New Study on College Sports Finances and NCAA Tax Exemption
The Indianapolis Star's Mark Alesia--arguably the nation's premiere reporter on NCAA issues--has outdone himself in his latest feature: a massive study on how university general funds and students contribute to athletic departments and the interplay of those contributions with the NCAA's tax exempt status as a non-profit entity (Alesia, "Colleges Play, Public Pays," Indianapolis Star, 3/30/2006; Alesia also built an NCAA Financial Reports Database from the story). The NCAA qualifies for the non-profit exemption because it claims to be "organized and operated exclusively for educational purposes." Earlier this month, we discussed a story by Alesia on how the U.S. House and Ways Committee has begun a quiet investigation into whether the NCAA, conferences, and school athletic departments have misused their tax exempt status as non-profit, educational entities (3/14/2006). For this story, Alesia analyzed the 2004-05 athletic budgets of 164 of the nation's 215 biggest public schools. He was assisted by Matt Moore, Mark Nichols, Chris Phillips, Ole Morten Orset, Ben Thomas, Jimmy Trodglen, and Kandra Branam.
So what did Alesia find? First off, he found that athletic departments at taxpayer-funded universities nationwide receive more than $1 billion in student fees and general school funds and services, and that without such outside funding, fewer than 10 percent of athletic departments would have been able to support themselves with ticket sales, television contracts and other revenue-generating sports sources. In fact, most would have lost more than $5 million.
Here are the top the top 10 Moneymaking State Schools and then the Final 4 Schools:
TOP 10 MONEYMAKERS (using adjusted bottom line)
FUNDING FROM OUTSIDE ATHLETIC DEPARTMENT
University,
Total
Total
% of operating
Student
government
outside
operating
revenue from
Reported
Adjusted
fees
support
support
revenue
outside support
Bottom line
bottom line
Georgia
3,028,878
0
3,028,878
68,787,384
4%
23,854,329
20,825,451
Michigan
0
0
0
78,424,186
0%
17,037,042
17,037,042
Kansas
972,123
2,214,159
3,186,282
50,826,019
6%
10,064,665
6,878,383
LSU
0
0
0
60,937,676
0%
5,080,280
5,080,280
Texas A&M
0
839,348
839,348
64,180,453
1%
5,307,357
4,468,009
Texas
1,673,928
1,353,382
3,027,310
89,651,682
3%
7,250,853
4,223,543
Iowa
1,505,016
2,127,182
3,632,198
61,676,257
6%
6,693,599
3,061,401
Alabama
2,550,605
0
2,550,605
62,287,192
4%
5,297,584
2,746,979
Kansas State
566,752
2,382,288
2,949,040
39,884,220
7%
5,489,599
2,540,599
Virginia Tech
5,840,958
324,469
6,165,427
45,730,485
13%
8,265,356
2,099,929
FINAL FOUR SCHOOLS
% from
ATHLETIC FUNDING FROM
student,
University
Student fees
Total athletic revenue
government
SCHOOLS
government support
(Per student)
(in millions)
funding
Louisiana State
None
None
None
$60.9
0%
Florida
$1.3 million
$2.4 million
($45)***
$77.7
5%
UCLA
$210,000
$2.3 million
($62)
$46.0
6%
George Mason
$1.6 million
$7.5 million
($346)
$11.0
84%
Alesia and his staff then studied the effect of taxpayers indirectly subsidizing athletic departments through the tax-exemption. He found that the exemption particularly benefits big schools, which receive up to 40 percent of their athletic revenue from donations, most of which are tax-deductible. At Indiana University, for example, donations constitute 21 percent of revenue; at Purdue, 27 percent. And keep in mind, all of the TV money the NCAA and its schools receive go untaxed--we're talking about hundreds of millions of untaxed dollars there.
Expectedly, there are serious criticisms of this arrangement in light of how big-time college sports appear far more focused on entertainment than education. This is particularly troubling, Alesia notes, considering rising tuition and stagnant state support for higher education. Economist Andrew Zimbalist of Smith College tells Alesia, "The subsidies grossly overestimate the role of intercollegiate athletics in higher education. This should be something that absorbs a much smaller share of outside resources." Moreover, as noted by Professor Rodney Fort of Washington State, "The simple fact is that the athletic department enjoys subsidies in many areas where other departments at the university must pay explicitly."
There is much, much more to this story, and I strongly encourage you to read it, as it is a masterpiece in the empirical research of sports economics. Part II of this story is being published on the front page of Saturday's Indianapolis Star, and it will soon be available on-line.
I also encourage you to check out Alesia's huge database on NCAA Financial Reports. It is the the most detailed, publicly available database of college athletic department financial information ever assembled. I just spent quite a bit of time on it and look forward to spending more.
-- Posted by Michael McCann @ 3/31/2006 06:12:00 AM --
Comments (7) --
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7 Comments:
I'd like to see this if all the 112 private schools would correspond and give their accounting numbers for the data. My college plays in the MAAC and all our schools are private so I couldn't find any new information on those schools.
But shouldn't the NCAA and this study be able to get those numbers because those colleges take federal money?
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