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Rat race

There's an interesting six part series running in the Orlando Sentinel this week about the financial side of college football. Most people are (incorrectly) focusing on the OPE revenue data, which is worthless for two reasons. Well, one and a half. The data that the Orlando Sentinel Gridiron 365 blog lists is particularly useless, because it for some reason doesn't include expenditures. Wouldn't it make more sense to focus on net profit instead?

Even counting overhead, college football should be a fairly successful business. Fans pay inflated prices to sit in the stands, often against paycheck opponents. However, it isn't, when programs are engaged in an arms race that constantly requires new expenditures in order to keep up with the competition. I find it strange that the blog cites that data, given that the one of the series articles correctly points out that

19 NCAA institutions made more money than they spent in 2006 in all of Division I. Those 19 are FBS schools. Only six of the programs that made a profit have done so for the past five years.

Listing these revenue figures paints a misleading picture; useful only in the sense that it gives an idea of what they could theoretically generate without overhead, or racking up new expenditures hand over fist. Most athletic departments compete to see who loses the least amount of money. Generating profits is unrealistic for most at current rates of expenditures (please do not confuse this point with the idea of taking on more expenses in the short term with the goal of expanding long term revenue).

The second reason why that blog entry is spectacularly uninformative? As I noted in April when blogging about the OPE data, the fly in the ointment that no one involved in college athletics really likes to acknowledge is the infamous "direct institutional support"; in laymen's terms, a direct subsidy from a university to its football program. The numbers in question don't specify exactly how much of that revenue came from the parent school instead of areas traditionally seen as revenue sources.

My position is that athletic programs provide direct benefits for schools that are not adequately quantified by current models, but that doesn't warrant just glossing over this point. It's one thing if an athletic program is making money hand over fist; in that case, they should be able to enjoy considerable autonomy. When you take money out of the general fund, that's when the spotlight deservedly goes in your direction. Again, I'm not exactly sure why that entry doesn't mention this, given that one of their articles did. What I'd really like to see is another Indy Star-style FOIA expose that publishes all the D.I.S. data for each program.

I have a couple more passing thoughts on this issue. It would be a good thing if athletic departments at once decided that they didn't need to do things like spend $5 million dollars on a new recruiting lounge, even if the money is readily available (as has been pointed out, Rutgers financed the project with private donations). I just chose that example because it's on my mind for obvious reasons; it's not a particularly egregious offender. I understand why it's being built; I wish it didn't have to be, and don't think that I'm alone in this sentiment. It's a pipe dream, but it would be nice, collusion be damned. All athletic departments spend far too much money considering the returns on their investment.

On one hand, athletic departments need to be cognizant of the strain that university budgets are facing across the country. And of the fact that even when they're not raiding the general fund, students often don't have a choice about funding the athletic department through mandatory student fees. That is difficult to accept when tuition is rising rapidly. The Sentinel does a fair job explaining the scope of these fees.

At UCF, in-state undergraduates pay $150.85 in fees per credit hour, $12.68 of which goes to the athletic department, school officials said. At FAU, the corresponding figure is $14.30, officials there said.

At FIU, it's $14.21, according to the university's data. And at USF, it's $11.76, USF officials said. The athletics fee is $6.77 per credit hour at Florida State, officials said.

Even Florida, one of the most profitable athletic departments in America, supplements its sports budget with student fees. School officials said students pay $1.90 per credit hour to the UF Athletic Association.

On the other hand, I'm sick to my stomach of reading ignorant comments by the William Dowlings of the world on this topic. Athletic departments need to be cognizant of public perception, but that doesn't mean that the perception is necessarily accurate. At least in RU's instance, academic dollars aren't being shifted towards athletics. Students are paying more for everything, and are quite honestly are close to a breaking point. Students and families paying tuition are being bled dry, and there is little more that they can give. A few hundred dollars in athletic fees matter here, but the issue's scope is far greater than that. The school will be on the hook if ticket sales don't pay for the expansion, but that's a hypothetical that's years down the road, and rather limited in scope.

Myself, I'm in a difficult spot here. I think that FBS schools are in a collective state of madness on this issue. Yet, when confronted with hyperbole on the level of the statements below, I realize that I have absolutely no common ground with these lunatics, and that the drunken sailors actually are the more reasonable party.

Stanley Smith, a finance professor and the chapter's treasurer, said he's not opposed to college sports, but the athletic program "does appear to be a much higher priority for the president and board of trustees than academics."

Now, because Acrobat reader is a piece of garbage, and UCF for some reason insists on using PDF files that can only be read with it, I can't directly check UCF's budgetary data. Let's just pretend that he said Rutgers, because assorted people have said the same thing here. The RU athletic department's budget for FY 2008 was "approximately $50 million" (a S-L article last year said it was at $49m, and going up to $52m for 2009, and I won't link it because the rest of the piece was a slash and burn hackjob). That's less than 3% of the school's total $1.75 billion budget, and the actual level of institutional support is surely lower still. Rutgers is making up for years of neglect with that spending. By spending over thirty five times more on academics than the athletic department, it's somewhat clear where Rutgers University's true priorities are. Moral of the story: don't exaggerate, or you'll alienate neutral parties.

I think this side of sports economics is a story that should be talked about far more frequently. Given that the bulk of research on the subject shows that public subsidies for stadiums have no net benefit on the economy (they generate revenue, but consumers shift their entertainment dollars from elsewhere - hence, it may make sense to build stadiums, but not to subsidize them for the purposes of generating net tax revenue), it's disgusting to see sweetheart deals handed to billionaires. College sports aren't the sinkhole that professional sports are, but they should not be immune to that line of criticism either.

The problem, of course, with these type of articles is that it's far too easy to fall into a S-L style trap of starting from a set, preconceived conclusion and working backwards. What I want to see are more interesting articles on the subject, with substantive original reporting, that actually move the debate forward, instead of flinging mud and hurling insults without warrant. It's not that there are necessarily two sides to every story; don't make up your mind until you have all of the facts. Then, if reality concurs, be as slanted as necessary

Up to this point, as far as I can tell, the Sentinel's series hasn't crossed that line into tabloid-style garbage. It's not Woodward and Bernstein, but it does a decent enough job for what it is, and its of a sub-genre that is currently underexplored. For that, I commend their efforts, and will try to stick with them until the conclusion. There's nothing groundbreaking in the fourth part about skyrocketing coaching salaries, but it is quite useful now and again to point out just how ridiculous that brand of compensation has become. Anyway, with far too many words and diversions, that's my beef with a nondescript, supplementary, throwaway blog entry.