Some Schools Use Millions in Student Fees to Supplement Athletic Revenue

Rutgers football coach Greg Schiano is making more than $2 million per season, and in recent years the University committed to spending more than $100 million to upgrade its football stadium. Meanwhile, student fees contributed nearly $8 million toward Rutger’s athletic department revenue in 2008-09, which equals more than 13% of the revenue generated by Rutgers’ athletics.

According to a USA Today database on athletic department budgets, Rutgers netted less than $200,000 in 2008-09. Take away the nearly $8 million contributed from student fees and the athletic department would have severely overspent.

Rutgers isn’t alone. A recent report by USA Today outlined in detail how some universities are using escalating student fees to support the multi-million dollar budgets of their athletic departments. The practice has some academicians, students, and parents crying foul.

Transparency, or the lack of it, is what has some up in arms, as many universities go to great lengths to make it difficult to discern just how much their athletic departments are benefitting from receiving student fees.

To some, it seems as if the athletic department is the big, bad bully on the block, stealing lunch money from poor students to pay its coaches millions of dollars and build lavish luxury suites for its millionaire alums.

But as Dr. William Kern, chair of the Department of Economics at Western Michigan University, pointed out to Fitness Information Technology, athletic departments aren’t the only units in a university that receive financial support from general funds. Kern and Donald Alexander, also a professor and economist at Western Michigan University, recently conducted a study on the effect of athletic success on state appropriations to universities. Their research will be published in the November issue of the International Journal of Sport Finance.

“There are a number of activities across the university that are subsidized through one means or another,” Kern said. “For example, there are probably a number of academic departments on every campus that don’t generate revenues sufficient to cover the costs of their operations.

“Philosophy might be such a case and the reader can probably think of others in the fine arts where this might also be the case. But we subsidize them because we think they are a necessary part of the university. That argument is easier to justify in the case of philosophy than in the case of non-revenue sports but some would no doubt argue much the same way that sports are an integral part of the university.”

Perhaps the biggest objection with using general funds and state appropriations to support athletic department budgets is the fact that salaries for coaches in football and men’s basketball, in particular, have escalated at a rapid pace during the past decade. It’s now atypical that a coach in one of those two sports at a large university isn’t earning in the neighborhood of $1 million annually, with a select few football coaches earning $3-4 million per year.

In addition, many universities are spending millions to upgrade athletic facilities, not necessarily because they are structurally unfit, but because their rival schools have enhanced their facilities.

“There seems to be an arms race with regard to improvement in facilities and coaches’ salaries, at least in the major sports at large state universities,” Kern said. “This spending is not likely to decline as any individual university that stops spending finds itself at a competitive disadvantage against its rivals. What is really needed to stop this is some sort of rule that constrains spending that applies to all schools. Robert Frank has a nice analysis of this issue in his Knight Commission report of collegiate athletics.”

Frank, an economist at Cornell University, concluded in his 2004 Knight Commission Report that after extensive research, “The empirical literature seems to say that if the overall net effect of athletic success on alumni giving is positive, it is likely to be small.”

Still, while Frank and other economists profess that athletic success has little effect on donations, it should be noted that athletic success is believed to contribute to school loyalty and a student’s enjoyment while on campus.

“Students seem to be demanding more and more amenities associated with their college experience and sports in both participant and spectator forms appear to be a part of that,” Kern said. “Most students don’t seem to want to attend ‘no-frills’ universities that would eliminate these sorts of things and just stick to the basics of instruction.”

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