Money Still Talks

Experts often cite escalating revenues and spending in athletics as a driver in the culture that, according to the Freeh report, helped enable the Penn State scandal. But don't look for the cash flow to slow any time soon.

July 23, 2012

It’s a good time to be a recruited athlete at the University of Oregon.

The campus -- which already boasts an indoor practice field, an athletic medical center, and a brand-new basketball arena and academic study center for athletes -- is building a new complex for its football program that will contain, among other things, movie theaters, an Oregon football museum, a players’ lounge and deck, a dining hall and private classrooms for top players.

Oh, and there’s a double-decker sky bridge.

The indictment of the big-time sports culture contained in Louis Freeh’s report of how Pennsylvania State University’s catastrophic scandal unfolded contains an obvious lesson for other institutions as well: when athletics wields too much influence, bad things (okay, maybe not Penn State-bad, but bad) can happen. Experts consistently point to the excessive spending of intercollegiate athletics -- multimillion-dollar coaching contracts and media rights deals, and a state-of-the-art facilities arms race -- as a driver in the very culture of reverence and privilege that contributed to Penn State’s downfall.

College presidents know it, too: three-quarters of them said in an Inside Higher Ed survey this winter that “colleges and universities spend way too much money on intercollegiate athletic programs,” and 86.9 percent said they did not believe presidents of institutions with big-time sports programs are in control of those programs.

And yet, even amid the disgust and soul-searching that Freeh’s investigation of Penn State has engendered, that “show me the money” attitude is unlikely to change, they say.

“You can’t take that position unless you’re at the very top of the game. If the people at the very top of the game would step back, then everybody can step back together. But if you’re just an aspiring power,” said the former University of Arizona President Peter Likins, “you can’t step back and fall further behind. Because, to say it bluntly, it’s a business, and in the business world you simply cannot fail to be competitive.”

The new football playoff system to begin in 2014 promises even bigger financial windfalls for those who succeed in competition: ESPN will reportedly pay $80 million to broadcast the Rose Bowl, pushing the value of the playoff rights for the national championship, two semifinal games and four additional bowl games to as high as $600 million. That will probably drive up the bonuses that teams receive for making bowl games, thus intensifying competition.

But that insatiable need to win can be toxic, the Knight Commission on Intercollegiate Athletics wrote in its 2010 report, "Restoring the Balance."

"In high-profile sports, tensions often surface between the core mission of universities and commercial values," the report reads. "In the Commission's view, addressing misplaced spending priorities requires answering some searching questions: Are financial incentives at the national, conference, and institutional levels rewarding behaviors that are aligned with the core values of higher education, institutions' educational missions, and amateur athletic competition? Or are they creating a 'winner take all' market in which there are very few winners? More often we see the latter."

The average salary for major-college coaches jumped 55 percent in six seasons, according to data compiled by USA Today, from $950,000 in 2006 to $1.47 million in 2011. Just this January, Oklahoma State University signed a contract extension with football coach Mike Gundy for $30 million over eight years, or an average of $3.75 million annually. Mack Brown of the University of Texas, the highest-paid coach in college football, earns $5.19 million a year.

On Tuesday, a Montgomery Advertiser columnist wrote this of the University of Alabama football coach Nick Saban, who makes more than $4.8 million annually: “Saban refuted the notion that he's all-powerful on Alabama's campus, saying he answers to the president and has great respect for him. But the reality is that coaches such as Saban and many others make in half a month what the school presidents earn in a year. The coaches are held up as almost gods by adoring fans who dump nine figures into the major programs, through cash donations, ticket purchases, apparel sales and tuition. Put simply: at many football-loving institutions, the head coach is king.”

Universities often say they have no choice but to offer increasingly lucrative compensation packages to coaches to avoid having to find someone new and risk paying an even larger salary.

“In a very real sense, big-time college sports have become the ‘credit-default swaps’ of higher education, an independent organization, poorly understood yet characterized by extremely high risk, driven by excessive compensation for coaches and staff that have created a culture that had become unacceptably damaging to the values of the university,” the former University of Michigan President James J. Duderstadt said. “It must be brought under control.”

Likins doesn’t have a problem with big spending per se -- it’s when the university pays for it, particularly while relying on future revenue projections that can always turn out to be wrong, that administrators are using poor judgment, he said.

To finance a $321 million football stadium renovation, the University of California at Berkeley is counting on the next two decades’ worth of seat licensing -- whereby people pay for long-term access to game day seats – but officials are confident in the strategy. So far, with about 60 percent of expenses covered, revenues are in line with projections, Berkeley spokesman Dan Mogulof said.

“We think we’re on the path to a balance that works really well for an institution that takes pride in its academic and athletic reputation,” he said, adding that the university estimates it draws about $20 million in academic donations thanks to its athletic program. “We try to learn from the experience of others, but we’re also thinking about to what extent we can perhaps provide a model of how to maintain that balance. But it’s a dynamic process…. It’s not like you can just at one time draw a sharp line and move on; it’s something that requires constant discussion and analysis.”

Berkeley, which by order of its regents had to either renovate or abandon the stadium because it sits on a fault line, is also building a 142,000 square foot “Student Athlete High Performance Center” with locker and meeting rooms, training facilities and academic space, as well as an applied sports science, nutrition and medicine complex. (A 21-month sit-in failed to stop the university from tearing down the trees that once sat on the site.)

“To the extent that Penn State raises questions about the appropriate role and influence of athletics programs – I mean, that’s something this campus has been grappling with and discussing for a number of years,” Mogulof said, noting that amid the state’s increasingly damaging disinvestment in higher education, the Berkeley chancellor declared that institutional subsidies to athletics must not exceed $5 million a year by 2014. (Current subsidy levels are about average for Football Bowl Subdivision institutions whose athletic departments are not separate from the university: around $10 million annually. The pledge came after a faculty review revealed that the university forgave $31 million in previous loans to the athletics department to cover annual deficits.)

“So I don’t think it’s really changed anything in terms of our perspective,” Mogulof said of the Freeh report, “but I certainly think it could legitimately be seen as an affirmation that things under way here are needed and necessary.”

While the Nike co-founder and Oregon mega-booster Phil Knight is picking up the $68 million tab to fund and furnish the complex, the Register-Guard newspaper reported, the athletic department must staff and operate it according to Knight’s wishes. (Though the alumnus is notorious for his donations to Oregon athletics – that $227 million arena is named for Knight’s late son, Matthew -- he has also funded endowed professorships and other buildings on campus, including the School of Law and main library.)

Craig Pintens, senior associate athletics director at Oregon, said the football building is a needed addition because the department’s other main complex, the 100,000-square-foot Casanova Center, hasn’t been renovated since it was built in 1991 – despite Oregon’s having added three teams and “around 100” employees.

“All you have to do is look at any school’s website or talk to colleagues within the industry, and certainly everyone is interested in building great facilities and everyone wants to compete at the highest level,” Pintens said. “Obviously, from a football perspective, the building is going to be second to none. But it also is going to benefit the entire athletic department.”

Pintens said the Freeh report did convey a valuable lesson for athletic departments -- just not one that has anything to do with money.

“What happened at Penn State is a horrific tragedy. They had a convicted criminal committing heinous crimes. I think for us, it serves as a reminder for everyone in our department to, when you see something, say something,” Pintens said. “Beyond that ... really not sure that has factored at all into the finances of our football operation.”


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