Restructuring for Cost-Containment in College Athletics

This article originally appeared in the September 1989 issue of AB with the headline, “The Money Game.”

All the challenges facing college athletic administrators as they head into the last decade of the 20^th century can be neatly wrapped up in two categories: financial issues and what are usually described as integrity issues. For that matter, most of the integrity issues are ultimately, one way or another, rooted in economics.

“If there’s not a money problem, you don’t have any problems,” says Mike Lude, athletic director at the University of Washington and chairman of the Division I-A Athletic Directors Association. “There’s not a single problem I couldn’t solve if there was an unlimited supply of money.”

Most agree that the challenges are most pressing in NCAA Division I and especially in Division I-A, where the major football-playing schools reside, but the smaller schools face many of the same problems—if on a smaller scale—as well as some of their own.

Among the primary integrity issues: recruiting (improper inducements), academics (admission standards, freshman eligibility, satisfactory progress, graduation rates), and equal opportunity (Title IX, increased hiring of women and minorities).

And, as Lude suggests, there’s a relationship between most of those issues and the financial issues facing college athletics. Most athletic administrators, for example, say they support increased opportunities for women to participate in college sports, but they quickly add that increasing sports or grants-in-aid for women means one of two things: eliminating some opportunities for men to participate or coming up with more money to support the increased opportunities for women.

Since most choose the latter, the argument goes, there is more pressure on athletic directors and coaches to produce winning football and basketball programs to generate more money to support women’s sports, as well as the men’s sports that consume more money than they generate. (Almost all do.) Inevitably, some say, the pressure causes a few coaches and athletic programs to bend or break recruiting rules and overlook academic shortcomings in order to attract and keep the blue-chip athletes it takes to compete successfully.

That argument, of course, misses the point that countless college athletic programs manage to compete successfully without buying players or ignoring their academic needs. Perhaps the real point, though, is that while college sports have grown exponentially, generating more money than athletic directors of 30 years ago would ever have dreamed possible, costs have risen even faster, the responsibilities have grown accordingly and today’s college athletic directors face imposing challenges in managing the economic forces surrounding their programs.

“The problems today are not that much different than they used to be, but the numbers are a lot bigger and a lot scarier,” says Lude, who’s spent 42 years as a college coach or athletic director.

University of Southern California Athletic Director Mike McGee agrees, noting that “a few years ago, when I was doing my dissertation, I interviewed an athletic director whom I respect greatly and he told me, ‘I’ve been doing this job for 10 or 12 years and I’m no longer qualified to do it, because it’s changed so much.’ I think we’re continuing to see those shifts.”

Jack Lengyel, athletic director at the U.S. Naval Academy and president of the National Association of Collegiate Directors of Athletics, says to understand the challenges facing athletic departments today, you need some historical perspective. At one time, he says, the “physical offerings” at most colleges were part of a four-part pyramid concept.

The bottom of the pyramid, says Lengyel, was physical education, “which was broad-based and encompassed the entire student population. The next level was intramurals, which was a little more skill-oriented and had a slightly smaller population base. Next was club sports, which again required more skill and a smaller participant base. Finally, the top one-quarter was varsity athletics.

“As the cash flow in varsity sports increased,” Lengyel continues, “we reached down into the club sports and incorporated more at the varsity level.” Now, he concludes, some athletic departments, faced with expenses that are rising faster than revenue, are finding it difficult to support all those sports offerings.

“I think it’s time for all of us to go back—as institutions, not just athletics departments—and review the entire physical mission of the institution, evaluate what we can afford with our current cash flow and decide what our philosophy is going to be with regard to varsity sports,” says Lengyel. “The goal is not reduction (of sports), though that may be a byproduct of your evaluation.”

Others argue that broad-based participation ought to be the principle that drives intercollegiate athletics.

“Something you really don’t like to hear is that the only way around the (rising costs) is to cut sports,” says Harvey W. Schiller, commissioner of the Southeast Conference. “We’re all in this because we believe strongly in competitive opportunities. We’re hopeful that we can maintain as many participants as possible and at the same time, balance the budget.”

At Virginia State University, a historically black school competing in the NCAA’s Division II, “90 percent of the athletic budget comes from student fees,” says Athletic Director Leon W. Bey, so there is clearly an expectation that the athletic program will be broad-based. “However, we don’t look at it as a mandate as much as a desire to maintain a wide range of competitive opportunities.”

Virginia State, with an annual budget that ranges from $1.2 million to $1.7 million, offers scholarships in 13 sports, plus cheerleading, but Bey recognizes that Division II is, in many respects, a far different world from Division I, where “many of the universities have more in their football budget than we have for all our sports. There’s a different level of pressure there.”

Indeed, the same can be said for Division III and NAIA schools, which—like those in Division II—tend to be subsidized by state funds or student fees. For that reason, there is considerably less pressure on those schools to generate revenue.

“Gate receipts augment what we’re doing here,” says Bey, “but they don’t make us or break us.”

The dilemma seems most perplexing at large Division I-A schools that sponsor 15 to 30 sports, supporting most of them with football and basketball revenue from gate receipts and television contracts. For any, these revenue sources have been lucrative, and annual budget in excess of $10 million are not unusual. At the same time, however, costs always seem to be outrunning revenue.

“The problem,” says USC’s McGee, “is that our costs are typically in areas that far exceed the Consumer Price Index. We travel, we recruit, we entertain. If the government ever did a tourism CPI, you’d be shocked because I’m sure you’d be looking at double-digit inflation, whereas the normal inflation rate might only be approaching 5 percent.”

In addition, says McGee, because of rising tuition costs, grants-in-aid have been increasing at more than twice the inflation rate. In fact, the U.S. Department of Education has estimated that tuition at many public universities could rise as much as 80 percent in the next decade.

USC is trying to head off the problem of dealing with those future costs by endowing scholarships for the football program. So far, all 22 positions, plus two kickers and a special teams player have been endowed for $250,000 each. Eventually, McGee would like to have all football scholarships endowed, as well as those in other sports.

USC and other private institutions, however, may have a leg up on their public counterparts in fund-raising efforts of that sort.

“That’s on the of the traditions that has been established among our alumni—that there is an obligation to perpetuate the institution,” says McGee. “In fact, we have started a fund-raising effort among our former football players, which has not traditionally been a very fertile area.”

Most conspicuous were the recent donations of $100,000 each by former USC running backs and Heisman Trophy winners O.J. Simpson and Marcus Allen, completing the endowment for the Ricky Bell tailback position, named for the late USC and Tampa Bay Buccaneer running back and another Heisman Trophy winner.

Still, McGee worries about the constant challenge of supporting 19 sports, only three of which (football, men’s basketball and baseball) generate “significant dollars” at the gate and through television contracts.

“We call them our Gold sports,” says McGee, “and the others are our Cardinal sports. This year we are spending $6.3 million on those Cardinal sports and they generate about 5 percent of that. In the last five years, the cost of our Cardinal sports has gone up 71 percent, whereas our Gold sports have gone up 53 percent.”

Much of that is a result of increasing the coaching staffs and the number of grants-in-aid for the Cardinal sports, especially women’s sports, so that now the number of grants-in-aid are roughly equal for Gold and Cardinal sports. (Of the 239 scholarships, 123 are in football, men’s basketball and baseball.)

The gap between what many sports generate in terms of revenue and what they cost seems to be widening, “and that’s a trend I don’t see stopping,” says McGee, “because every one of the coaches in every one of those sports are out to have the most competitive program they can, and that’s as it should be. Sooner or later, though, we have to get a better means of controlling costs.”

Doug Single, athletic director at Southern Methodist University, says there needs to be a way of tempering coaches’ competitive instincts with some rational budget setting.

“I don’t know a single coach who doesn’t believe he’s just one weight machine away from the Orange Bowl,” says Single.

McGee says redefining the way grants-in-aid are awarded might be an important step in reducing athletic costs, but he cautions that such a plan would have to be well thought out. Proposals to base some grants-in-aid on need, rather than athletic ability, were soundly rejected at the January NCAA Convention, at least in part because they were perceived as favoring football and men’s basketball (which would have been exempt) at the expense of other sports.

“The problem with that is it did not think through all the Title IX issues,” says McGee. “You have to have everyone ‘hurt’ to some extent so that opposition can’t coalesce.”

McGee says an acceptable plan may be one in which a roughly equal number of men’s and women’s grants-in-aid would remain full scholarships, (room and board, tuition, fees and books), with other sports offering partial scholarships (tuition, fees and books) and other aid based on need.

There are a lot of proposals on the table to cut costs: reducing the number of grants-in-aid allowed, moving to need-based grants-in-aid, reducing the number of sports, reducing the length of seasons, reducing the size of coaching staffs and reducing recruiting trips are among the perennial proposals. While there is no shortage of ostensibly workable ideas, the problem has always been building a consensus for any of them.

“People are always willing to say, ‘OK, let’s cut the size of coaching staffs, but not in this sport,’” says Washington’s Lude.

That inescapable fact leads some to believe that the problem is one of too many schools with too little in common trying to decide on solutions to problems that affect only a few. Many of the large football-playing schools, for example, have lobbied hard for more federation within the NCAA to allow them to make decisions on issues that affect them, without voting input from the other schools.

Some believe even that is not enough. SMU’s Single, for example, says change “is going to have to happen with a consortium of schools that get together, as opposed to having the NCAA do it, because they’re just going to form a committee. It’s like getting a budget cut through the federal government. Once you establish a line item, it’s very difficult to end it with all the interest groups lobbying on it.”

Single is certainly right about one thing: The NCAA does have a committee on cost containment, chaired by ACC Commissioner Gene Corrigan. There’s also a committee on NCAA restructuring, chaired by SWC Commissioner Fred Jacoby.

Those two committees “are kind of working right down the road together,” says NCAA Executive Director Dick Schultz, “because a number of those issues may have compatible responses.”

While many in Division I-A want more control over their own destiny, others worry about the possibility of over-federation—the breakup of the NCAA into more splinter groups with less and less in common. Judy Sweet, athletic director at the University of California at San Diego (Division III) and secretary-treasurer of the NCAA, is one of them. While acknowledging that there are good reasons for Division I-A institutions to have more control over decisions affecting them alone, Sweet says NCAA members “need to be very clear in defining what the limits of federation might be. If taken too far, the end result could almost be three separate organizations, or maybe even five, if you count Division I-AA and I-AAA.

“I think there are some things that can be done for the sake of efficiency that might be termed greater federation,” says Sweet, who many believe is in line to become the first woman president of the NCAA. “There could be more voting taking place during the separate division business sessions, so that what takes place in the general session is more efficient and focused.”

Nonetheless, says Sweet, “I would like to see all institutions working together collectively in the best interest of intercollegiate athletics. When you have groups that break off, you lose the benefit of having differing viewpoints. I would be concerned about any more fragmentation.”

Still, a lot of Sweet’s Division I-A colleagues say no meaningful cost-containment decisions will be made until restructuring occurs.

“Where we tend to get log-jammed,” says Lengyel of the Naval Academy, “is with the NCAA, and I think federation would facilitate a faster resolution of these problems.”

The issue may not simply be more federation for the divisions as they now exist, but realignment within the divisions, with some of the less successful schools moving down.

“Those who can afford a certain level of program would get in one division and those who can’t get in another,” says Lude. “You make your decision as to what kind of program you can afford.”