Beer and Circus

by Murray Sperber

  Those are the revenue totals in big-time intercollegiate athletics. But the expenses numbers are higher, resulting in the amazing fact that most college sports programs lose money. Most extraordinary of all, the losers include many schools in the BCS conferences, including those playing in the most lucrative bowl games and advancing deep into the final rounds of the NCAA basketball tournaments. In late 1999, the athletic director of the University of Michigan—a school with an always full 110,000-seat stadium and 20,000-seat basketball arena—acknowledged that “the Wolverines intercollegiate sports program … last year ran a deficit,” more than $2 million dollars of red ink. If Big Blue loses money in college sports, what hope is there for smaller programs?

  Historically, and contrary to popular myth, almost all colleges and universities have always lost money on their intercollegiate athletics programs. Moreover, athletic departments ran deficits long before the federal government’s Title IX mandated equality for women’s intercollegiate athletics, and male athletic directors seized upon their Title IX costs to excuse their overall money losses. Historically, the main causes of athletic department red ink were waste, mismanagement, and fraud, and this situation continues today.

  Of course, these annual deficits preclude paying the players: journalists like Tony Kornheiser have logic and ethics on their side when they demand that the athletes receive their fair “share” of the TV payouts—except, after the athletic directors, coaches, and athletic department staff spend the revenue, nothing remains for the players. Before the athletes can obtain their share, the entire athletic department finance system must be overhauled. But the people who run intercollegiate athletics, and benefit so handsomely from the corrupt system in place, will not willingly overturn the red ink trough.

  The NCAA, in its regular financial reports, provides an indication of the profit-and-loss situation in big-time college sports. The most recent edition revealed that a majority of Division I athletic departments lost money in the 1990s, running larger deficits at the end of the decade than at the beginning, even though their revenue increased every year. However, because of the accounting tricks used by almost all athletic departments, the NCAA reports are only partially accurate, and the actual annual deficit numbers are much higher than the NCAA and member schools admit publicly.

  Some accounting experts multiply the NCAA’s deficit numbers by a factor of three. They point out that almost all athletic departments routinely move many legitimate costs from their ledgers and place them on their universities’ financial books. These items include the utilities, maintenance, and debt-servicing bills on their intercollegiate athletic facilities—multimillion-dollar annual expenses for most big-time programs. Economist Andrew Zimbalist, after in-depth research on the finances of intercollegiate athletics, recently concluded that, despite all the accounting maneuvers, “the vast majority of schools” still “run a significant deficit from their athletic programs,” and “only a handful of schools consistently earn surpluses,” often small ones.

  Athletic department deficits impact on host universities in many negative ways. Not only are millions of dollars siphoned from schools when athletic departments move expenditures onto university books, but more millions depart when schools cover the annual athletic department deficits. At the end of each fiscal year, universities “zero out” athletic department books; to do so they divert money from their General Operating Funds and other financial resources to cover the college sports losses. Money that could go to academic programs, student scholarships and loans, and many other educational purposes annually disappears down the athletic department financial hole.

  The bottom line is clear: Big-time intercollegiate athletics financially hurts NCAA Division I schools more than it helps them. For every dollar that a few of these institutions acquire through college sports phenomena like the Flutie Factor, many more Division I members annually lose millions of dollars as a result of their athletic department deficits and other negative college sports factors. One inescapable conclusion appears: College Sports MegaInc. is the most dysfunctional business in America.

  But neither the media nor the public focuses on this fact. Even Tony Kornheiser, one of the savviest sportswriters in America, says that the schools, as well as the individuals in charge of intercollegiate athletics, amass fortunes from the fun and games. Other media personalities also state this loudly and frequently.

  The myth of college sports profitability not only masks the deficits of intercollegiate athletic programs, but it generates other negative financial consequences:

  The public hears about the millions that universities rake in from the NCAA basketball tournaments and bowl games, and people conclude that higher education doesn’t need their tax dollars or private contributions. They believe that universities are doing great from their big-time college sports teams … . At Illinois, it couldn’t be further from the truth, and that’s also the situation at most other schools.

  —Howard Schein, professor at the University

  of Illinois, Champaign-Urbana

  During the last two decades, legislative and taxpayer support for higher education has declined considerably. The role of big-time intercollegiate athletics in this decline is difficult to ascertain, but some observers believe that the never-ending college sports recruiting and academic scandals have made the public cynical about intercollegiate athletics, and stingy toward the universities that promote it. Additional evidence suggests that the myth of college sports profitability also closes taxpayers’ wallets. In interviews for this book, a number of respondents offered comments similar to Professor Schein’s. Common sense suggests that the myth of college sports profitability is a factor, possibly an important one, in the decline of public support for higher education; it certainly appeared to be so in the state of Illinois in the 1980s and 1990s. (For a discussion of the myth that college sports generates increased alumni donations, see Chapter 21.)

  Not only is the public unaware of the financial reality of college sports, but it knows even less about the causes of this situation. The media trumpets the huge payouts from bowl games and the NCAA basketball tournaments, and the public sees the high dollar numbers, but rarely does the media go beyond the myths and explore the financial facts.

  A discussion of the following myths and realities helps explain why College Sports Megalnc. is the most dysfunctional business in America. It also explains how and why the men and women who administer universities and supposedly control their schools’ athletic departments are totally complicit in the deficit financing of College Sports Megalnc.

  Myth: Schools make millions of dollars when their teams play in football bowl games.

  Reality: Most universities lose money when their football teams appear in bowl games. In a typical case, the University of Wisconsin received $1.8 million for participating in the 1999 Rose Bowl, but racked up almost $2.1 million in expenses on this event, close to $300,000 of rose-colored ink. The Rose Bowl payout could have helped the UW athletic department balance its books—its announced deficit at the end of the 1998–99 fiscal year was $1.1 million—but its excessive spending on this trip turned potential profit into real loss.

  The cost of flying the football team, the coaches, and the team’s support staff to and from Los Angeles, and housing and feeding them while there came to $831,400. In addition to this cost, like all schools going to bowl games, Wisconsin took along the families of the coaches, as well as babysitters (six) for the coaches’ kids. Also a large number of other athletic department personnel and their spouses made the junket. Also on the “gravy plane” were members of the University of Wisconsin Board of Regents and spouses, school administrators and spouses, plus the so-called Faculty Board of Control of Intercollegiate Athletics and their spouses, and many hangers-on (termed “friends of the program”) and their spouses. Then there was the marching band and cheerleaders, and not one but three Bucky Badger mascots—possibly in case the school-sponsored New Year’s Eve celebration, costing
$34,400, incapacitated one or two Buckys and the third one had to suit up on January 1.

  The official Wisconsin traveling party numbered 832 people, including well over one hundred university officials and spouses. The Wisconsin group journeyed in the usual athletic department deluxe-class-for-all style, staying at a very expensive Beverly Hills hotel, wining and dining in an extravagant manner. After the UW athletic department paid all the bills from the trip, the expenses totaled $2,093,500. The travel manager of a major corporation, after examining a breakdown of the Wisconsin expenses, concluded:

  They could have done this trip for at least a fifth the cost and still stayed at nice hotels and eaten well. And that’s with all the extra people—I’ve never seen so many free-loaders on a trip before and it appears completely unjustified … . These athletic department administrators could give lessons to drunken sailors on how to throw money around.

  In the amazing world of college sports finances, Wisconsin’s losses were not an anomaly: most athletic departments lose money on their bowl game excursions, and often they incur greater losses than Wisconsin’s because few payouts equal or top the $1.8 million the Badgers received from the Rose Bowl Corporation.

  With bowl paydays so fat, why do athletic directors pass up these excellent opportunities to help balance their books? The answer is twofold: Despite all the corporate jargon that ADs spout, their management style has never been lean and mean. Because Big-time U’s always sop up the red ink at the end of the fiscal year, most ADs spend in an extravagant and wasteful manner and allow many of their employees, particularly their football and men’s basketball coaches, to do the same.

  The other reason ADs sanction lavish bowl trips is self-protection: Long ago, they learned that by spending money on university officials and faculty boards of control, taking them and their spouses to bowl games and on other junkets (as well as providing them with free skyboxes or excellent seats to all home football and basketball games), athletic departments obtained insurance policies—they persuaded the people within the university who have direct oversight over intercollegiate athletics to back it enthusiastically. The potential critics of the financial and other abuses of big-time college sports climb onto the gravy planes and become complicit in the wasting of large sums of money. As a result, these university officials rarely question the specific expenses or the general financial operations of their athletic departments, nor do they hesitate to cover the annual deficits.

  Not only are most university officials intimidated by powerful ADs and coaches and fear displeasing them, but, in the current era, many administrators seem to believe the NCAA and athletic department propaganda about the wonderful benefits that College Sports Megalnc. bestows upon the university (see chapter 21 for refutations of these supposed benefits).

  Is this the total explanation? It accounts for athletic department behavior—ADs and coaches are merely doing what comes naturally—but beyond the obvious causes of administrative complicity in the deficit spending, a more complex reason for their official conduct exists. Many Big-time U officials, knowing that their schools cannot provide the vast majority of undergraduates with meaningful educations, try to distract and please these consumers with ongoing entertainment in the form of big-time college sports. For all of its high expenses, an intercollegiate athletics program costs far less than a quality undergraduate education program. University officials deny employing this strategy, but their denials are less important than the current reality: Many Big-time U’s supply their students with an abundance of college sports events and accept the drinking culture that accompanies the fun and games; meanwhile, these schools offer their undergraduates few quality educational opportunities, reserving those for the honors students (usually a single-digit percentage of the student body).

  An administrator of a Sunbelt university, when presented with this thesis, replied:

  There’s certainly no plot or conspiracy by school officials on this. You have to remember that most universities are always in a money bind. We sure as hell can’t get enough money out of our state legislature or anyone else to turn our undergraduate education program into one big honors college. But we need every undergraduate tuition dollar we can get … and we can swallow the million bucks a year that the athletic department costs us … . Maybe that’s how it all happens. I can assure you that we never thought any of this out beforehand, nor did any other school.

  He also mentioned, somewhat defensively:

  Yes, I’ve been to bowl games and the NCAA tourney with our teams, and I’m not going to apologize for enjoying those trips. I see them as rewards for me working hard on behalf of the athletic department … .

  He concluded:

  I don’t know how it all happened, how our athletic department never stops growing, and how this school always rates high on the “Party School” lists in the college guides, but I’m not going to carry the can for it, and my president sure wouldn’t. Anyway, he’s mainly concerned with our research and graduate programs which have really improved under his leadership.

  Finally, in an age of accepting personal responsibility, college presidents and administrators at beer-and-circus schools should assume some of the blame for the current situation. They make frequent pronouncements on “refocusing student life” and “curtailing drinking” on their campuses, but they sanction, promote, and sometimes even participate in the beer-and-circus culture out of which student sports fandom and partying comes. Remarkably, they never acknowledge their hypocrisy, even when they tailgate with alums before and after college sports events.

  In the 1960s, rebel students often accused university administrators of “selling out” undergraduate education to gain power and perks for themselves, and to keep their institutions running efficiently. Thirty-plus years later, the activities of university officials in charge of beer-and-circus schools adds a new dimension to the term selling out.

  Another illustration of presidential and administrative misconduct concerns their dealings with the NCAA. Deconstructing a popular myth about the March Madness money provides a way into this subject.

  Myth: Thanks to the NCAA’s billion-dollar TV contract for its Division I basketball tournaments, schools make millions when their teams participate in March Madness, and college officials put this money into academic programs.

  Reality: The association distributes the tournament revenue through a complicated formula that sends most of it to the conferences of the participating schools. Because the BCS football conferences also form the big-time college basketball leagues and dominate the NCAA tourney, they receive the highest percentage of the money. As a result, when a school in a minor conference makes a brief appearance in the men’s tourney—thirty-two of sixty-four teams lose in the first round—it receives a low-six-figure check.

  On the other hand, if several teams from the same conference enter and reach the final rounds, they and their fellow conference members gain low-seven-figure payouts. With more than three hundred schools in NCAA Division I men’s basketball, the minority who receive the million-dollar checks resemble lottery winners. But, like addicted gamblers, all three-hundred-plus schools spend big bucks to enter the Division I basketball season lottery, and most end up holding losing tickets. Athletic directors and coaches drive this process, and university presidents and administrators approve it.

  But financial reality never deters fanatic lottery players, especially when they are playing with other people’s—in this case, their school’s—money. After the announcement of the recent NCAA/CBS television deal, a national newspaper predicted that the increased payout will prompt “a continued migration of schools from lower divisions into the NCAA’s Division I to more fully share the wealth.” Probably the migration will occur, but the NCAA wealth is a mirage. Economist Andrew Zimbalist states bluntly: The new “CBS contract will have precious little impact on the economics of college sports.” According to this expert, of the three-hundred-plus athletic departments in Division I basketball ope
rating under the current miltimillion-dollar CBS contract, a tiny percentage “generate black ink in any given year. The prudent bet is that college sports will be in the same financial mess or worse in 2003,” when the new NCAA/CBS deal begins, and that the red ink will continue to flow for the length of the contract until 2013.

  But, thanks to the media, the public only hears about the NCAA’s fabulous deals with CBS, and it considers March Madness a financial bonanza for American higher education. The public also believes that the colleges and universities who belong to the NCAA run the association, and they use the TV money to help their academic missions. In reality, the NCAA is a large, autonomous bureaucracy acting primarily out of self-interest, and because almost all members lose money on their college sports programs, they rarely have excess revenue to put into academic programs.

  Finally, the March Madness money is not an NCAA share-the-wealth plan with higher education, but trickle-down economics in a slow-drip phase. The bottom line for almost all NCAA members is simple: Belonging to the NCAA costs much more money annually than they receive from the association.

  Every year, the largest financial drain on NCAA members results from the association’s requirement that schools field a minimum number of teams to remain in good standing—for Division I, at least fourteen teams in seven sports. This is a compulsory stake in a very expensive poker game. The motive behind this rule is self-interest: NCAA executives, mainly former athletic directors and coaches, regard the NCAA as a trade association, in business to promote college sports; they are empire-builders, they want athletic programs to be as large as possible, and to employ as many athletic administrators and coaches as possible.