NFL Should Reimburse Colleges — Say What?

In Thursday’s Wall Street Journal, Allen Barra explores “Pro Football’s College Tuition Bill.” Here’s a slice:

In other words, based on the approximately 361 athletes who will be drafted by professional leagues in 2009 it can be reasonably estimated that the total cost of putting those students through four years of college at the schools that produce most of the professional athletes is around $26 million. That’s only 53% of last year’s combined salaries for Ben Roethlisberger and Jason Kidd, the two highest-paid players in pro football and basketball, respectively, to have played college ball. And it’s only 62% of the minimum salary the Detroit Lions are guaranteeing this year’s bonus baby — quarterback Matthew Stafford of the University of Georgia — over six years.

Here’s an idea for a stimulus package for America’s colleges: the NFL and the NBA and MLB should provide a full, four-year scholarship to each school for every player they draft from that college.

First of all, this pays a debt, or at least part of it. The cost of providing a scholarship for every player drafted would still be just a fraction of what it costs to train and care for each athlete.

So, if I’m getting this right, Tennessee and Michigan, should be paid back for charging $50 per ticket (plus seat license fees) for their 100,000+ fans per game while pocketing the player’s share (say 65%) of this take? We even get a quote from English professor qua sports econ non-expert “expert” Murray Sperber.

Ultimately, the “logic” here relies on the oft-repeated distortions about college athletics. (Let me first take sports that are not big revenue producers and lower tier schools out of the discussion. Those probably don’t make much financial sense, but are a matter for a different post.) I’m interested in the mid and upper tier producers, where most pro players play in college, and yet including programs mentioned over the past 20 years as “losing money. These have included the likes of Notre Dame and Michigan (in a Business Week piece). Along with some others, I’ve tried in various ways and venues to dispel the mistakes in thinking about college athletics for major revenue sports at the mid and major producers. Here’s a 2005 TSE post on the subject. These are the key problems:

  • Costs are expensed at “maximum list price” — not at incremental costs of instructing and feeding players. At selective private schools near full capacity, this incremental expense is, at most, the price an average foregone student would pay and well below max list price. At public institutions with excess capacity, this incremental expense is very low. Most of the costs being included in the $140,000 and $65,000 figures reported in the article are fixed costs that would not vary if the program is jettisoned.
  • Revenues may not include transfers for grants-in-aid made from college athletic foundations to general funds. In addition, many other revenues due to athletics are not attributed to athletics. Merchandise sold is a common one. The “M” caps seen everywhere in the late 1980s or early 1990s were not because of stellar physicists or economists at Michigan.
  • The lack of reported surpluses and even deficits means nothing. These are not-for-profit entities. Revenues flow back into expenses (whether in the athletic department or the general fund through subtle transfers not reflected in official NCAA data). A NCAA-commissioned February 2009 report passed to me by our President of the “Empirical Effects of College Athletics” makes a bulleted statement there is a dollar-for-dollar relationship between revenues and expenses — that is, not net revenues from athletics. For a not-for-profit, this is akin to saying that raindrops are wet.

I would be more than happy to take on the athletic programs at Michigan, Tennessee, Texas, Florida, Syracuse, USC, … and the supposed deficits, pay the school a royalty of $2 million per year and lease facilities at a market rate. If I don’t have to pay players, my personal net worth will be a lot higher after 10 years than before even if Murray Sperber thinks otherwise.

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Author: Brian Goff

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