.9 million dollars of student fees to subsidize athletics, or an average of about $3.4 million each.

However, ICA subsidization, even when not directly funded through student fees, also affects students. Money is fungible, meaning that every dollar spent on ICA, is a dollar that cannot be spent elsewhere (or used to reduce tuition/fees). The graph below shows the sources of funding for the ICA sports subsidy.



We have been arguing that the ICA subsidy is a regressive tax on precious resources. Students and taxpayers are increasingly footing the bill of an athletics complex. Ott's thesis shows that at least at Toledo (which is among the leaders in the largest ICA subsidies), students often do not support their fees going primarily to ICA. Does this hold true at other institutions? CCAP hopes to explore this question very seriously within the next year.

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.

The Real ICA Scandal

By: Matthew Denhart & Michael Malesick

As the college football season is getting underway, all the talk recently has focused on reports that college players attended a Miami Beach party thrown by 49ers running back Frank Gore at which professional agents were present (and perhaps helped fund). If true, this of course would be a violation of sacrosanct NCCA policies that forbid amateur college athletes from financially benefiting from their sports participation. But who cares? We have argued that by-and-large, major college athletics have greatly deviated from their "amateur" ideal and that players should be paid for their services anyway.

Data provided by USA Today and the U.S. Department of Education suggest that the real intercollegiate athletics (ICA) scandal is the amount of money used to subsidize sports in the first place. CCAP has argued this subsidy acts as a tax on scarce educational resources and that serious reform is needed.

Increasing college access to lower income groups through Pell grant assistance is a major national objective. Yet, how serious is this commitment relative to subsidizing ICA? We have explored this question, and our findings are not very encouraging.

Dividing ICA subsidy outlays by Pell grant outlays for 2008 (the most recent year data are available) shows that at the 99 public FBS schools, the average ratio was 59 percent. This means that, on average, more than half as many resources are devoted to ICA than to funding Pell grants for students. In a sample 108 schools from the FCS and "No Football" divisions, the ratio is even worse at 108 percent, meaning that at these schools, on average, more money is devoted to subsidizing athletics than to Pell grants.

Some schools are worse than others. Listed below are the top 10 most egregious offenders in the FBS and FCS/No Football:

FBS
1. U of Virginia (289%)
2. U of Wyoming (240%)
3. U of Nevada-Reno (186%)
4. Miami U (OH) (161%)
5. Louisiana Tech U. (146%)
6. U of Alabama-Birmingham (138%)
7. Eastern Michigan U. (127%)
8. U of Maryland (124%)
9. U of Connecticut (123%)
10. Ball State U (122%)

FCS/No Football
1. Citadel (667%)
2. U of Delaware (564%)
3. College of William & Mary (490%)
4. James Madison U (486%)
5. Manhattan College (415%)
6. VMI (386%)
7. Longwood U (325%)
8. U of New Hampshire (268%)
9. Delaware State U (251%)
10. Coastal Carolina U (244%)

Topping the FBS list is the University of Virginia, where Pell grant outlays were only $4.1 million compared to ICA subsidies close to $11.9 million. At the nation's oldest public institution, William and Mary, ICA subsidies were over $9.5 million while Pell grant outlays were much lower at around $1.95 million.

While America's political and academic leaders espouse the noble goal of increased access, their funding priorities do not match the rhetoric. As college tuition continues to climb, funding for athletics has likewise grown. Perhaps the NCAA should be investigating this scandal rather than fretting over the partying habits of college athletes.

Ref Needs New Glasses

by Daniel L. Bennett

Daniel Luzer of the Washington Monthly is calling foul on the for-private sector for supposed corporate welfare.

About a quarter of that tuition revenue goes to pay for recruitment, advertising campaigns and call centers. That’s fine for a business to do (I wouldn’t presume to tell anyone how to run his private company) but should the American taxpayer really fund this?

While I agree that it is outrageous that huge sums of taxpayer money are being transferred to colleges and being used for nonacademic purposes, I'm calling the referee out for his lopsided umpiring. Hey ump, seems like you need a new pair of glasses! I left the following comment on his blog:

Let's not forget that public and nonprofit colleges are also receiving tremendous sums of taxpayer money (much more than the for-profit sector) that is being used for non-academic purposes, including huge sums for sales and marketing. We just don't hear about it because the accounting standards for nonprofit colleges are not quite as demanding as they are for private enterprise.

Lest we not forget college sports, which are big-time revenue pits. Its supporters often claim that sports are a form of advertising or PR for a college and hence, a legitimate expense in spite of significant losses. Here again, we are subsidizing marketing in the nonprofit education community with taxpayer dollars.

Let's stop calling foul on one player when the entire league is committing egregious offenses.

Higher Ed Priorities: Academics or Sports?

by John Glaser

Ever think about all that collegiate money going towards football stadiums, coaching salaries, and team advertising? College sports are a multi-billion dollar a year industry. What if univerisities paid more financial attention to academic pursuits and understanding our world, rather than games of physical competition? CCAP thinks about these issues, as does the The Knight Commission:

The median budget for athletics programs in the Football Bowl Subdivision is about $40 million, but that number is deceiving. There is a wide gap in spending from the very top programs to the bottom. If we split big-time athletics programs into 10 deciles of 12 institutions based on expenses, the median budget for the lowest decile was $14 million in 2007 and the median budget for the top decile was $83 million. The highest spending categories for the average athletics program includes the following:

Salaries and benefits, especially coaches’ salaries (32 percent of total expenses);

Tuition-driven grants-in-aid—or sports scholarships (16 percent);

Facilities maintenance and rental (14 percent);

Team travel, recruiting and equipment and supplies (12 percent combined);

Fund-raising costs, guaranteed payments to opponents, game-day expenses, medical costs, conducting sports camps and other miscellaneous costs (12 percent).

The greatest challenge facing universities and their athletics departments today is dealing with the rapid rise of expenses. Athletics expenses are growing at an annual rate approaching 7 percent, according to a variety of studies (For more information, see references to Cheslock, Fulks, and Orszag and Israel at the end of this report.)

At the same time, revenues are not keeping up. In 2009, the National Collegiate Athletic Association published a report that found median operating spending for athletics increased 43 percent between 2004 and 2008, but median revenue generated by athletics programs grew only 33 percent over the same time period (Fulks, 2008). In another telltale spending reality a few years earlier, the NCAA reported in 2005 that athletic expenses rose as much as four times faster than overall institutional spending between 2001 and 2003 (Orszag & Orszag, 2005).

And here:

Median athletics spending at public institutions in the Football Bowl Subdivision (FBS) has grown nearly 38 percent from 2005 to 2008, while academic spending grew only 20 percent.

The ten public institutions spending the most on college sports are on pace to spend more than $250 million annually, on average, in 2020.

Median athletics spending per athlete ranges from 4 to nearly 11 times more than the academic spending per student in the FBS conferences.

This is troubling on a number of levels, but, just intuitively, how would non-sports fans feel if they knew their tuition was markedly higher only for the betterment of the vast industry of college sports?

CCAP in the News: 06/08/10

CCAP's latest report, Intercollegiate Athletics Subsidies: A Regressive Tax, continues to garner attention around the country. The Charleston Daily Mail in West Virginia, the El Paso Times in Texas, the NBC affiliate KLS in Salt Lake City and the Washington Monthly College Guide have all reported on the paper recently.

Higher Ed's Regressive Tax

CCAP released its latest research study today, a white paper titled Intercollegiate Athletics Subsidies: a Regressive Tax. The report reveals that funding for intercollegiate athletics (ICA) is often diverted from traditional academic purposes, in effect imposing a tax on students to subsidize sports. CCAP’s analysis indicates that this tax is highly regressive and unequal in nature, with the relatively poor institutions and students bearing more of the cost burden for ICA than the rich. This inequality in sports subsidization occurs on two levels. First, ICA subsidy rates at institutions that are relatively poor in resources are significantly greater than they are at more affluent institutions. Second, the sports tax burdens lower income students attending college more than it does higher income students. One could say that the athletics arm race is a burden on the poor to finance entertainment that is largely consumed by the middle and upper classes.

Here are a few other highlights from the report:

The ICA subsidy is highly unequal among athletic conferences, ranging from 3.6 percent of total athletic budgets in the Big-10 to 72.3 percent in the Mid-American Conference.

There is a huge disparity in the annual per-student ICA tax among athletic conferences, ranging from $67 in the Big-10 to $1,177 in the Mountain West Conference.

The four Football Bowl Subdivision (FBS) conferences with the most subsidized ICA budgets also have the four highest percentage of Pell Grant recipients, in addition to being the bottom four conferences in terms of institutional resources, as measured by average institutional expenses per student.

This regressive subsidization and taxation to fund sports occurs as college tuition continues to soar, making it increasingly difficult for student and taxpayers to foot the bill. Reform of our unsustainable ICA system is well overdue and is essential to help reign in rapid tuition inflation. Authors Matthew Denhart and Richard Vedder suggest that reform could occur at the state and/or conference level.

Justice Department Investigates Intercollegiate Athletics

by Matthew Denhart

Inside Higher Ed and the Chronicle of Higher Education both recently ran stories (here and here) speculating as to the position the current Justice Department inquiry into intercollegiate athletics (ICA) will take with respect to scholarship rules for student-athletes. Currently, according to NCAA guidelines, scholarships for athletes are granted on a year-by-year basis and can be revoked for academic or athletic reasons. The Justice Department is likely most concerned with the legality of this policy and seeks to clarify whether such policies impede competition in violation of anti-trust law.

The NCAA maintains that this guideline is in place because athletic based scholarships are a merit award and student-athletes must maintain eligibility throughout their collegiate careers. This eligibility hinges on both athletic and academic qualifications. If scholarships were guaranteed, the argument goes, then student-athletes not meeting eligibility requirements would face no consequences.

However, critics assert that the one year renewable scholarship model is used to mislead student-athletes and inappropriately emphasizes athletics at the expense of academics. They argue that when committing to a college, high school athletes are often misled into believing that their scholarship is guaranteed for all four (or five) years of college. Furthermore, they contend that since coaches can revoke scholarships for athletic reasons, student-athletes find themselves in a precarious position. Being a student-athlete is supposed to imply that these individuals are students first. However, the opposite is usually true as they face great pressure to perform well athletically. Even though coaches are not supposed to strip scholarships for things such as injuries, many in the college sports world admit that appeal committees are a joke and it's rare for a coach's decision to be overturned.

Compared to the real scandals associated with ICA, this argument is somewhat inconsequential. My hope is that the Justice Department condemns the NCAA for its cartel like policy that allows student-athletes to be manipulated and exploited. As Dr. Vedder and I argued last year in an article for the Wall Street Journal, many student-athletes are wildly undercompensated for the marginal product they return to their universities. In a normal market, exploitation doesn't persist for very long because rival firms offer a higher compensation package and lure away formerly exploited employees. However, the NCCA fervently insists that member schools cannot provide compensation beyond scholarships to their athletes because they are amateurs. It would be difficult to convince anyone that college sports is indeed an amateur operation. Many football coaches earn salaries in excess of $1 million and this month the NCAA just inked a new contract with CBS and Turner to cover March Madness for $10.8 billion. The only people treated as amateurs are the players who actually enable the entire system. The Justice Department would be well served to eliminate this practice.

Another issue in ICA that deserves more investigation is the highly regressive nature of the "athletics tax." Nearly all athletic departments require subsidies from the wider university, students, and taxpayers to balance their budgets, this subsidy can be thought of as a tax on resources that would have been used for other purposes. The tax is small (or non-existant) at the well-known and more wealthy institutions, but much larger at the lesser known schools that have poorer students on average.

ICA needs serious reform to help control costs and address scandals. A number of organizations such as the Knight Commission, the Drake Group, and the Coalition on Intercollegiate Athletics continue to fight. Perhaps the Justice Department will be a positive force. Time will tell.

New Leadership at the NCAA: Does It Matter?

by Richard Vedder

Mark Emmert, president of the U. of Washington, is the new president of the NCAA. This is being heralded as a victory for reformers, maintaining the more reformist leadership started under the late Myles Brand, himself a former president. The athletic directors are being subordinated as the academics assert some leadership. This, we are told, will keep alive the greater academic orientation begun under Brand's leadership.

It sounds nice, and it is true the NCAA did move to end some of the more egregious practices prevailing in the pre-Brand era. But, I for one, am not expecting much. Attending the College Sports Research Annual Meetings in Chapel Hill last week, I was reminded how college sports is broken on both the moral/ethical/academic and financial levels.

On ethics, I heard the story of Sally Dear, the SUNY Binghamton instructor who refused to bow to athletic department pressure and pass students who failed to attend large amounts of the course. The sad thing with her story was the complicity of so-called academic leaders in the move to preserve eligibility for some students who deserved to fail.

On finances, my sidekick Matt Denhart keeps showing me stats that show that not only are college sports a drain, but they are more so at the poorer (financially and in terms of academic reputation) schools than the rich ones --there is a highly regressive intercollegiate athletics (ICA) "tax" on the generally middle to lower income students attending wannabe athletic powers --like my own Ohio University or SUNY Binghamton.

Back to Mark Emmert. If he really wants to be bold, he can use the NCAA's cartel powers to scale back the financial excesses of ICA. He could call together the presidents of Football Bowl Series schools and propose that no school in the FBS division can subsidize ICA more than two percent of core revenues or five percent of tuition revenues collected from students. The financial burden that the Eastern Michigans of the world immpose upon their students is unconsciousable. Or, he could go conference by conference, asking, for example, for the Mid American Conference to meet with him to impose a conference rule similar to above, and promising help with the NCAA in transitioning to a lower level of competitive play --perhaps a five year phaseout at the FBS level.

It won't happen, however. College presidents look at the new 14 year NCAA contract on basketball and see dollar signs in their eyes. They believe they can get their hands on enough money to makes sports financially viable, at the same time they are paying coaches 10 times what their counterparts of a generation ago made. Sports was, is, and always will be a losing proposition for most schools. Why sell your soul and integrity to keep Bubba the Alum happy? Why? Because most typical university presidents lack certain intimate body parts needed to resist pressure, and they are whores. Plain and simple.

Taxing the Poor to Entertain the Rich

By Richard Vedder

My Chief Whiz Kid Matt Denhart and I are traveling to Chapel Hill, NC, tomorrow to speak at the annual conference of the College Sports Research Institute. In our paper, we are going to argue that the growing financial burden of intercollegiate athletics (ICA) is very unevenly distributed, and that students at mostly relatively poor state schools pay a high "tax" for ICA, while those attending wealthier flagship universities face very little in the way of sports "taxation." In short, there is a highly regressive ICA tax nationwide that is of a consequential magnitude.

Specifically, big-time sports schools like Ohio State or the University of Texas roughly break even from ICA, and there is little university subsidy. These schools mostly are also the prestige flagship institutions in their state that draw students from mostly upper middle class, affluent families. The second tier state institutions in the state, say Eastern Michigan University, or my own Ohio University, aspire to make it big in ICA but their aspirations are not matched by revenues (e.g., lower attendance, fewer big-time TV appearances), so they end up subsidizing ICA a lot --and ultimately, since state governments do not generally provide special athletic subsidies, the burden of the cost falls on the students. These schools tend to have a higher proportion of lower income students, those receiving Pell Grants.

Compare the University of Michigan with Eastern Michigan University (EMU), whose stadium is less than six miles away from the Big House in Ann Arbor. At EMU nearly 39 percent of students are on Pell Grants, triple the proportion at the U of M. The students there on average are considerably poorer. Yet the huge $20 million subsidy at EMU for sports is equal to nearly 16 percent of tuition revenue. One could say there is a 16 percent ICA tuition tax at EMU. By contrast, at the relatively well to do (not only in terms of student body but in terms of university endowment) University of Michigan, that ICA tax is zero. The burden of intercollegiate athletic varies a lot --and it burdens the students who struggle the most financially to attend college. If one views big time ICA support at wannabe schools like EMU largely as a consequence of pressure from affluent alumni, one could say we are taxing the poor to entertain the rich.

The example above is not an isolated example. Let's compare entire athletic conferences. The Big Ten Conference serves a geographic area highly similar to that of the Mid American Conference. In the Big Ten, the average ICA tuition tax is under one percent, while in the MAC it approaches 15 percent. Yet the proportion of Pell Grant recipients in the student population averages just 16 percent in the Big Ten (excluding private Northwestern), compared with 27 percent in the MAC. There are four athletic conferences besides the MAC where the ICA tuition tax is 13.8 percent or more, while there four other conferences besides the Big Ten where the subsidy averages four percent or less. The four conferences where the average Pell Grant recipients are under 20 percent of the enrollment all have average tuition taxes of under four percent; the four conferences where there are over 25 percent Pell Grant recipients all have average tuition taxes exceeding 13.8 percent.

So is ICA truly a sizable financial issue for American higher education? The answer depends a lot on the schools. But we can say that on balance the subsidization of ICA is regressive in nature, burdening the poor more than the rich. We will post our entire study on the CCAP web site shortly.

Robbing the Cradle

By Richard Vedder

The University of Southern California has been rising in the US NEWS rankings through somewhat dubious means I suspect, hiring lots of expensive faculty, doing flashy things that raise ratings. We at FORBES/CCAP rankings have a different view about USC. The kids don't like the professors much, possibly because a lot of them don't speak English but write dull articles for dull journals for a nonexistent audience. We think USC is not in the top five schools in Los Angeles County using an outcomes based approach to measuring excellence.

Now the ultimate example of why this is not a real great university, but more of a tacky entertainment oriented school that venerates Bubbas more than Brains. The new football coach, recently arrived from Tennessee (home of the Escorts who tantalize high school seniors in order to sign them up for football), has signed a 13 year old middle school kid to play football whenever he gets to college in 2016 or thereabouts. Is there no end? Is there anything beyond the pale in intercollegiate sports? Why don't university administrations, the NCAA, the Pac10 or someone put a stop to this madness? Is USC a serious school dedicated to the pursuit of knowledge, or is it an exploiter of child labor for decidedly non-academic purposes?

The Epicenter of the Athletics Scandal: The Mid-American Conference

By Richard Vedder

The Grapevine at Illinois State University reports that state appropriations for universities were down this year for the second consecutive year. After allowing for inflation and enrollment increases, the declines average something on the order of 10 percent per student over two years, with little prospect that this will reverse soon, particularly since federal stimulus money will not be provided in the future. Yet amidst all of this, university subsidies for ball throwing and related athletic activities are soaring, and new data gathered by USA TODAY and reported today in INSIDE HIGHER ED is mind-blowing.

It is true that most big nationally contending sports powers get by on very modest subsidies --the Ohio States, LSUs, Oklahomas, even Cal Berkeley and Illinois (whose major sport athletic success in recent years is relatively mediocre). But many of the schools aspiring to athletic greatness are getting clobbered financially, and the epicenter of that phenomenon is the Mid-American Conference, a group of 13 schools with so-so athletic prowess but alumni and bubbas who have huge aspirations.

The survey provided, by my calculations, data on 10 of the Mid-American Conference Schools: Ball State, Bowling Green State U., Central Michigan, Eastern Michigan, Kent State, Miami (Ohio), Northern Illinois, Ohio University, and the universities of Akron and Toledo. Collectively, these schools had $140.7 million in subsidies in 2008, well over two-thirds total sports revenues of $209.6 million. The typical school in this group probably has 20,000 students, and a budget excluding auxiliary enterprises of perhaps $400 million. That typical school is now devoting $35 of every $1000 raised to athletic subsidies, which typically now exceed $700 per student --typically well over 10 percent of net tuition fees collected by the schools.

The best example is Eastern Michigan University, nestled in the suburbs of the nation's most dysfunctional economic basket case, Detroit. A good runner could run the 5.7 miles from Eastern Michigan's Rynearson Stadium to the University of Michigan in Ann Arbor's Big House in well under an hour. My friend at Michigan, ex-prez Jim Duderstadt, tells me state appropriations there now are (or soon will be) less than in 1990. Yet next door to this athletic powerhouse, Eastern Michigan University, amidst declining incomes and massive unemployment, used $21.4 million to subsidize sports --and the program appears to have run a budget deficit, so the true subsidy may have been greater. My guess is the subsidy is equal to at least 20 percent of EMU state appropriations. In a state desperate to finance the most basic of services, why is it allowing this school to drain perhaps one-fifth of state funds received away from core missions in order to make alums and bubbas happy and engage in unaffordable hubris?

My school, Ohio U., is slightly worse than average for the bunch. Aside from drawing nearly $15 million in subsidies, the program routinely exceeds its budget (absolutely forbidden of nearly all other units of the university), and recently added scores of thousands of dollars to the deficit so it could play a losing game in a fourth rate bowl (called the Little Ceasars Pizza Bowl--best known for their $5 Hot-n-Ready pies), in a fifth-rate city (Detroit) to a sixth-rate sized audience --the stated attendance, 30,000, according to friends I know who were there, was in fact a gross exaggeration. It was on ESPN. Big deal. Losing one of the lesser bowl games on national television to a smallish audience ---how does that further the academic mission?

Why is this being allowed? Why don't states apply a tax on appropriations? For every dollar of athletic subsidies equal one percent of core (non-auxiliary enterprise) revenues or expenses, there will be a reduction of state appropriations by two dollars. At Ohio U., I think this would be an appropriations reduction approaching $20 million a year --enough to make the Bubbas and their puppets (university trustees and the president) realize that we must down-size sports just as we downsize the English Department and get rid of some of the excessive bureaucracy.

Economic Decisions Are Better Left to Individuals

by Daniel L. Bennett

Edububble has an interesting post up concerning recent statement from ED Secretary Arne Duncan concerning basketball players and college.

Mr. Duncan, who played four years at Harvard, scolded the NCAA and the NBA for letting kids play professional basketball when they’re 19 and then used the “farce” word. Clearly he doesn’t want kids to have a successful career in the NBA without the benefit of four years in college.

This move by the colleges is so self-serving. When the kids are at college, they must play for free because it would somehow be a terrible corrupting crime to give them a cut of what the university gets from the gate and the television revenues. But if they head off the NBA and get a share of the revenues, they’re somehow robbed of the wonderful chance to have a college degree.

This might make sense if the college degrees were really worth that much. This might make sense if dragging a horse’s ass to knowledge will make him think. This might make sense if more humans were drawn to academic pursuits. But none of those facts are true. If a kid doesn’t have a real drive to learn, there’s no reason for him to be wasting everyone’s time in college.

I couldn't agree more. If an extremely talented individual has the opportunity to pursue what he loves and gain economically by doing so, then the government or anybody else should not be authorized to stop him or her. These decisions are better left to the individuals directly affected rather than handed down from some bureaucrat. Professional Athletes have a short career span and spending 4 years or more in college will only diminish their opportunity to make a living doing what they love. They can always enroll in distance education while "employed" or take courses towards a degree during the off-season, or even pursue college after their career, if they so choose to do so. Forcing them to go to college is similar to forcing all actors to go to college before they can star in a movie or tv show, or forcing Bill Gates to complete his degree before allowing him to found Microsoft.

As for the issue regarding colleges benefiting from the low cost labor, Dr. Vedder and Matt Denhart covered that in this WSJ article.

Are We On the Cusp of True Reform in Athletics?

By Richard Vedder

Serious individuals of all political perspectives agree that intercollegiate athletics have become a scandal and a burden. More and more schools are doing absolutely reprehensible and dishonest things to win. Florida State is the latest example, but not the only one. Tennessee lures promising high school senior athletes with sexy looking girls, Florida State takes kids who are nearly illiterate, other schools give athletes perks under the table, many schools are literally letting staff go and reducing salaries while athletic budgets continue to grow. Adults (football coaches, for example) enrich themselves off the exploitative profits made from accomplished football and basketball players. It is not uncommon for mediocre athletic powers hoping for greatness to lose perhaps $15 million a year on their sports programs --real money. Classes are canceled to let kids go watch a game (Alabama), and academic values are subordinated. The Bubbas are triumphing over the Nerds, even though in real life (e.g., at age 30, 40, or 50) the Nerds tend to triumph.

What to do? Unilateral approaches do not work. Neither the US nor the USSR would disarm during the Cold War, anymore than Texas will scale back outlays on sports unless Oklahoma, Alabama and many other rivals do as well.

I have always thought it would take concerted moves by whole conferences or by large numbers of university presidents acting together to change this --and even that has only a 50-50 chance at success. A friend of mine, an extremely prominent ex-university president at a prestigious university, tells me that I am naive. University presidents are hopeless. It will take a smoking gun, a scandal that captures the indignation of the broader public to effect change. Evidence that college football players die early because of sports related injuries, while working for pennies to provide income for coaches making millions a year --or something like that.

The more I think about it, I think my friend is right. A good 60 Minutes television expose, a powerful congressional hearing complete with prostitutes hired by athletic departments to service aspiring athletes, ex-athletes who are living in destitution from brain injuries, etc.

The pity is I think intercollegiate athletics, in moderation, are fine. Aside from providing entertainment for students and alums, they help universities develop a sense of community. They teach a variety of useful skills for the athletes themselves, including the importance of discipline, hard work, and leadership. But Socrates was right --there is a "golden mean" -- a moderate amount of emphasis on sports is good, too much is bad.

One reason for the intense interest in sports amongst members of university communities is that there is no other bottom line. Alabama and Texas have great football teams by objective, quantifiable measures --but do UT seniors know more, think better, act more ethical than UT freshmen? Who knows? We at CCAP want to see intercollegiate sports continue --but in a way more compatible with the values and finances of these institutions.

Why Southern Universities Are Not World Class

By Richard Vedder

I like the South, and American universities in the south have improved relative to national norms a lot over the decades. So the heading on this blog is a bit unfair, a gross generalization. But it is true that the very best top flight institutions of higher learning are underrepresented in the South, although I think Virginia, along with California, has the best quality public universities in the United States.

But the good ole boy mentality still runs strong in the South. Football is far more important than learning at many schools. The University of Alabama has cancelled classes for THREE days to have the students focus on what is truly important in life --a bunch of its boys throwing a ball around in a match against a bunch of Texans. Not one day of class cancellations, not two but three. Harvard would not do that. Oxford would not do that. Michigan or Berkeley would not do that, but in Alabama football is king and academics play second fiddle. I certainly would not recommend the University of Alabama to any daughter or son of my friends. One southern school is in some hot water now for using "hostesses" (cute college coeds) to lure high school senior boys to their schools to play football - a reminder of the sex scandal at the University of Colorado a few years back.

Meanwhile, at my university, which had a reasonably decent football team (9 and 4), the grown ups (trustees, alums, etc.) are all excited that we made some third rate bowl in that garden spot of America, Detroit, playing the second best school in West Virginia. We will receive a few hundred thousand dollars in revenue, and spend far more than that in bribing students and others to attend the game so attendance is not embarrassingly low. We spend roughly $15 million a year subsidizing intercollegiate athletics, probably more than we spend on some of our academic colleges. This is not unique.

However, some schools are starting to reassess their priorities. Hofstra and Northeastern have dropped football, for example. Other presidents are talking of dropping out of BCS level football competition. Maybe school spirit will remain, alumni will donate, etc. even if the school competes at a less expensive level. In reality, of course, the evidence is that, on average, the claims that intercollegiate athletics confers enormous external benefits on schools (especially donations) are simply bunk.

When are the university presidents collectively going to propose radical changes? When will some of them get the courage to "just say no" to the Bubbas who insist on high cost programs? To be sure, there are always the Ohio State type schools that break even on intercollegiate sports. Remember, however, every time someone wins a match, someone else loses. Not everyone can be Ohio State.