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College Athletic Department Subsidies

2011 March 15
by Phil Miller

ESPN has a new data tool that allows people to obtain detailed expense and revenue data for many major college athletic programs.  Here is the link.  Here is the disclaimer at the bottom of the table for 2010 data.

The information comes from detailed financial disclosure forms that athletic departments submit annually to the NCAA and federal government. ESPN requested the forms from all 120 Division I colleges in the Football Bowl Subdivision under state and federal public records laws. Private colleges and others not subject to those laws declined to release their forms. In those cases, ESPN filled in some of the blanks using financial information that public and private schools are required to provide to the U.S. Department of Education Office of Postsecondary Education or the IRS.

I created a table showing the schools with the top 10 university subsidies, the subsidy amount, the total operating revenues, and the subsidy as a proportion of revenues.  Note the prevalence of MAC and Conference USA schools in the top 10.

 

University Conference University subsidy Total operating revenues Proportion
UNLV Mountain West $19,275,082 $56,496,233 34.1%
Rutgers Big East $18,411,795 $64,203,255 28.7%
Central Michigan MAC $16,457,883 $24,703,101 66.6%
Eastern Michigan MAC $15,334,255 $26,270,721 58.4%
Western Michigan MAC $13,815,834 $23,761,393 58.1%
Cincinnati Conference USA $13,457,464 $40,920,893 32.9%
Houston Conference USA $12,691,796 $33,034,483 38.4%
Wyoming WAC $12,153,845 $26,979,594 45.0%
Alabama-Birmingham Conference USA $10,519,032 $24,273,967 43.3%
Buffalo MAC $10,033,178 $25,385,009 39.5%
Overall Average $3,732,991 $52,091,327 7.2%

 

Given that UNLV, for example, is probably going to fire tenured faculty to deal with what amounts to a “fiscal collapse”, I find it hard to believe the UNLV athletic department enhances the value of the school by at least $19.275 million.

17 Responses
  1. Ddganstine permalink
    March 15, 2011

    Note the differences in student fees as well. Do you think the students at Miami of Ohio know that they are paying more than 50% of the budget for athletics? Do you think they would want to lower the fee and decrease the support? While in MAC, the university subsidy there is much smaller–they just pass along the fees.

  2. BenM permalink
    March 15, 2011

    Outside of the footnotes, is there any more information available on the methodology used by ESPN?

  3. Rodney Fort permalink
    March 15, 2011

    Phil.

    Thanks for the post. UNLV’s 2010 operating budget is $625,578,929. $19,275,000 is 3%. Suppose it needs a 5% return. That’s just another $96,000 in other values. Really not much of an expected return.

  4. Phil Birnbaum permalink
    March 15, 2011

    I’m not sure I understand this. Do the numbers mean that UNLV has operating revenues of $56MM, but expenses are $56MM + $19MM?

    If that’s the case … what are the $75MM of expenses? Seems like a lot …

  5. Andrew permalink
    March 16, 2011

    Fascinating. Some things that stick out from 2010:

    -Oregon’s donations.

    -Ohio State’s payments to visiting teams. Trying to buy a tougher schedule?

    -UNLV was still nearly $3 million in the red.

    -More than half the athletic departments actually operated at a surplus. (75 out of the 96 reporting).

  6. Pete permalink
    March 16, 2011

    I think to list just the “University subsidy” doesn’t give a clear picture. There is also the “Student Fees” to consider. This is another subsidy that the athletic department didn’t earn from ticket sales, TV contracts, etc. Student fees are different from the university subsidy in one important respect, however. One presumes that the university could choose to use the money going to subsidize sports exhibitions in a different way but the only way students can not contribute to the athletic department is to not enroll in school. When you include both kind of subsidies, the top ten are:

    Rutgers $26,852,887
    UNLV $21,562,758
    Central Florida $19,699,547
    Florida International $17,816,999
    Buffalo $17,472,600
    Houston $17,420,416
    Akron $17,247,933
    Miami (Ohio) $17,097,540
    Eastern Michigan $16,907,098
    Ohio $16,460,250

    Perhaps these public institutions are getting more that $15M of benefit from this spending but good luck getting a university president to explain why he or she thinks so. What one is more likely to get in response to such a question is a muted apology for the past spending and an optimistic view of the great things yet to come.

    With regard to Andrew’s comment above, that 75 out of the 96 reporting had a surplus, I don ‘t see how that can be. There are 99 schools (not 96) with data but only seven (LSU, Nebraska, Ohio State, Oklahoma, Purdue, Texas, and Texas A&M) have zero subsidy (from both students and administration). In other words, 93% of the reporting institutions said they needed money from either the students pockets or university funds that could have been used on teaching or research in order to pay for all of the expenditures of the athletic departments.

  7. Kevin permalink
    March 16, 2011

    Is subsidy aka the profit from an athletic department that’s turned back to a university?

  8. Pete permalink
    March 16, 2011

    I think considering only the university subsidy misses some important data. 80% of these schools have student fees that go to the athletic department. So there are two kinds of subsidies, one a choice by the university administrators and an involuntary contribution from students.

    When both subsidies are considered, the top ten subsidy schools are

    1. Rutgers $26.9 million
    2. UNLV $24.2 million
    3. Central Florida $18.9 million
    4. Florida International $18.3 million
    5. Akron $17.7 million
    6. Houston $17.4 million
    7. Miami U. $16.7 million
    8. San Diego St. $16.5 million
    9. Cincinnati $16.0 million
    10. Central Michigan $15.9 milllion

    When one considers these costs, I don’t think it is correct (as asserted by Andrew above) that “more than half the athletic departments actually operated at a surplus.” The ESPN data show that total revenues minus total expenses is greater than zero for 68 of the 99 schools reporting (not 75 out of 96) but that counts the subsidies as revenue. Removing the money taken from students pockets and the money from university accounts that might otherwise have been spent on teaching or research, the number of schools reporting total revenues minus total expenses is greater than zero is only 24.

    The total operating loss in the remaining 75 schools for just the one year reported was $682 million dollars. Of course, if these schools are collectively getting a benefit equal to two-thirds of a billion dollars, then there’s no problem. Otherwise, these 75 schools are hurting the teaching and research activities by staging the many sports exhibitions throughout the year.

  9. Pete permalink
    March 16, 2011

    sorry for the dupicate posts. I thought my first one didn’t get through.

  10. Rodney Fort permalink
    March 16, 2011

    But UNLV was not $3 million in the red. They simply received $19+ million from their university administration. Without any further connotations, that is what the data say.

    “Subsidy” implies that one of these universities requires the university allocation in order to survive. Not true. They would just shrink.

    Instead, as good little economists, it seems we should ask the question that Phil hinted earlier: What does the university get for its allocation?

    That is what all university allocations are about–is the return worth the investment?

    Arguably, since they really don’t need much return, we should be looking for about $960,000 (I missed a decimal point, above) in return at 5%. That is, did the presence of the athletic department return the principal and the 5%, or about $20.2 million. On their entire budget of $625,578,929, that isn’t a very big number.

    All of this “labeling” of a university allocation is fraught with both value judgement and analytical peril.

  11. Phil permalink
    March 16, 2011

    Interesting comparison Rod. As a comparison to UNLV, the U. of Neb. Lincoln had an operating budget of about $740 million in 2009-10. 3% of that – using UNLV’s subsidy-as-proportion-of-operating-budget is about $22,000,000. But UNL apparently* gives its athletic department $0 in subsidies and $0 in student fees (basically another type of subsidy). If any athletic program generates a positive externality worth subsidizing, it’s the UNL football program.

    *I write “apparently” because I have no idea what kind of coconut-shuffling goes on when preparing the financial reports.

  12. Rodney Fort permalink
    March 17, 2011

    Hmm.

    If the Med School is a moneymaker, why would the university administrators put much of anything into the Med School? They get the value and it costs them nothing.

    Looks to me like football at Nebraska (or Michigan and a few others) is like the med school; UNLV must pay more because their football program is like the Economics Department–its greatest value to the university is at a level of output where direct revenues cannot cover costs so the university administration kicks in some money to make sure it gets the preferred level of output. It’s not an externality issue at all since the athletic department is inside the firm in this case.

    And I still don’t see why you continue to refer to this as a subsidy? But you can make it clearer to me–do you think the Economics Department at your institution is subsidized? If all university allocations to all of its programs are “subsidies” then I get your use of the term; I don’t agree with this characterization but at least I can see what you mean by it.

    Just helps me to be clear on what you mean by this value-laden term.

    Thanks Phil.

  13. Sam permalink
    March 17, 2011

    Thanks for the pointer and table. By the way, Wyoming is in the MWC, not the WAC.

  14. Victor Matheson permalink
    March 18, 2011

    While Rod and I have some disagreements about this general topic, I think he is exactly right that language and meaning are important.

    Rod objects to the word “subsidy” as a value-laden term that has a negative connotation that implies a sense of dependency rather than athletic spending simply being allocations determined in a rational fashion by administrators.

    On the other hand, I would object the fact that the NCAA reports traditionally report mandatory student fees, university transfers, and direct government payments as “revenues.” I don’t think transfers from one part of the university to another constitute revenues in any commonly accepted notion of the term.

    I mean, when hospitals treat indigent patients at no cost and use internal funds to cover the personnel expenses, I don’t think hospitals typically cheer about the huge revenues these poor patients who pay nothing have just generated for the hospital.

    Of course, even once we agree on the language, the real question goes back to whether UNLV’s $19 million annual expenditure generates at least $19 million (+5%) in benefits. Benefits are tricky to measure at non-profit educational institutions. On a pure dollar basis, my institution, Holy Cross, spends $20 million more than it brings in every year thanks to endowment funding and we would like nothing more than to have a big enough endowment that we could spend $100 million more than we bring in. So, from a purely accounting standpoint, we are an unsuccessful business, but, of course, our objective function is not profit maximization. (And unfortunately, it is also not economic professor salary maximization…)

  15. March 18, 2011

    Seems the discussion on my observations is moving away from Phil’s original intent.

    I’d be glad to entertain more at Sports/Monsters Blog at my website: http://www.rodneyfort.com

    I have a post that makes it clear where to bring the discussion if anybody would like.

    Again, thanks Phil for a meaningful post.

  16. Phil permalink
    March 19, 2011

    @Pete: I think you are correct in calling the money from student fees a subsidy from students. I don’t think it’s a stretch to also call the student fees, per-se, taxes.

    @Rod: I wasn’t using the term “subsidy” rhetorically. I used it in a positive, non-normative sense and I wasn’t implying that the subsidy is a payment needed to keep the athletic department in the red. It may well be the result of rational decision making of administrators.

    Think of a university as some type of community with the university administration playing the role of government. Giving a university subsidy, whether it comes from student fees or not, may well be rational if the athletic department’s activities create spillovers to the university as a whole. For example, a successful men’s basketball program might create non-use satisfaction to students and faculty. Some faculty and staff who never watch games or buy team-related clothing may nevertheless get some measure of school pride if the men’s basketball team makes it into the NCAA tournament.

    @Victor: I thought the same thing re: subsidies being called revenues. I think who ever created the variable names was using revenues in an accounting sense: to refer to cash inflows to an athletic department.

  17. stan permalink
    March 21, 2011

    I’m really surprised at the lack of depth in thinking about this issue. First, the quality of this data is serious questionable. Just look at some of the numbers. The accounting choices are subject to all kinds of interesting manipulation. Second, let’s just look at the types of issues which are not addressed:

    If the athletic dept builds parking garages which are paid for by donors for use at games and the spaces are available to the university the other 359 days a year, what is the value of the “subsidy”? If students get in free to games, but students pay an athletic fee, what you really have is a subsidy running from those students who don’t go to games to those who do. If the athletic dept can sell the student tickets for a lot more than they get from student fees, who is subsidizing whom?

    If donations to the school entitle donors to priority for football or basketball seats, the athletic dept is subsidizing the development office.

    Finally, most sports lose money. Football and basketball (and sometimes baseball) generate almost all the revenue. Track, cross-country, golf, et al are subsidized. What is interesting is that most of the heat directed at athletic departments is focused at football. The better question to ask — are critics really interested in eliminating all the non-revenue sports?

    If the school pays for intramurals, clubs, and various organizations, should such “subsidies” be eliminated?

Comments are closed.