Settlement Raises Questions for NCAA

Agreement with former athletes a good financial deal for NCAA, sports officials and legal experts say, but does it add momentum to the push for players to be paid?
February 4, 2008

Questions about whether college athletes (particularly those in big-time football and men's basketball) are appropriately compensated for their contribution to the enterprise have existed for decades, but they have intensified as sports revenues and coaches salaries have continued to soar. The National Collegiate Athletic Association has clung vigorously to the principle that athletes should not be paid, even as athletes -- in various ways, including by suing the association -- have aggressively pushed for a share of the cut.

Last week, in agreeing to a tentative settlement of a federal antitrust lawsuit brought by a group of former players, the association made several concessions, both financially and otherwise. NCAA officials insist, though, that the settlement would not compromise on their bedrock embrace of amateurism, and most legal and other observers say they believe the association made a shrewd and generally advantageous decision in settling. But should the settlement become final, they say -- not a done deal -- it also poses myriad practical and philosophical questions for the association going forward.

Among them: Will it exacerbate tensions between the richest sports programs and the "have-nots" in Division I, by allowing wealthier programs to offer health insurance and injury insurance to athletes that smaller or less-wealthy athletics departments might not be able to afford? And does the settlement propel or slow down the push by college athletes to seek more money?

Scholarships vs. Stipends

Debates have long raged inside and outside the NCAA about whether an athletics scholarship -- historically valued at tuition and fees, room, board and books -- sufficiently compensates college players. The association has argued that a free education is the appropriate standard, and that paying players would destroy the sheen of amateurism that separates college sports from their professional counterparts.

But critics, including players’ rights advocates, have increasingly argued that athletes, particularly those in the high-profile sports of football and men’s basketball, share more in common with their professional counterparts than with other students, and that the fact that athletes are not paid is one of the only things about big-time college football and basketball that remains “amateur.” Those calls have escalated with the multimillion-dollar salaries of coaches and the size of the NCAA’s television contract, which now sits at $6 billion over 11 years.

The calls for stipends or other payments to athletes have gone nowhere, despite talk of unionizing athletes and various lawsuits by players over the years. In most of those legal challenges, the NCAA’s argument that paying players would fundamentally alter the nature of college sports has won out.

In the class action that the NCAA agreed to settle last week, known as White v. National Collegiate Athletic Association, the four plaintiffs -- former big-time football and basketball players -- took a decidedly different approach, charging that by limiting the value of athletics scholarships to less than the full cost of attending their colleges, the NCAA and its member institutions had created a hardship for them. They were seeking the difference between the value of an athletics scholarship and the full cost of attendance (estimated at about $2,500) for all Division I football and men’s basketball players between 2002 and 2007.

That purposeful narrowing may have helped their chances in court. By framing the issue that way, instead of seeking outright payment, the plaintiffs “attempted to strip one of the critical defenses of the NCAA in a potential antitrust action” -- the amateurism argument, said Paul H. Haagen, a law professor at Duke University and an expert in sports law. The NCAA has contemplated increasing the value of sports scholarships to the full cost of attendance before, and the association’s president, Myles Brand, had endorsed the idea in public comments several times this decade.

“Since they had a series of public statements that the cost of education would be fully consistent with amateurism,” Haagen said, “it raised the question about what exactly would be the reason why you would suppress payments below that level?”

NCAA officials had expressed confidence that they would ultimately prevail in the lawsuit, but the association also faced a potential verdict of hundreds of millions of dollars, since antitrust lawsuits can result in trebled judgments. Association officials said they settled to avoid the continuing costs of the litigation, among other reasons.

Although early news reports pegged the cost of the settlement as $228 million, in fact the agreement would only require the association to pay less than $20 million in new funds, and a maximum of $10 million of that would go to athletes. Paying the plaintiffs’ legal fees would cost the NCAA about $8.6 million, and the association agreed to create a new $10 million fund to reimburse educational expenses for athletes who qualify as part of the “class” of plaintiffs -- scholarship football players at universities that compete in Division I-A or men’s basketball players at colleges in 11 Division I conferences between 2002 and 2007.

Athletes who qualify could apply for a $500 payment for career development expenses, and for reimbursement of a maximum of $2,500 a year for three years for expenses (in future years) for undergraduate, graduate or certificate education.

Among the other elements of the settlement, which must be approved by the vast majority of members of the class of scholarship athletes and by the court:

Expanded funds for current athletes. The NCAA will expand the criteria it uses to award $218 million in existing funds for colleges and athletes to make them more available to athletes with financial need. The NCAA now has three such funds: (1) the Academic Enhancement Fund, which provides equal amounts of money to Division colleges to spend on improving the academic experience of athletes; (2) the Special Assistance Fund, which provides money to colleges based on how many athletes receive Pell Grants and can be used to meet the players’ needs over and above the scholarship (such as for winter clothing, travel home, etc.); and the (3) Student-Athlete Opportunity Fund, which is allocated to conferences based on the breadth and success of their members’ sports programs. The opportunity fund has the most flexible criteria; the NCAA “basically tells schools, you can spend them for anything you want to directly provide benefits to student-athletes,” said S. David Berst, the NCAA’s Division I vice president. The funds cannot be used for coaches’ or other salaries, for building projects, for stipends or to replace scholarship funds for athletes, or to improve players’ skills, Berst said.

Under the settlement, the NCAA would pool the money from those funds (without adding any new monies) and make all of them available under the more flexible terms of the Student-Athlete Opportunity Fund. Although the funds may be made available to athletes who do not have financial need, Berst said that the NCAA would send the message to its members that “we want you to take into account especially the needy student-athlete.”

But Ramogi Huma, a former athlete who has pushed for greater benefits for players as president of the National College Players Association, said the settlement appeared to shortchange athletes significantly. According to NCAA documents, the association now allocates about $60 million a year to the three abovementioned funds. Promising to put $218 million toward those funds over the next six years for colleges to distribute to athletes -- "if and to the extent they choose," as the settlement says -- "appears to be letting the NCAA decrease" the amount they make available to colleges to spend on athletes' needs. "And to make matters worse," he said, "the settlement does not require the NCAA to disclose how much money goes to the schools and how they spend it, so we'll never know if one dime got to the athletes."

Freeing institutions to provide health insurance and injury insurance. Under the settlement, the NCAA would adopt a new rule that permits (but does not require) Division I colleges to provide year-round comprehensive health insurance to athletes, and permit institutions to provide basic insurance coverage against injuries stemming from their participation in sports.

Possible multiyear scholarships. The NCAA would agree under the settlement to examine whether to allow its member colleges to provide athletics scholarships that last for more than one year. Advocates for athletes have frequently complained that under the association’s current setup, athletes have little certainty that they will continue to have the money to attend college if they don’t perform well athletically, since their scholarships technically only cover one year at a time.

"From the NCAA perspective, we are satisfied that we have come to a conclusion that keeps our college model intact is appropriate, and at the same time, attempts to provide avenues to provide appropriate benefits, academic and educational benefits, to student-athletes," said Berst.

Consensus among legal and college sports experts is that the NCAA struck a good bargain in settling the case, at least from a financial standpoint. "The alternative they were looking at was much, much, much larger," said Andrew Zimbalist, an economics professor at Smith College. "On the financial end, Myles Brand and the others made themselves a nice little deal."

Too nice a deal, in the eyes of Huma, of the college athletes' association, who was a consultant to the athletes' lawsuit but quit out of unhappiness with the outcome. "This lets the NCAA off the hook with a great PR spin," he said. "There won't be a dime going to athletes if the NCAA doesn't want it."

But the various aspects of the settlement, and its overall terms, create a set of potential practical and philosophical issues, say the college sports officials and legal experts interviewed for this article.

Some of the issues are financial. Allowing Division I colleges to begin offering health and injury insurance, for instance, could exacerbate the existing competitive divide between the NCAA's biggest-time sports programs and less-wealthy members of Division I. It also could create an imbalance among colleges with different financial situations within conferences.

"This is yet another raising of the cost of athletics," said Haagen of Duke. "Because they're not requiring it, it is not necessarily a financial hit. But it will be an impossible competitive advantage if some do and some don't."

Some sports officials also expressed concern that some of the purposes for which NCAA member colleges now use their funds for needy athletes, such as academic enhancement, could get short shrift under the new arrangement.

But the more significant questions are about whether this settlement alters the landscape going forward for the NCAA's relationship with college athletes.

By settling this case, the NCAA has "conceded the point that there's reasonableness in the argument that the grant-in-aid [or athletics scholarship] should be larger," Zimbalist said. "It gives some greater force and ongoing momentum to the forces of reform that are challenging the NCAA notions of amateurism and the prevailing hypocrisy of running these very commercialized operations and not paying the players."

The settlement could well restart the conversation within the NCAA about whether all athletes, or at least more athletes, should receive scholarships worth the cost of attendance. But most sports officials agree that that is as far as the NCAA would ever go, at least willingly.

"There is a lot of revenue flowing into the big programs, and people are increasingly asking how do they justify what they're providing coaches and staff but not athletes," said Richard Ensor, commissioner of the Metro Atlantic Athletic Conference, which competes in Division I but not among the NCAA's biggest programs. "I think the membership is philosophically comfortable with the idea that athletes can receive as much as it costs to go to college during the course of a year.

"Where you set that line, whether at our current mix of books, tuition, room and board or up to the full cost of attendance is matter of debate," he added. "That keeps us philosophically on the same page. When you start going beyond that, though, is when most of us start getting uncomfortable."

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