How to Curb Spending in College Athletics

Nearly a year ago, this article asked, how much is too much when it comes to spending on college football?  Assuming the answer is whatever they’re spending now, the next question is how to reform it.  I have a thought.  What if there was a cap on the amount of money universities could spend on college athletics?  Think about it.  University presidents and other observers are constantly decrying the “arms race” that exists today, yet nothing is done.  The reason: presidents know (or suspect) their counterparts are going to keep on spending and gaining a competitive advantage, and no president is going to risk crippling their athletic programs and alienating the alumni base.

But what if there was an NCAA rule which capped the amount of money you could spend each year?  Or perhaps a luxury tax imposed on those who spend over the cap?

A policy like this would allow presidents to put athletics spending on a more sustainable path, without the risk that competitors are going to exploit it and surge past their teams on the field.  It would help address the concerns faculty and other constituents have about spending at the expense of academics, including the public relations problem of increased athletic spending at a time of shrinking state appropriations and rising tuition for students.  Capping spending also means more schools would have the opportunity to compete for championships.  This is a big one.  Our country’s most popular sport by far, the NFL, has a hard salary cap to help provide all its teams with a realistic shot at taking home the trophy.  Even Major League Baseball, which doesn’t have a salary cap, has a luxury tax that teams must pay if they go over the spending threshold.

But why should the University of Texas be prevented from or penalized for spending as much on its athletic programs as its leadership and alumni please?  This is America after all!  Read its leaderships’ comments on this issue here.  They’re going to spend as much as they can and don’t see a problem with it.  But there is a problem.  Texas, Ohio State and others aren’t operating independently.  They are voluntary members of a conference and an association, with other institutions, upon which they depend for competition as well as the revenue they love to spend.  And the large majority of these institutions can’t and shouldn’t keep up.  Texas President William Powers said you don’t tell Albert Pujols he can’t hit in the 9th inning because it’s unfair to the other team; but that isn’t the analogy that applies here.  More on point would be the Angels can’t stack their lineup with nine Albert Pujolses without paying a hefty luxury tax.  In the NFL, you don’t get a backfield with three Adrian Petersons because you literally won’t be able to field a team and stay under the hard salary cap.  In leagues of athletic teams, rules are crafted to foster competition for the betterment of the league over and above the betterment of individual members.  A spending cap is precisely this type of rule.

An issue that would need to be resolved simultaneously with something like a spending cap or luxury tax is the Division I membership, which simply has too many schools which cannot compete at the highest levels.  I would not advocate for a system which tried to bring Texas football and Louisiana-Monroe football to a similar place in the financial “middle.”  In 2010 for example, Texas spent $25M on football; Louisiana-Monroe spent just under $3M.  They are both playing for the same championship.  That’s a joke and needs to be rectified with a split into more divisions.  But certainly you could do something with the top 50 or 60 (financial) football schools.  Michigan, Miami and Nebraska each spent $18M on football in 2010.  You think those schools are operating on the cheap?  Is there any need for those guys to spend more money?  Of course not, except for the fact Texas is outspending them by nearly 40%.

Whether it’s a hard spending cap or a luxury tax, there are controls that should and could be put into place to control spending in college athletics.  However, they will only happen if the presidents collectively decide it’s something they want to do.  Otherwise Mr. Powers and company at Texas will continue circling the Monopoly board, collecting properties, and charging obscene rent to the rest of the college athletics world.

Follow Daniel on Twitter: @DanielHare.

Posted on March 14, 2013, in Finance, Uncategorized and tagged , , , , , , , , , , , . Bookmark the permalink. Leave a Comment.

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