The always-fun USA Today NCAA financial report, put together by Steve Berkowitz, came out today, giving us a glimpse into just how much money is in college sports.
The database is outstanding and you should see how much revenue your school is bringing in. Unfortunately, it also leads to headlines like this.
— MarkEmmert (@MarkEmmert) July 6, 2017
Oh no! LOSING MONEY! CAN’T TURN A PROFIT! UNSUSTAINABLE SPENDING!
In this article, Mark Emmert (no, not that one), explains that even though Iowa’s athletic department brought in $113.25 million in 2016, the department is still struggling financially. That’s pretty rich, considering that Iowa has not added any sports since 2005 but is bringing in $52 million per year more than it was back then.
Necessary expenses haven’t gone up; rather, the Hawkeyes are just spending money because it’s there to spend—like giving football coach Kirk Ferentz free use of a private jet for vacations.
College athletic departments like to pretend they’re broke by focusing on “profits,” even though profit is a wholly irresponsible way to judge their financial health. That’s because they’re “non-profits”—they’re incentivized to spend as much money as they bring in, because if they don’t, there will be pressure to either return the money to the university to pay for academics or to pay the labor that’s generating all this money.
Instead, athletic administrators give themselves massive bonuses and hire needless employees in order to claim that they’re broke, and that there’s no way the money could be spent another way.
Look at it another way: Iowa decided to spend $90 million on renovating its football stadium, because the money is there to do it. Because of that, the Hawkeyes’ athletic department is $3 million “under water.” But let’s say Iowa made a tiny tweak to that plan, and only wanted to spend $87 million. Is the athletic department now totally financially viable? Or what if athletic director Gary Barta didn’t fire someone because of her gender and sexual orientation, and therefore had a $3 million surplus to work with? Would Iowa athletics have suddenly been a profitable venture, or would it have just spent that extra $6.5 million on some fun locker room upgrade? Trying to judge this non-profit’s financial viability on its profit and how much it’s comfortable spending on needless upgrades makes no sense.
It’s like if I made $1 million per year but claimed I couldn’t feed my family because I bought 100 Ferraris.
For the most part, this strategy works. People buy the absurd statement that only a handful of athletic departments are financially viable on their own—Florida State athletics must be a drain on the university because it doesn’t “generate profit” from a $115 million payday, huh?—and it leads to ludicrous determinations of financial health.
OREGON'S REPORTED PROFIT: $1,498,487
CHICAGO STATE'S REPORTED PROFIT: $1,994,563
seems legit, imo.https://t.co/qiQUG6WVN8
— Ben Goren (@BenG412) July 6, 2017
So let’s be smarter than this. When you see that your school brought in $100 million per year and doesn’t have any additional necessary expenses, but still “loses money,” here’s what you should think. Either …
- Your athletic director is worse at economics than Rick Perry
- Your school is just spending money to roughly match revenue, regardless on how necessary that spending is, because that’s how non-profits work
Iowa athletics has tons of money to continue operating completely independent of the university, and it has the money to pay players. So does your favorite Division I athletic department, more than likely. Don’t let them off the hook.