Hidden Costs of Football

Recent scandals have exposed huge expenses facing big-time athletics programs, and it's time for universities to be more honest about those expenses, writes Lewis Margolis.

August 7, 2012

In the multibillion-dollar world of Division I intercollegiate sports, some costs are part of the public conversation and others are not, making it difficult for university administrators, faculty members and fans to understand the true costs of the athletic enterprise.

For example, the salaries of coaches and universities’ sports profits command much attention. The University of Alabama’s football coach Nick Saban’s reported salary of $5.3 million pushes him past Mac Brown, the head football coach at Texas, who earned $5.2 million. The University of Kentucky wins the basketball salary ranking at $5.4 million, followed closely by Louisville’s $4.8 million. Profits are also well-publicized. In 2010-11, Duke University basketball was reported to have had a profit of $14.3 million, barely beating its in-state rival, the University of North Carolina at Chapel Hill, at $13.8 million.

Two recent reports, however, are stunning examples of the types of expenses that add immeasurably to the costs of the intercollegiate athletics enterprise — at a minimum for the revenue sports — yet become transparent only when a scandal or crisis forces this information into the sunlight. UNC and Pennsylvania State University have revealed that they have generated sizable expenses to address athletics scandals.

In the ongoing athletically driven academic scandals that erupted at UNC in 2010, the administration recently announced that the university has incurred $467,000 in fees for outside legal services to date. Penn State has reported nearly $12 million in fees — including crisis communication and the bill for the Louis Freeh report — to address the massive scandal involving former assistant football coach Jerry Sandusky and the university’s response to his years of child molestation.

Even though officials have claimed that these expenses do not diminish the resources of the university — because they are almost magically covered by unrestricted endowments, athletics revenues, and insurance — the opportunity costs are still immense. To put the UNC expenses in perspective, based on in-state tuition of $7,008, these fees would have helped 66 students reach their educational goals, or provided books and supplies for over 400 students. These fees would have supported seven assistant professors in the arts and humanities or four full professors in the natural sciences and math. Or how about salaries for 12 North Carolina public school teachers?

Further, how do we begin to calculate the costs of the time and energy that UNC’s chancellor, Holden Thorp, and Penn State’s president, Rodney Erickson, have devoted to the respective scandals on their campuses, not to mention the many other administrators who support these leaders? The costs of time spent by special faculty committees that investigate intercollegiate sports improprieties only add to the financial toll. These costs do not appear on university financial statements.

The growth in the complexity of the National Collegiate Athletic Association’s byzantine participation rules that vainly attempt to rein in the corruptive effects of the billions upon billions of dollars that flow through the athletic enterprise further add to costs. As part of its response to the ongoing scandal, UNC has hired two additional "compliance" officers, adding to the already substantial burden of adhering to NCAA codes. The news coverage of UNC’s external legal fees noted that most of these fees were directed to two law firms that have particular expertise in NCAA investigations. The fact that law firms have actually developed specialties in NCAA regulations is further evidence of the costs of compliance.

There are also hidden costs to the university in salary negotiations. With the escalation in compensation for celebrity coaches in football and basketball, many have turned to professional agents. To my knowledge, not many philosophers or music professors or historians have hired agents to represent them with their deans in salary negotiations. And yet, an Associated Press article in 2010 indicated that one sports agent was associated with coaches who were likely to earn $50 million in post-season bowl payouts for their universities, some fraction of which gets converted to bonuses negotiated into contracts.

Highly paid coaches understandably depend on the expertise and experience of agents to develop and manage negotiating strategies in the same way that they count on their talented (and often highly paid) assistant coaches to design game plans. While the economics of the relationship between coaches and agents makes sense from the perspective of coaches, it is not clear that universities have the expertise and experience to be suitable and effective advocates for their own interests. After all, a university might negotiate with a head football or basketball coach every few years, while a sought-after sports agent is likely engaged in high-stakes negotiations frequently. If negotiations are handled internally by administrators who are no doubt competent, but inexperienced, there is a cost in failing to achieve the best outcome for the university.  If universities turn to outside negotiators, that too becomes a hidden cost.

These hidden costs are not limited to the "business" aspects of intercollegiate sports. In recent years, it has become increasingly and alarmingly clear that football-related head injuries take a painful toll on the well-being of athletes in their later years. Indeed, the cost of injuries has been recognized by the NCAA for many years, but as Taylor Branch noted in his recent cogent critique, the NCAA decided to not be fully transparent about those costs. The workmen’s compensation system is designed to provide payments to workers who are injured on the job. But in the early 1950s, when faced with the potential financial impact of making universities "employers" of athletes — that is, athletes as workers, with the associated financial compensation for their injuries — the NCAA crafted the term “student-athlete” to make this responsibility ambiguous. As Branch noted, the question of athletes as workers entitled to worker’s compensation is continuing to work its way through the courts. And given the current use of the ambiguous concept of “student-athlete,” the true costs of football-related injuries have yet to be estimated. If the courts find in favor of the athletes, universities and the NCAA could be on the hook for millions.

Some claim that the legal and other professional fees that seem to be a growing dimension of intercollegiate sports come from assets that do not directly diminish university resources. Yet the opportunity costs are substantial and should be discussed openly and explicitly as such — not rationalized away. As institutions with special status in society and as institutions where the search for truth is at the core of their missions, universities should make great efforts to bring the hidden costs of intercollegiate football into the light.  Only then can universities accurately calculate and weigh what sadly appears to be the increasingly harmful impact of intercollegiate football on their missions.



Lewis Margolis is associate professor of maternal and child health at the Gillings School of Global Public Health of the University of North Carolina at Chapel Hill.



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