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NCAA Sanctions and Economic Impact

2013 January 5
by Phil Miller

TSE readers know that we here at TSE roll our eyes at economic impact claims regarding sports and economic development.   So when I saw that the governor of Pennsylvania was filing suit against the NCAA regarding the sanctions handed down on Penn State, I raised an eyebrow Spock-wise.

The projected loss to the state’s economy combined with the hit to Penn State’s prestige are the basis for Gov.  Tom Corbett’s lawsuit to have the sanctions, including a $60 million fine and a four-year ban from lucrative postseason bowl games, thrown out.

Legal and strategic questions notwithstanding, we’re talking about an entire state here.  I imagine that the vast majority of people who go to Penn State football games live in the state of Pennsylvania, meaning that the vast majority of dollars spent on Penn State football would have been spent elsewhere in the state if Penn State didn’t have a football program.  If the Penn State football program didn’t exist, how much smaller would the Pennsylvania economy be?  Not much if any.

The impact of the sanctions is even smaller because the sanctions won’t cause the football program to go completely belly up.  There are lots of dents in the NCAA’s armor that we can point to, but sanctions harming a state economy is not one of them.

7 Responses
  1. Kurt permalink
    January 5, 2013

    Even when there is no economic impact from a team, the team (and more specifically the owner) does receive benefits (ie profits) from playing.

    If the owner of PSU is the state itself, does that mean the benefactor is the state itself? Thus, could the ‘owner profits’ be the state’s economic impact they are referring to?

  2. Don Alexander permalink
    January 5, 2013

    I also wondered how this could possibly affect the state economy since the sanctions will not likely impact attendance or reduce television appearances. In addition, I believe the University still gets its share of bowl revenues from the Big Ten, although this share is probably less than what it would have been if Penn State was permitted to go to a bowl game. So, what has changed? Nothing.
    The governor is probably disappointed he cannot join the bowl party during the holiday season.

  3. Nick W. permalink
    January 6, 2013

    I’m sure Penn St. will bring out the University of Wisconsin economic impact report which claims almost a billion dollars of economic impact for the state of Wisconsin from UW athletics. I’m hoping that whoever testifies in court gives that study a good bashing.

  4. January 6, 2013

    That so many people who go to Penn State games “live” in Pennsylvania doesn’t mean all that much. How many are originally from another state, and were drawn to Pennsylvania by the Penn State franchise? How many are students who come to Penn State from other states? How many were students from other states who came for the academics, graduated, and then stayed for the football?

    If you think of falling attendance at Penn State games as coming from out-of-towners, then it becomes like a fall in net exports, not a shifting of resources/consumption from one part of Pennsylvania to another.

    (That’s not to say I think the impact is large, just that not everybody who “lives” in Pennsylvania would necessarily be living there without that football program in all its glory, so you have to take that into account. Is this measurable somehow?)

  5. James permalink
    January 7, 2013

    I’m totally with you guys on the fallacy of stadium impact and so on, but to pretend that Penn State football has no impact on the town of State College, and thus the state, is pretty silly and not something I think you guys believe. The number of people that go there on Saturdays from other states alone is enough of a case to prove it’s incremental, not to mention various studies that show a direct correlation between football success and the number of applicants the following year, which gives a university an opportunity to raise standards, reputation, and drive a more desirable place for companies to recruit and give research grants.

    Again, I’m not blowing this out of proportion, the impact isn’t in the trillions, but let’s be real.

  6. James permalink
    January 7, 2013

    @Don

    So FWIW you’re wrong about most of those things. Attendance has fallen significantly this year. In a somewhat unusual move, Penn State does not get any bowl revenue share during the full four years of their ban as “handed down” by the conference (the Big Ten splits all bowl revenue evenly every year with every team. Regarding unusualness, Ohio State received a bowl ban this year and they are getting their usual bowl revenue share amount).

    And regarding television appearances, all of that has been negotiated beforehand by the conference, and shared evenly like bowl money, so it that sense it’s kind of a non-factor.

  7. Don Alexander permalink
    January 8, 2013

    @James
    Your points are well taken. I checked the attendance data and Penn State experienced a 5 percent drop from 2011. However since attendance has fallen since 2003 for college football in general it is hard to say if the 5 percent is due to the sanctions or it is part of the general decline across many programs.
    I agree with the television comment and like I said not much has changed. I did not know about the bowl revenues, but thanks for pointing this out.

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