May 4, 2005

Sports, Spending and Subsidies

Spending by Division I and II athletics programs grew sharply between 2001 and 2003, according to a biennial study released Tuesday by the National Collegiate Athletic Association. So, too did the amount colleges spent out of their own institutional funds to subsidize the sports programs’ bottom lines.

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The study, conducted by Daniel Fulks, who heads the accounting program at Transylvania University, found that in Division I-A, which includes universities that play football at the highest level, revenues and expenses both grew at a rate of about 17 percent from 2001 to 2003. The average Division I-A budget in 2003 was $29.4 million and the average operating expenses were $27.2 million. That would appear to create an average “profit” of $2.2 million — except that $3 million of the “revenues,” on average, came from what the report calls “institutional support,” which it defines as “direct transfers of administrative funds.”

The average financial picture in Division I-A looks even worse when you consider that the $29.4 million in average revenues includes another $416,000 in what the report calls “direct government support” (which is not defined) and $1.85 million a year in student activity fees, which are a source of tension on some campuses.

And on the expense side, the report notes that sports programs accumulate another $3 million a year in debt service and capital expenditures, for an actual total cost of more than $30 million. (One unidentified sports program in Division I-A took in a total of nearly $88 million in revenues in 2003, while the costliest program spent a total of $67 million.)

While the revenue and expense numbers are not as high in the other NCAA divisions, the deficits, and in some cases the institutional subsidies, are greater.

In Division I-AA, for instance — colleges that play big-time basketball but compete in football one notch down from the big boys — the average athletics program spent $7.5 million and took in $7.2 million in revenues in 2003. But $3.4 million of those revenues — the largest of any revenue source for I-AA programs — were in institutional subsidies, resulting in an average actual deficit of $3.7 million.

Division I-AAA programs, which don’t play football at all, took in $6.2 million in revenues against $6.5 million in expenses, and with a $3.2 million subsidy, accumulated a deficit of $3.5 million.

The after-subsidy deficits in Division II were $1.3 million for colleges without football programs, and $1.6 million for colleges with them.

While critics of big-time sports might look at the growing subsidies and see a runaway train, the NCAA’s president, Myles Brand, put a positive spin on the finding that colleges increased what they spent to subsidize sports programs. “Leaders at our member institutions determine the value athletics brings to their campus communities and fund it accordingly,” Brand said in a news release accompanying the report.

Among other findings of the study:

• The gap between the “haves” and the “have nots” in big-time football seemed to grow between 2001 and 2003. The portion of Division I-A colleges reporting a profit (after removing direct institutional support from the equation) rose from 35 percent in 2001 to 40 percent in 2003, though their average profit declined slightly. The average deficit for the remaining colleges, though, rose from $3,800,000 to $4,400,000.
• While the amount of money that the average Division I-A college spent on women’s sports rose from $4.6 million in 2001 to $5.4 million in 2003, the proportion of the average sports budget that was allocated to women remained flat at 20 percent. The proportion of budgets going to women rose slightly in Division I-AA and Division I-AAA but declined across Division II.

— Doug Lederman

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