Bristling at Budget-Busting Buyouts

When a joint committee of the state Legislature spent more than seven hours Tuesday castigating members of the University of South Carolina Board of Trustees, their main target was the multiple botched attempts to hire a permanent university president. Also high on the lawmakers’ list of grievances, though, was questionable spending by university administrators to cover a contract buyout of a fired football coach, and the potential to do the same for a recently fired basketball coach.

The lawmakers’ ire was prompted by a $10 million loan made, with the board’s approval, by the university to the athletic department. The loan was made in 2020, during the pandemic, which closed down athletic events and cost the institution and the department millions in lost revenue. The money was needed to cover a $12.9 million lump-sum payment to end the contract of Will Muschamp, the football coach fired before the end of the 2019 season, with four years remaining on his contract. The university is now also liable for a $3 million buyout for basketball coach Frank Martin, who was fired in early March with two years remaining on a contract extension he had signed just one year earlier.

With billions of dollars flowing to major universities annually for big-time college sports, subsidies from the institutions’ main budgets are increasingly being seen as unnecessary and unreasonable by students, faculty members, alumni and donors, especially at a time when tuitions are rising and revenues are falling as enrollment declines nationally.

Andy Schwarz, an economist who specializes in the legal and financial aspects of college sports, said what appears to be happening at South Carolina’s flagship public university “sort of sounds like run-of-the-mill athletic department stuff.”

“You usually don’t see it discussed at the level of the state house,” Schwarz said.

The South Carolina legislators harshly criticized the university’s board for allowing the hefty payout to take place and for not providing more oversight of the expenditure. The lawmakers ended the legislative session without offering once-routine endorsements for five of the 21 trustees up for re-election.

“We do not control the president, but we control the board, and I think what we’re sending is a message that we’re going to spend some more time on how that board acts and reacts,” committee member Representative Kirkman Finlay told the State newspaper.

Board of Trustees members and athletic department officials did not respond to several requests for comment, and calls and emails to the offices of members of the joint committee were not immediately returned.

While it’s now commonplace for universities and colleges to spend on athletics departments and big-revenue sports such as football and basketball—which are ostensibly designed to be self-supporting through ticket and suite sales, broadcast revenues and fundraising—it’s fairly rare for university leaders, and especially lawmakers, to hold public institutions accountable for such spending, said Charles Clotfelter, an economics professor at Duke University and author of Big-Time Sports in American Universities (Cambridge University Press, 2011).

He said the universities’ reasoning for such decisions make no sense.

“In their mission statements, you don’t see mention of the athletic departments,” he said, “but in reality, entertainment and, in this case, sports—it’s one of the biggest priorities they have.”

Coaches’ salaries, particularly for the biggest, most popular sports, continue to be prioritized above the rest of the athletics departments—largely because the student athletes are not paid salaries, so the coaches are the highest-compensated talent. Long-term contracts with sizable buyouts are now the norm for programs that want to stay competitive in order to recruit the best coaches and, in turn, the best athletes.

The consequences are predictable and dire: “It’s a huge money-sucker,” said Welch Suggs, a professor of journalism and mass communication at the University of Georgia and former associate director of the Knight Commission on Intercollegiate Athletics.

“Those contracts are sunk costs; when you fail, you have to eat it and move on,” Suggs said. The bigger-revenue programs reach out to deep-pocketed donors to cover the cost of buyouts.

“But if you’ve alienated your top donors, who do you turn to?” The answer is often the university and the funds intended to support other departments, students and services.

Rutgers University’s athletic program has long been held up as the most egregious example of this sort of disproportionate spending on sports, particularly since it joined the Big Ten conference in 2012. The university was $121 million in debt in 2020 and has fallen short in fundraising for athletics, ticket sales for their largest sports venues—and in winning in football and basketball, the biggest revenue-generating sports.

Mark Killingsworth, an economics professor at Rutgers and longtime critic of the athletic department funding imbalance, noted that just 55 percent of Rutgers’ athletic department revenues come from the department itself, with the rest coming from loans from the university and the conference and, worst of all, some $12 million a year in student activities fees.

“To me, that gives them zero incentive to go out and fundraise,” Killingsworth said.

The University of Maryland—which joined the Big Ten the same year as Rutgers—became a lightning rod for similar use of student fees for the athletic department. The administration came under increased scrutiny in 2018, after the heatstroke-related death of football player Jordan McNair and the revelation of mistreatment in the team’s strength and conditioning areas. The student government pointed out that the university received some $12 million a year from student fees, despite the millions it continued to earn from playing in a major sports conference, and was not only devoting far more to big-time sports than to normal student services and activities, but was falling far short in safeguarding the athletes’ health and safety.

At the University of California, Davis, a level below the top competition of the Big Ten and other conferences (Davis competes in the NCAA’s Football Championship Subdivision, rather than the Football Bowl Subdivision)—but still a large public state university—one student is rallying his fellows to fight the use of student fees to fill the athletic department’s coffers. Calvin Wong, a senior at the university, has urged the Student Senate to call a referendum to stop the practice. Wong puts the figure the institution collects annually from student fees at nearly $12 million—with nearly 89 percent going to the athletic department, at a time when the physical education department had recently been closed down.

“Foremost, my goal is to generate the conversation about our student fees, because a lot of the students don’t know what their student fees go to,” Wong said. He noted that only 2 percent of all UC Davis students participate in intercollegiate sports.

The University of South Carolina is a member of arguably the most lucrative and prestigious conference in college sports, the Southeastern Conference. The university has to compete with regional and national football and basketball programs with larger fan bases and revenue generators, such as the Universities of Alabama, Georgia and Kentucky and Louisiana State University.

The fact that in order to keep pace USC has to use general university funds is not an anomaly, either in the conference, the geographic region or the country. To the legislative committee, however, this practice apparently signaled serious financial mismanagement.

“The SEC shouldn’t need a subsidy from the rest of the school—and I want to be careful about using the word ‘subsidy,’” Schwarz said. “There’s no reason the football program should make money. If you have a football program, the football program should pay for it.

“You have to be a really special kind of spendthrift to run through your SEC allowance and have to go to Dad for more money.”