College Sports Reform: Opening Up the Budget Books

Big-time college sports teams are not only skilled on the field, they are also talented at keeping their off-the-field activities in the dark. Athletics programs, for example, are experts at keeping their budgets under wraps. As spending on college sports soars to towering new heights, faculty members, students, taxpayers, and policymakers are often clueless about how the money is being spent.

The first step toward genuine college sports reform must be greater transparency -- in academic outcomes, as I argued last week -- and also in athletics budgets and expenditure decisions. While we have anecdotes about extravagant spending, the lack of transparency makes it difficult to know the extent of the problem. In addition, the NCAA's revenue distribution and scholarship rules encourage the professionalization of sports teams by emphasizing the value of athletic performance over academic achievement.

The NCAA -- or Congress if necessary -- must require the disclosure of more detailed information about athletic spending. The NCAA must also modify its own spending rules in order to slow down the college sports arms race and ensure that all athletes have the financial support they need to finish a degree.

Shining a Light on Spending

In recent years, some powerful lawmakers have started to question the tax exempt status of the NCAA and its member institutions. For example, in 2006, Rep. Bill Thomas (R-Calif.), the powerful then-chairman of the House of Representatives Ways and Means Committee, wrote a letter to the NCAA demanding to know why the association deserved its exemption. Citing big-time football and basketball teams raking in millions of dollars in revenue each year, Thomas asked how these lucrative programs furthered the NCAA's "primary tax-exempt purpose" to "maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body."

At most Division I football and basketball schools, the answer is they don't. The commercialization of college sports has fueled an arms race among colleges, resulting in intense competition for recruits and coaches, which in turn has led to excessive spending on salaries and facilities. Each high-profile program tries to outdo the next, pouring money into lavish new stadiums, complete with luxury skyboxes and state-of-the art training rooms.

If the NCAA wants to show Congress and taxpayers that it is serious about keeping athletics integrated with the academic mission of higher education, it needs to do something about this arms race. There are no easy answers, but, at the very least, the NCAA can bring excessive athletics spending to light -- and hopefully spur other concerned actors (faculty, students, parents, taxpayers) to force colleges to reign in the spending. If the NCAA fails to act, it up to Congress to step in and take action.

Under the Equity in Athletics Disclosure Act, which Congress passed in 1994 to expose differences in collegiate spending on men's and women's sports, the federal government currently requires colleges that receive federal student aid and have intercollegiate sports programs to submit an annual report on athletic participation, staffing, revenue, and expenses. The financial disclosure requirements, however, are vague, allowing each college to craft its own definition of what's included in aggregate revenue and expenses. As a result, the federal athletics spending data is not comparable from school to school, making it essentially useless. The NCAA also collects revenue and expense data from each college, but reports the numbers only in aggregate.

Recommendation: Require each college to publicly report data on its athletics revenue and expenses, using consistent accounting methods.

• In addition to the currently reported categories, require that colleges break down the data to reveal how much revenue their athletics programs receive from the sports teams themselves ("generated revenue") and how much the colleges provide to the programs ("allocated revenue"). Also detail how much the schools spend on coaching salaries by team and on facilities.

Sending an Academic Message

Another consequence of the athletics arms race is the widening wealth gap between high-profile sports schools and low-resource colleges that can barely support their athletic teams. While it is not practical for the NCAA to regulate spending growth, the organization does have one tool at its disposal that it can use to affect the unequal distribution of college sports revenue: a $6 billion contract with CBS to broadcast the men's basketball tournament.

At present, the NCAA allocates the lion's share of the CBS revenue to its member institutions based on their performance in the tournament and on the size of their athletics programs. Only four percent of the revenue is distributed based on the financial need of the institutions.This allocation system makes the big-time programs richer and contributes to the commercialization of college sports by emphasizing performance on the field and court.

Recommendation: Distribute a larger share of NCAA revenue to schools based on need, and eliminate performance-based rewards.

• The NCAA should provide a much more generous share of its revenues to those schools that actually need the money. This would help sustain athletics programs at struggling colleges and demonstrate that the NCAA is actively working to reign in commercialization.
• While it might be difficult to convince NCAA members to allocate the organization's revenue entirely based on need, the association should stop taking schools' athletic performance into account.

Creating Different Incentives

The NCAA's scholarship rules also wrongly place the most generous incentives for individual athletes on athletic performance, instead of degree attainment. The NCAA allows schools to award athletic scholarships only on a one-year basis, meaning an athlete can lose his or her scholarship for any reason including poor performance on the court or field at the end of a year. While that athlete can challenge such actions at a scholarship withdrawal hearing, the NCAA hasn't set any rules or standards for those hearings.

What type of message does a one-year scholarship send to athletes? It tells them that they have to do everything they can to excel athletically in order to receive money for their education. With the stakes so high, students will inevitably spend their free time in the weight room instead of the library. But if athletes are truly students first, then the priority should be reversed. When a college recruits a player, and the player commits to that school, the institution has a four-year responsibility to fully support that player in his or her pursuit of a degree.

Recommendation: Make athletic scholarships four-year scholarships.

• Allow schools to rescind athletic scholarships only for academic or discipline reasons. If an athlete gets injured or does not make a team, the athletics program must continue to financially support the athlete (but the athlete will not count against the school's scholarship limits).
• Establish NCAA guidelines for scholarship withdrawal hearings.

Unfortunately, the likelihood of the NCAA taking strong action to open up the college sports world is slim -- unless there is a significant scandal or Congress makes more transparency mandatory. I'm afraid that college sports, specifically football and basketball, will continue to drift further and further away from the true mission of athletics: to enhance a student's path toward a degree, not replace it.

I applaud individual schools that are trying to maintain the integrity of their athletics programs against the forces of commercialization. And I hope that more of the athletes who were used by their schools for profit and prominence, and left empty-handed without a degree, will speak out. At this point, their stories provide the best information we have about the dark underside of college sports.