If schools don’t regain their fiscal sanity, pretty soon it won’t just be Grambling that can’t afford to scrub away the mold in the shower room.
According to sports economist Andrew Zimbalist, NCAA Division I schools have created a dangerous economy, spending and wasting wildly, gambling on limitless revenues and mortgaging the future.
“I think they are in a bubble,” Zimbalist said, “and the bubble is going to burst and undermine a lot of what’s there.”
This fall, Forbes examined football expenses in the top 25. While Alabama’s spending was the highest, Ohio State was right behind at $34 million, and there was hardly a ranked school that didn’t report at least $20 million or more in costs. What does the money go to? Well, in 2012, ’Bama spent $1.4 million on recruiting, according to numbers self-reported to the Department of Education. Another $5.3 million went to Coach Nick Saban’s salary, and then there were 25 extra staffers who assist Saban, described as “non-coaching personnel.” Lucky for the state, the outlay paid off: The Tide has won three national titles in four years, and last season brought in $82 million in football-related revenue.
Yet many other schools spend just as liberally, without Alabama-like dominance. Texas ($25.8 million) is 4-2. Northwestern ($20.1 million) is in last place in its division of the Big Ten at 4-3. LSU ($24 million) is 6-2.
Nor do most of them pay their bills. According to the NCAA, just 23 athletic departments out of the 228 that play Division I football covered their expenses in 2011-12. And of those, just seven were fully self-sufficient; the rest needed subsidies from their states or universities.
In fact, those subsidies rose by a staggering $200 million over the previous year, football schools utterly callous to multimillion-dollar deficits, draining their campuses at a time when universities across the country are struggling to meet financial obligations. The Grambling scenario — dilapidated facilities and insufficient funding — is one that any number of schools could face if they aren’t careful. But the worst part is, it’s unnecessary.
It’s simply not the case that to be top-tier requires these nine-digit layouts and endless deficits. Evidence for that consists of two words: Boise State.
Take a look at the profit-loss sheet for that program. From 2008 through 2011 the Broncos went 50-3. They’ve been undefeated twice, won a pair of Fiesta Bowls and upended the likes of Oregon, Virginia Tech, Georgia and Oklahoma. Know what their football costs were last year? Just $8.5 million. Revenue: $15.3 million.
You don’t have to gamble like an out-of-control hedge-funder to compete on the biggest stage. You can spend reasonably and still win and make money. Need more evidence? One word: Purdue. The Boilermakers are that rarity, one of the seven programs to operate in the black. Athletic Director Morgan Burke, the former vice president of a steel company, has handled Purdue’s business with an old fashioned fiscal ethic in his 20-year tenure. “Our mantra is, pay as you go,” he said.
He supports 18 varsity sports on a budget of $70 million, and he does so without sacrificing quality, or conscience. Think it harms the Boilermakers competitively? Think again. In 2011-2012, a total of 14 Purdue teams earned postseason NCAA berths, a school record. Individual athletes have won a total of 11 NCAA titles. Meantime the graduation rate for all athletes was 78 percent and they delivered a cumulative GPA of 3.01.
True, the football program is struggling this season at 1-6, but from 1997 to 2007, the Boilermakers appeared in 10 bowl games, including a Rose Bowl. And Burke’s careful management means that when football is weak, other sports don’t have to suffer, and he doesn’t have to plunder the university’s coffer.
“We try to make sure we have adequate reserves each year,” he said, “so if we have a year when the team doesn’t perform well, you’re not going to the university hat in hand.”
Why don’t all athletic directors behave this way? What makes them gamble like speculators? “Every campus has a different risk tolerance,” Burke said diplomatically. According to Zimbalist, it’s a false sense of security from the enormous proliferation of sports networks over the last couple of decades, and the assumption that rights fees will keep rising.
“Most of these programs are losing money and are a drain on schools’ educational budgets,” Zimbalist said. “But another problem is the TV deals they’ve signed are not on firm ground, and some of them have thresholds that, if not met, could undo the contracts.”
For instance, some of the amounts delineated in the pacts are contingent on number of subscribers. Or stipulate that a certain amount of ad revenue must come in. If the thresholds aren’t met, the money dries up.
Zimbalist’s projections aren’t just economist-theory. At Purdue, Burke sees it happening. “I would argue that the TV is now an offset against the gate,” he said. “You’re seeing a softening of demand.”
Pull a brick out of the wall, and everything could collapse. Should those TV contracts fail to pay out, or not be renewed, schools could be facing massive cuts without replacement revenue — on some campuses as much as two-thirds of the overall athletic budget is based on football-TV-related revenues — coaches and staffers laid off. Sports downsized or eliminated. Worst of all, scholarships would disappear. And that would defeat the purpose of the whole exercise.
“This is one of the last merit-based scholarships out there,” Burke points out. “I don’t want to do anything short-sighted to lessen opportunities for the next generation.”
For more by Sally Jenkins, visit washingtonpost.com/jenkins.