Fund and games

When the pool is the NCAA's basketball fund, conferences have a lot riding on games. Teams that advance earn more, which can make a big difference, particularly for smaller leagues.

March 18, 2014

The payout rules are complicated but enticing. Even if your college basketball team doesn’t win a game, you win $1.67 million. A round-of-16 appearance rakes in almost $5 million. A Final Four run? $8.3 million.

What sounds like the country’s most lucrative office pool is actually how the NCAA splits up much of the $700-plus million dollars its men’s basketball tournament makes each year. The competitors in this pool are collegiate sports conferences, and this month a large chunk of money — nearly $220 million, according to NCAA projections — is up for grabs.

The “basketball fund,” as it’s simply labeled, is the largest pool of money the NCAA doles out to schools and the only one allocated according to competitive sports success. A closer look at where the money goes illuminates the stratified economic landscape of college sports, where the rich schools get richer and the players remain amateurs.

The NCAA “urges” — but does not require — conferences to share this money equally among their member schools. Of the 32 conferences that participate in the tournament, 15 agreed to answer basic questions about how they use the basketball fund. Those conference officials said that, while specifics vary from conference to conference, they expect their peers use the money similarly.

In general, officials said, larger conferences split the money evenly among their schools, who use it to help cover athletic department budgets. Smaller conferences, meanwhile, depend on the basketball fund to cover their expenses, and some award any extra money to schools based on their own complicated formulas. For a smaller conference, one surprisingly successful tournament can produce budget-inflating windfalls for years.

Conference officials defend the system as a fair way to share money that supports college athletics. To critics of the NCAA and amateurism in college sports, however, the only number that matters about the basketball fund is the amount paid to the players: $0.

Much at stake

The men’s basketball tournament basically funds the NCAA’s existence. Between television revenue and ticket sales, the tournament annually produces more than $700 million. The NCAA keeps about 40 percent and distributes the remaining 60 percent to schools; the basketball fund is the largest piece of that distribution.

The fund is doled out using a complicated formula that rewards conferences for how their teams played over the previous six tournaments. The key component of this formula is the “unit.” Every game a team plays in an NCAA tournament earns one “unit” for its conference. More teams in the tournament mean more units, and more teams winning and advancing to play more games also mean more units.

Just by making this year’s tournament, a school earns its conference a projected $1.67 million over the next six years, broken into annual payments from the NCAA that will start with $260,500 in 2016. A run all the way to the Final Four earns five units, or an estimated $8.33 million, which is the maximum for most teams. The NCAA stops awarding units after the national semifinals.

(The four teams that play first-round games are the only ones that can potentially earn six units, because they play one more round than everyone else. A miraculous Final Four run by one of those teams, as Virginia Commonwealth pulled off in 2011, would earn its conference about $10 million.) While most of the conferences send some of the money back to their schools, the money stays with the conference when schools switch leagues. This has created an interesting situation for one of basketball’s biggest earners: the Big East.

Realignment in 2013 created the new Big East conference, and the organization previously known as the Big East became the American Athletic Conference. The AAC continues to rake in millions in basketball fund payments earned by schools such as Villanova, Georgetown and St. John’s that started the new Big East.

The formula dates from the early 1990s, when the NCAA’s annual television income started its steady climb. Back then, when college sports was less lucrative, and the concept of amateurism was not yet the fodder for multiple federal lawsuits, college officials were unabashed when discussing the basketball fund.

In 1996 Chicago Tribune story, Purdue business manager Glenn Tompkins recalled his deflated reaction to a tough tournament loss.

“Everybody is crying about the officials and how hard it is on the kids,” Tompkins said. “And I’m sitting here thinking, ‘There went $300,000.’ ”

It’s big for the littles

The so-called “Power Five” conferences — the Pacific-12, SEC, ACC, Big 10 and Big 12 — sit at the top of the college athletics financial stratosphere. Each has large amounts of television income (much of it associated with football) able to cover conference costs and send large annual payments back to their schools. They also typically are the highest basketball fund earners, but because they have so many other revenue sources, their cuts of the “basketball fund” represent a smaller percentage of their income.

In 2013, for example, the Big 12 earned $20.6 million from the basketball fund, more than every conference but one. But that money was just about 10 percent of the annual income for the Big 12, which made more than $130 million that year from TV, so the conference was able to simply split it up and send it back to its schools.

But for smaller conferences, the basketball fund is much more important, in some cases constituting nearly 70 percent of annual revenue.

“The standard of living, if you will, is really dependant on the men’s basketball tournament,” said Tom Yeager, commissioner of the Colonial Athletic Association.

Yeager’s conference has its own complicated formula for the basketball fund: the conference keeps the money it is guaranteed every year thanks to its automatic bid, and any more money gets split in half, with one half getting split among the 10 schools, and the other half doled out competitively through an “Excellence Fund.”

In the 2006 tournament, Yeager’s conference enjoyed unexpected success that brought in larger-than-expected payments for years.

George Mason’s run to the Final Four, coupled with UNC- Wilmington making the tournament as an automatic bid, meant a six-unit tournament. That 2006 tournament earned an estimated $7.7 million over six years for a conference whose total annual revenue that year was $2.8 million. A lot of that money went into the “Excellence Fund” and found its way back to George Mason and other schools, and some of it stayed with the conference. Some it also went to cover conference costs, such as Yeager’s salary. Over the six years that 2006 tourney windfall paid out, Yeager saw his total compensation more than double, from $203,600 in 2006 to $428,130 in 2012, tax records show.

Yeager said there was no connection between tournament success and his pay. The CAA acquired football-playing schools in 2007, he said, and his responsibilities expanded.

“It didn’t have a darn thing to do with basketball,” Yeager said. “My compensation follows what’s going on in our schools and generally increases at a very modest rate.”

Another smaller league had great success in that same tournament: the Missouri Valley Conference. Bradley and Wichita State made surprising round-of-16 runs, and two other schools also made the tournament, for eight units, or $10.2 million over the next six years.

Missouri Valley Commissioner Doug Elgin’s compensation increased 40 percent over the life of that payout, from $224,250 in 2006 to $316,269 in 2012, according to conference tax records. Elgin defended his compensation and, unlike Yeager, said it was absolutely tied to the success of his conference’s basketball performance.

“I would hope that when the CEO of a business, when their return is off the charts, that their compensation is commensurate with performance,” said Elgin.

No pay for play

Basketball fund money covered new electronic digital signage at Metro Atlantic Athletic Conference schools, about $750,000 total or $75,000 per school, according to Commissioner Richard Ensor. Basketball fund money has been split up and sent out to athletic departments across the country, paying for everything from coaches’ salaries to tutors for players. One thing basketball fund money has not gone into, however, is a paycheck for one of the players actually winning it for the conferences and schools, which bothers people such as Dan Rascher.

“It’s un-American,” said Rascher, a sports economist who has testified against the NCAA in legal challenges to amateurism. “It’s so atypical of anything else we have in this country, where we have this very successful industry, and the athletes generate a ton of value, and the money goes elsewhere.”

Brad Traviolia, deputy commissioner of the Big Ten, acknowledged that changes are on the way for how the NCAA splits up its revenue, change that would mean more for players, such as increased stipends for players. that cover costs like food and rent. But he made sure to draw a line.

“We’re trying to enhance and promote the student-athlete experience but keep it a student-athlete experience, not an employee-employer experience,” he said.

Other conference officials sounded less concerned that change is needed, as revenue continues to spiral but the amount paid to college athletes stays the same.

“There are tremendous benefits and opportunities that are provided to the student-athletes,” said Yeager, the CAA commissioner. “To place no value on a degree from William and Mary, or Michigan, I think, sells the whole argument really, really short ... If they [players] want to go apply their talents to the professional leagues, go right ahead. I’m not particularly moved by it. There’s a lot more to this than money.”

SOURCE: NCAA, Conference 990 forms; Graphics by Lazaro Gamio and Todd Lindeman.