Study Looks at Big-Time Spending

By Staff

Athletic Management, 15.6, October/November 2003, http://www.momentummedia.com/articles/am/am1506/wuspending.htm

The basic findings in a much-heralded study of NCAA Division I athletics spending didn’t surprise many of the people in charge of writing the checks, but that’s not to say the enterprise wasn’t worthwhile. If nothing else, real numbers are now available for future comparisons and to help athletic administrators put their own budgets in perspective.

The NCAA refers to “The Empirical Effects of Collegiate Athletics: An Interim Report” as a “baseline study,” and that’s what it was primarily designed to do—provide a rational starting point for discussions of collegiate athletics spending. To compile the report, three highly regarded economists examined data from Equity in Athletics Disclosure Act reports and the more-detailed NCAA proprietary database, along with football and basketball win-loss records and federal data on general university spending. The study’s 1993-2001 timeframe was dictated by availability of the data.

The economists acknowledged there are widely varying accounting practices from school to school, so they tried to assess how athletic spending at each campus changed over time. The main thrust was to assess whether spending more helps—by generating more student applications and alumni donations or other means—or hurts universities by sucking money from more productive endeavors.

Overall, that question went unanswered. For one thing, the numbers weren’t statistically conclusive. For another, the data didn’t include capital spending, the arena where many believe the real arms race in big-time college athletics lies. Ultimately, the authors couldn’t say whether spending more on sports affects academic quality or alumni giving, or whether there really is an arms race. But the authors did draw some conclusions:

• Athletics spending remains small compared to overall higher education spending: 3.5 percent on the average campus, the authors concluded. While the growth rate after 1995 seemed to increase, that could be because of the healthy late ’90s economy.

• Spending on women’s sports generally increased, while spending on men’s sports other than football and basketball decreased. Average spending on football increased more slowly (2.9 percent) than average overall athletics spending (4.5 percent).

• The gap between the richest and poorest football and basketball programs grew in the late 1990s. However, who spent what, as well as who won and lost and who generated revenue, changed during the time period examined. In other words, the biggest spenders and the winningest programs changed during the period studied.

• Nevertheless, the researchers were able to say that spending more on football and basketball did not produce a medium-term change in net operating revenue, nor higher winning percentages.

Chris Hill, Athletic Director at the University of Utah, says the lack of a clear connection between increased spending and more wins may help slow the perceived arms race. But, given the study’s limits, that is unlikely. Some critics say the limited period studied is not realistic—that it takes more time for spending to bear fruit. Another shortcoming of the study is that capital spending was not examined—though it will be in follow-up studies, the NCAA says—and many people contend that the so-called arms race is really about facilities. For these reasons, the study probably won’t change the minds of people who hold it as obvious that it takes big budgets to be a big winner year in and year out.

“There may be blips, but I think that the schools with larger budgets are the ones that are in the top 25 every year in most of the sports,” says Lee Fowler, North Carolina State Director of Athletics.

Fowler sees the capital-spending issue as critical. He says that by 2008, N.C. State will have spent $140 million in 15 years on its facilities, a sum he acknowledges will astound many outside athletics. But the reality is N.C. State had to upgrade its physical plant to meet the expectations of the student-athletes its coaches are trying to attract, he says.

“Really, we’re in a catch-up mode trying to get general facilities that represent a I-A athletic program, mainly with our locker rooms and the areas for academic support,” Fowler says. “I think that translates into being competitive on the field, because 18-year-old athletes buy with their eyes. If they compare us to Ohio State, Tennessee, Florida, or whoever we’re competing with, more times than not, they’re going to pick the team that has the best facilities and gives them the best opportunities to improve themselves to maybe play at the next level.”

Hill, however, hailed the part of the report that pointed out that few Division I-A schools got by without some form of institutional support. “I think it brought out that the large majority of athletic programs cannot make it if they have to count on only their own resources,” he says. “There are so many myths that athletics generates a whole bunch of money, but it really doesn’t generate profits at most schools. I don’t know whether that message will get out there, but I hope it does. And I hope it creates dialogues on campuses. It’s always good to have a dialogue about the place of athletics and the financial state of the program so that it remains an integral part of the university.”

The full study is available in PDF format on the NCAA’s web site at www.ncaa.org/databases/baselineStudy/baseline.pdf.