Upon Further Review, College Football Is a Giant Waste Of Money For Most Schools

Schools keep losing millions of dollars on bad or mediocre football times, so why do they keep them?
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Schools keep losing millions of dollars on bad or mediocre football times, so why do they keep them?
Image credit: Wikipedia, user: thecoiner

As if his ludicrous $7 million salary wasn't enough, on Monday news broke that University of Alabama head football coach Nick Saban's outstanding debt on his $3.1 million, 8,759-square-foot home was paid off by university-affiliated boosters with the Crimson Tide Foundation. Saban's property tax bills are being paid by the foundation, and he'll be able to live in the house after he retires.

As CTF's Kevin McGuire points out, this isn't entirely new. The university has paid for coaches' housing before, and other schools do as well. But Saban's good financial fortune is yet another ill omen that the college football bubble is becoming dangerously engorged.

Alabama has a wildly successful football program, with its 2013 revenue of $143 million beating out all 30 NHL teams and 25 of 30 NBA teams. So maybe it can sustain this brutal race to the top, which has seen college football costs double from 2005-2011. But most colleges can't. By the NCAA's own admission in a report released in August, rising revenue hasn't been nearly enough to offset dramatically rising athletics expenses. Of the 128 schools in the Football Bowl Subdivision (FBS), most are doing poorly:

Expenses exceeded generated revenue at all but 20 schools in the Football Bowl Subdivision. The average loss among the five highest-resource conferences was $2.3 million, but was much higher — $17.6 million — at all other FBS schools. From 2012 to 2013, median annual generated revenues (all athletics revenues excluding those allocated through the government, the school or through student-activity fees) increased by 3.2 percent, yet median total expenses rose by 10.6 percent.

Athletic departments outside of the 20 schools whose revenues exceeded their expenses close the gap through subsidies provided by their institutions. But at the median Division I school, the athletics budget rose more quickly than the institutional budget, requiring the athletics department to take a larger percentage of institutional funds.

Of the FBS programs whose revenue exceeded their expenses, median total revenues were just $8.45 million. Over in Division II, no school's revenue exceeded its expenses. Division II schools required a median subsidy of $4.8 million, compared to $3.8 million at comparable schools without football. That cost has grown 103.4% in the past decade. The year before, the Knight Commission concluded that the biggest driver of these expenses was skyrocketing coaches' salaries. Finally, rising athletics expenses have to be taken in the context of a higher education system that has seen state funding linger well below pre-recession levels. Athletics are living high on the hog and draining resources from the rest of the college community.

The NCAA's numbers themselves can paint a distorted picture. As Ethos' Ben Mangrum wrote earlier this year, other analyses have shown a more dire picture:

... there’s actually a kind of hierarchy among the top-tier football programs.  According to Jeff Benedict and Armen Keteyian, authors of The System: The Glory and Scandal of Big-Time College Football (2013),figures from the 2010-11 academic year show that only 22 of the 120 top-tier football programs broke even or made a profit.  That means that while these big-time teams generate millions of dollars of revenue, the cost of running such programs usually exceeds that revenue.  To put that more starkly, even within the so-called top tier, 82% of college football teams actually take away money from the university’s budget, rather than generate net revenue.

Alabama is one of the few very successful and profitable football teams, and other schools might be tempted to try and replicate its success. But Mangrum notes that there's a very serious problem with expectations; to experience a serious bump in tickets sales in the next year, schools need to be in the top 16% of FBS schools. The vast majority of schools will experience dry spells that could span decades while they still dump money into athletics. Even among the schools that do generate revenue, the vast majority is funneled right back into athletics, athletic scholarships, and the immense administrative costs that come with such huge programs. Sports facilities approaching or breaking $100 million are increasingly common. According to the Knight Commission, Division I schools spent nearly $91,936 per student athlete in 2010, and just $13,628 on average students. Those without football programs spent just $39,201. Just 16.2% of athletic spending at  Division I football schools goes to student aid.

"It's very alarming to see how intercollegiate athletics is distorting expenditures and value in higher education," the Knight Commission's Brit Kirwan told USA Today. "It has so much potential for good, but I think we're on a trajectory now that in my opinion is doing more harm than good."

These problems appear to be getting worse with the rapid rise in expenses among athletics programs, and highly-paid athletics staff are a huge part of the problem. Nick Saban's $7 million salary is more than 13 times that of University of Alabama president Judy Bonner, who makes $535,000. Last year, Deadspinfound that 27 out of 50 states' highest-paid public employee was a football coach. (In 13 states, it was a basketball coach.) Deadspin notes that compensation like bonuses or payouts for terminated contracts can push coaches' compensation even higher.

Finally, the programs depend on free money. From 2011-2012, 99 athletic departments lost an median of $5 million; excluding donations, the median loss drops to $17 million. Those donations don't occur in a vaccuum, either. Colleges have a limited pool of donors, meaning athletics are competing with academics for finite amounts of charitable funding. The Atlantic's Jordan Weissman notes that such donations comprise over 22%  of FBS athletics "revenue," possibly costing academic programs much of that money.

This all adds up to a lot of misspent funds and challenges the narrative that ultra-expensive football programs are worth it because they generate lots of money. From 2005-2010, Weissman argues that less than a quarter of 97 top-tier schools made more than they spent on sports in any given year, at the same time colleges began spending 64% more per athlete. This graph from the Delta Cost Project shows how badly the lower-ranking schools are doing.

delta

Finally, there's some evidence that colleges with successful sports teams attract a little more state funding. It's possible that this is helping offset the cost of football at some schools, but ultimately represents money being allocated for reasons that don't make any sense. Legislators with stingy purse strings are making education decisions based on football.

All this is to say, the massive flow of college money into athletics is being driven largely by football. Except for a minority of lucky top-tier schools, an awful lot of college administrators are wasting money on lackluster football programs that will never generate money and typically operate at a loss. It's a bad bet. In many cases, other sports programs can even lose out when tight budgets affect them instead of the sacrosanct football programs.

As Friday Night Lights author Buzz Bissinger suggested in The Wall Street Journal in 2012, collegiate football won't be going away soon. Rather, it's steadily growing totally out of control, and many schools would do well to put football programs on the chopping block. If that means the NFL has to set up a minor league for recruiting, so be it. But don't hold out much hope that any cost control is on the way: A 2009 Knight Commission poll found that 85% of administrators agreed athletic staff salaries were too high. They haven't done anything since, and Saban is getting a free house along with his fat salary while most schools and students are losing out.