- Auxiliary Enterprises “are those non-instructional services provided to individuals, primarily students, in return for specific user charges. These services include student housing, intercollegiate athletics, food services, and parking. Auxiliary Enterprises are self-supporting and are not subsidized by the state”, Governor’s Budget 2009-10.
- The Intercollegiate Athletics Resolution was discussed and put to a vote at the Fall 2009 Berkeley Academic Senate Meeting on November 5, 2009. The faculty voted in favor of the Resolution with no modifications.
- The IA Resolution website provides updates on the Resolution and progress towards IA financial self-sufficiency. It also provides links to relevant IA budgets and contracts.
Intercollegiate athletics (IA) is supposed to be a self-supporting auxiliary program, yet it has enjoyed substantial subsidies from central campus funds and student registration fees. Plus it has also accumulated a huge debt, with no realistic plan to pay it off. Many of us support intercollegiate athletics in that it provides entertainment for the campus community and provides fund raising opportunities. But there are faculty who object to the special admissions policies and preferential treatment it gives to IA student athletes in classes and other campus services. This blog is not intended to address the pros and cons of IA, in general, rather it addresses the budgetary implications given the current budget crisis.
There is a myth that Intercollegiate Athletics is a revenue generator for campuses. Although this might be the case on some campuses, in depth analyses indicate otherwise for most campuses (see reference list below). The question is: what is the impact on the University of California Berkeley campus? Is it a revenue generator for our campus? Or is it a cost center?
The tables below shows that IA has cost the campus money (in millions of dollars) every single year of operation since 2004 when the Chancellor opened the books up to the Academic Senate. The accumulated loss (revenue minus costs, not including campus subsidies) since the 1991 Semlser Report was estimated to be approximately $128.3 million at the end of the 2005-06 academic year (estimated by Cal Moore, then Chair of CAPRA- Committee on Academic Planning and Resources Allocation). Most of the data come from the NCAA financial statements provided by Laura Hazlett, the chief financial officer for athletics.
In addition to using part of the student registration fees (about $2 million every year as listed below), the Chancellor has subsidized IA ($3-8 million per year) so that the annual debt is lower (see second table below).
The annual Cost to Campus (shown in bold, the bottom line in the second table) is the annual deficit plus these annual subsidies. This Cost to Campus was lowest in 2007-08 at “only” $7.4 million, but picked up again last year and is reported to be $13.5 million in 2008-09 and projected to be $13.7 million in 2009-10 (as reported by Calvin Moore in his April 27, 2010 presentation on the interim report of the Task Force on Intercollegiate Athletics).
Note that these numbers are over and above the capital costs of the Stadium retrofit and the new Student Athlete High Performance Center (SAHPC) estimated at $136M, a facility with access that will be restricted to only 450 student-athletes, less than 1% of the students, staff and faculty on campus (download Regents agenda to see the exact text p. 3 and p. 9). The Regents approved financing of the seismic retrofit of the Memorial Stadium for $321 million to be financed externally out of Athletics program gross revenues (download Regents agenda to see the exact text p. 3-4). Where are these excess revenues that could be used to pay off capital debt? They can’t even pay off the annual operating expenses. Furthermore, the authorization said that only the interest on the debt need be paid before or during construction. There are further costs that are not accounted for here that are paid for directly out of student registration fees, such as compensation and expenses for the Faculty Athletic Representative (FAR) and half the cost of the Athletic Student Center.
Revenue and Expenses (Millions of $’s)
|Generated Revenue (Excluding Campus Subsidies)||34.155||40.101||42.836||51.666||56.875||51.4||59.073||57.247||54.737||58.665||66.710|
|Profit/Loss (Total Generated Revenue minus Expenditures)||-11.012||-13.073||-10.887||-9.786||-7.400||-13.5||-13.667||-12.099||-10.325||-9.382||-8.797|
Annual Cost to Campus (Millions of $’s)
|IA FAQ||NCAA Report|
|Student Reg Fees||2.013||1.911||1.968||2.070||2.241||2.7||3.184||2.146||2.258||2.447|
|Annual Cost to Campus||11.012||13.073||10.887||9.786||7.400||13.5||13.667||12.099||10.325||9.382||8.797|
Cumulative Cost to Campus (Millions of $’s)
|Cumulative Cost to Campus since 2003||11.012
|Cumulative Cost to Campus since 1991 Smelser report||128.3||138.086||145.486||158.986||159.152||171.251||181.019||189.844||198.084|
This last line is important from the long term perspective. Cal Moore, while Chair of CAPRA calculated the shortfall from Intercollegiate Athletics at the end of the 2005/06 academic year to be $120.3 million. These numbers were distributed to the University Athletics Board and we received no challenge to their accuracy. (Note: this original estimate did not include student registration fees for the previous 4 years as this number was not available at the time of calculation. We now estimate this to be $2M per year for four years and have increased this debt estimate to be $128.3 million, as reflected in the bottom line of the third chart above.) This represents the amount of money that would have been available to the rest of the campus if not used to subsidize IA operations or its debt. Some of the details for the basis of this shortfall are provided below:
- Total subsidies beginning in 95-96 and extending through the end of 2005/06. $44.6M (per sheets passed out to UAB).
- Total deficits beginning in 1991 through the end of 2005/06. $50.5M. $17.4 M of this was forgiven in 1999 and $33.1 has accumulated since then and probably has no chance of ever being repaid so it is a sunk cost (per sheets passed out to UAB).
- Starting in 2003-04, the campus has forgiven the yearly STIP interest on the current accumulated. Estimated cost to the campus through the end of 2005/06. -$2.3M
- Prior to 04-05 the utility bill for the Haas Pavilion (basketball) was paid fully by the campus. Now it is split – in 04-05 it was split $644K athletics , $170 K campus ( this recognizes the point that other campus units use Haas). If the utilities has been split this way in 2003-04, athletics would have paid 500K (according to Ken Hirano). A straight line backwards projection, assuming an athletics portion of utilities in 1992 to be 300K, then 400K, the average, times 13 years since 1991-1992 yields a campus subsidy of $5.2M for the athletics share of Haas Pavilion utilities through 03-04.
- The campus has forgiven $18.3M in capital debt– almost all of it for the Haas Pavilion. This does not include the capital loan of $2.7M even though that one may also be dubious as to repayment.
- Addition of student registration fees at estimate of $7.4M (approximately $2M per year) for the four years 1991-92 through 1994-95.
The total of $128.3 million (44.6 +50.5 +2.3 +5.2 +18.3 +$7.4M) represents the subsidies and debt since the 1991 Smelser report through the current year 05-06. And it is getting worse at an average rate of $10 M per year and is estimated to be over $14M in 2008-09 based on preliminary estimates.
Key Oversight Organizations
- Coalition on Intercollegiate Athletics; an alliance of 56 NCAA Division 1A university faculty senates whose aim is to promote comprehensive reform of intercollegiate sports. UC Berkeley is a member of this alliance.
- The Drake Group - “Defending Academic Integrity in the Face of Commercialized College Sport”.
- The Knight Commission on Intercollegiate Athletics. The Knight Commission just issued a report titled: College Sports 101: A Primer on Money, Athletics and Higher Education and in the Twenty-first Century. “The Knight Commission has spurred reforms that emphasize academic values in an arena where commercialization of college sports often overshadows the underlying goals of higher education.”
References and News Articles
- At Long Last, the Sports Mortgage – In Lean Times, Teams Try ‘Equity Seat Rights’ to Raise Money; $220,000 for a Seat at Cal, Wall Street Journal, September 29, 2009.
- More humiliation for Berkeley, Michael O’Hare, September 29, 2009.
- Debt Loads Weigh Heavily on Athletics Programs – Planned in boom years, costly facilities now burden bottom lines, September 28, 2009.
- A lesson in economics – Athletic finances many universities are facing tough times while trying to support their athletic programs, Oklahoman, August 2, 2009.
- UC Irvine Cuts Five Sports Teams, Inside Higher Education, July 31, 2009. “Citing the state’s severe budget problems, the University of California at Irvine announced that it will cut its men’s and women’s swimming and diving, men’s and women’s rowing, and sailing teams. The institution expects to save nearly $1 million as a result of the cuts.”
- Programs in precarious position, ESPN, College Sports, July 14, 2009.
- Programs struggle to balance budget, ESPN, College Sports, July 13, 2009. (Stanford and others are dropping teams and cutting IA sports programs to meet budget woes).
- For Athletics, a Billion-Dollar Goal Line, Chronicle of Higher Education, January 23, 2009.
- For Berkeley’s Sports Endowment, a Goal of $1-Billion, Chronicle of Higher Education, January 23, 2009.
- Sharp Growth in Athletics Fund Raising Leads to Decline in Academic Donations on Some Campuses, Chronicle of Higher Education, 25 Sept 2007.
- UC Berkeley athletics program runs record $13.5M deficit, Oakland Tribune, Matt Krupnick, Dec 27, 2006.
- Robert Baade and Jeffrey Sundberg, “Fourth Down and Gold to Go? Assessing the Link Between Athletics and Alumni Giving,” Social Science Quarterly, 1996, vol. 77, no. 4: 789-803. Baade and Jeffrey Sundberg concluded that winning did not increase donations to the universities.
- Grimes, Paul, and Chressanthins, George. “Alumni Contributions to Academics: The Role of Intercollegiate Sports and NCAA Sanctions,” American Journal of Economics and Sociology, January 1994, vol. 53, no. 1. Grimes and Chressanthins found that winning in football correlated with reduced alumni giving.
- Sigelman, L. and S. Bookheimer. “Is It Whether You Win or Lose? Monetary Contributions to Big-Time College Athletic Programs,” Social Science Quarterly, 1983, vol. 64, no. 2: 347-359. Sigelman and Bookheimer examined two different kinds of giving: restricted gifts directly to athletic departments, and general gifts given to institutions at large. The result was that the two types of giving are essentially uncorrelated with each other, and that only direct gifts to the athletic department depend in any way on athletic success.
Selected Quotes and Reports
Reports from studies debunking the myth that intercollegiate athletics increases donations to academic programs.
- “Repeated studies indicate that most contributions to colleges and universities come from those to whom athletic records have little import. Big athleticboosters, conversely, are far less likely to support other aspects of the universities’ life and mission”A Call to Action — Reconnecting College Sports and Higher Education, Knight Foundation.
- “We conclude that the hypothesis that increased operating expenditures on sports affect other measurable indicators, including alumni giving, is not proven.” – - Robert E. Litan, Jonathan M. Orszag, and Peter, R. Orszag, report commissioned by the NCAA itself (who would be biased towards Intercollegiate Athletics).
- “Increased spending on football and men’s basketball produce neither an increase nor a decrease in net operating revenue, on average, over the eight-year study time span. . . There is little, if any, correlation between increased spending and increases or decreases in the measurable academic quality of students or alumni giving.” Eight-year study of sports spending takes myths to task, NCAA News Archive, 2003.
- “Two of the most powerful myths that circulate around college sports (are) that former athletes are disproportionately generous in donating to their alma mater, and that winning sports programs encourage alumni/ae in general to give more money. ” “The data flatly contradict one of the strongest myths about college athletics, that winning teams, and especially winning football teams, have a large, positive impact on giving rates.” – - James L. Shulman and William G. Bowen, The Game of Life: College Sports and Educational Values, Princeton University Press, 2001.
- “Some claim that big-time sports can increase donations to academic programs. But several studies have concluded that athletics has essentially no effect on contributions to the school outside the athletics programs.” - – Roger C. Nolls, “The Business of College Sports and High Cost of Winning” in The Business of Sports by Scott R. Rosner and Kenneth L. Shropshire.
- “Apart from two very limited and statistically sloppy studies, all the published literature suggests that there is no reliably positive impact of athletic success on giving to the general endowment of a university. This literature consists of at least twelve separate studies. In some cases, a significantly negative effect is found.” – - Andrew Zimbalist, Unpaid professionals: Commercialism and conflict in big-time college sports, p. 168.
- “Sports fund-raising success has come at a cost: While donations to the country’s 119 largest athletics departments have risen significantly in recent years, overall giving to those colleges has stayed relatively flat.” Brad Wolverton, “Sharp Growth in Athletics Fund Raising Leads to Decline in Academic Donations on Some Campuses”, Chronicle of Higher Education, 25 Sept 2007.
- “The problem here is that there is ample evidence that contributions to athletics often substitute for contributions to the school’s academic programs. That is, the net contribution to the university is smaller than the gross contribution to the athletics department.” — Andrew Zimbalist, “College athletic budgets are bulging but their profits are slim to none”, Sports Business Journal, 18 Jun 2007.
- “Evidence indicated a winning athletics program may have significantly impacted alumni giving behavior, and that increased giving to athletics by both alumni and non-alumni was linked to a decline in academic fundraising at the same institution”, Jeffrey L. Stinson and Dennis R. Howard, “Scoreboards vs. Mortarboards: Major Donor Behavior and Intercollegiate Athletics”, Sport Marketing Quarterly, 2004,13, pp. 129-140.
- “Athletic success appears to have little or no influence on academic giving.” “Giving to academic programs appears to be independent of athletic influence.” “The percentage of total gift allocated to academic programs is falling, whereas the associated percentage of total gift allocated to athletic programs is increasing.” – - Jeffrey L. Stinson and Dennis R. Howard, “Athletic Success and Private Giving to Athletic and Academic Programs at NCAA Institutions”, Journal of Sport Management, 2007, 21, pp. 237-266.
- “General giving rates are unaffected by won-lost records at the high-profile Division IA schools”. – - Turner, Sarah E. ; Meserve, Lauren A. ; Bowen, William G. , “Winning and giving: football results and alumni giving at selective private colleges and Universities”, Social Science Quarterly, Volume 82, Number 4, December 2001, pp. 813-826.
- “Recent econometric research fails to find any correlation of consequence between winning and giving.” - – William G. Bowen, Sarah A. Levin, and James Lawrence Schulman, Reclaiming the Game: College Sports, 2003
- “Since the self-supporting approach to football does not hold water boosters of college football needed to find alternative financial support. This alternative argues that big time sports attract alumni donations to the university. The idea is that football teams attract attention and that attention leads to contributions. This notion was rejected after extensive empirical work as well as much anecdotal evidence failed to turn up the desired connection.” “It is clear that college football programs do not in general enhance endowments for a university. Other research clearly indicates that very few football programs succeed in covering current expenditures. Thus most football programs, even good ones in Division IA are a net financial liability to the institution.” “These results follow on the heals of a large body of earlier work suggesting that football does not have a positive impact on university finances. At best football is neutral on endowment and endowment per student. A negative effect is far more likely based on these results.” — Jonathan Willner, Big Time Endowments, Southwestern Economic Proceedings, pp. 33-46.
- “Well respected scholars who have intensively studied intercollegiate athletics and its relationship with higher education have examined this body of work in total and concluded that there is little if any empirical support for the notion that athletic success translates into increased levels of alumni support to institutions of higher learning.” — Ellen J. Staurowsky, The Relationship Between Athletics and Higher Education Fund Raising: The Myths Far Outweigh the Facts, A Report Prepared for the United States Department of Education Commission on Opportunities in Athletics.
- “Contrary to one of the most tenacious myths in American society, the vast majority of colleges and universities do not make money in big-time intercollegiate athletics.” . . . “(Athletic departments) actively undermine efforts to raise money from alumni for educational programs” (p. 259), Murray Sperber, Beer and Circus How Big-time College Sports is Crippling Undergraduate Education.
- “The lack of any relationship between success in intercollegiate athletics and increased alumni giving probably matters less than the fact that so many people believe that such a relationship exists.”Sigelman, L. and Carter, R. Win one for the giver? Alumni giving and big-time college sports. Social Science Quarterly, 60 (2), September 1979, 284-293.
- “The empirical literature provides not a shred of evidence to suggest that an across-the-board cutback in spending on athletics would reduce either donations by alumni or applications by prospective students.” by Robert H. Frank in “Challenging the Myth: A Review of the Links Among College Athletic Success, Student Quality, and Donations”, Review prepared for the Knight Commission, May, 2004.
- Unsportsmanlike Conduct: Exploiting College Athletes by Walter Byers with Charles Hammer, University of Michigan Press, Ann Arbor, 1995. Walter Byers served as NCAA executive director from 1951 to 1987.
Here are some selected quotes from from university presidents debunking the myth that intercollegiate athletics increases donations to academic programs:
- “Repeat after me: there is no empirical evidence demonstrating a correlation between athletic department achievement and [alumni] fund raising success. A number of researchers have explored this putative relationship, and they all have concluded that it does not exist. The myth persist, however, aided anecdotal evidence …” Vice President of the University of Notre Dame Richard W. Conklin, quoted in Beer and Circus: How Big-time College Sports is Crippling Undergraduate Education by Murray Sperber.
- “More than a few college presidents seem to think that a successful athletic program will at least inspire the alumni to give more money to their alma matter. Yet even this hope appears to be groundless. . .” “There is no reliable evidence that successful athletic teams raise … alumni giving to any appreciable extent”. – - Former President of Harvard Derek Bok, Universities in the Marketplace: The Commercialization of Higher Education.
- “The myth of institutional dependency on athletic revenues — therefore on athletic victories — needs to be aggressively refuted” – - Former President of Michigan State University, John D. Biaggio.
- “Many of the university’s most generous donors care little about its athletic success and are sometimes alienated by the attention given to winning athletics programs.” – - Former President of University of Michigan James J. Duderstadt, Intercollegiate Athletics and the American University.
- “Sacred cows such as intercollegiate athletics continue to graze on the core academic programs of the institution.” – - Former President of University of Michigan James J. Duderstadt, The Future of the Public University in America.