Category Archives: Pay-For-Play

College Athletes Can Form A Union: What’s Next?

The regional National Labor Relations Board in Chicago issued a stunning decision Wednesday, granting employee status and unionization rights to college football players at Northwestern University (PDF of decision here).  The decision will almost certainly be appealed to the national NLRB in Washington, D.C., and from there can move over into the federal appellate courts and ultimately the Supreme Court.  While we won’t have a final resolution to this issue anytime soon, the decision issued today was significant and will have immediate impact.

Remember, we’re less than three months away from a trial in the O’Bannon v. NCAA case which has been in the courts since 2009.  A judgment against the NCAA there would no longer allow it to profit off of student-athlete (or should I now call them employee-athlete-students?) images and likeness without compensation.

We also had a new case filed just this month directly targeting the cap on scholarship amounts, demanding that the free market determine what a school may offer a prospective student-athlete.

In January, the NCAA hosted sessions at its convention on the future of Division I athletics.  But the feedback was skeptical and the detail missing.  The presentation reeked of bureaucratic speak such as new committees and task forces.

Now with this NLRB decision, you get the feeling the entire student-athlete / amateurism model is going off the rails.  But what did the decision actually say and how does it apply?

It says the scholarship (walk-ons are excluded) college football players at Northwestern University are employees, and have the right to unionize and collectively bargain for compensation and benefits.  The decision focused mostly on the level of control the school, via its athletic department and coaching staff, has over its athletes.  It covered in depth the athletes’ daily routine, the hours spent on football, and the rules that must be adhered to in order to remain on the team and keep the scholarship.  Special emphasis was placed on the fact the scholarship is contingent on a number of different factors which all ultimately are controlled by Northwestern, the employer.

Northwestern tried to argue that a 2000 NLRB decision involving graduate-students at Brown University should control, and lead to a determination the athletes are not employees.  (I went through a detailed analysis of this last month).  The NLRB said the Brown case did not apply here, and even if it did, the result would be the same.

Presumably, today’s decision would allow other private university athletes to follow a similar path.  The NLRB does not govern public institutions, so athletes at state schools will have to navigate the unionization process in their own state under state law.

To this point, the College Athlete Players Association (CAPA) has not said it will pursue increased financial compensation and/or salaries for performance.  It’s focus has been on better health care as well as some type of structure to receive funds from likeness and image use, as well as sponsorship revenue (i.e. along the lines of O’Bannon case issues).  However, the authority granted by the NLRB today would certainly permit increased compensation to be included in any collective bargaining.

It’s also difficult to read today’s decision and not think it could very easily be applied to many other sports at many different levels down the road.  As I mentioned, the focus was much more on the time commitment of the athletes and the control the coaches and school have over them, rather than the large amount of revenue the athletes in major college football generate.  Many student-athletes in non-revenue sports and at smaller schools are on scholarship, put in the same hours, and are under the same university control.  It will be interesting to see which group of college athletes follows in Northwestern football players’ footsteps.

There are two key dates coming up soon as this process moves forward.  Northwestern must file a list of eligible employees with the NLRB (Chicago) by April 2nd so that an election can take place regarding forming the union.  Then, Northwestern has until April 9th to file an appeal with the national NLRB in Washington, D.C.  It most certainly will do that, and where it goes from there is likely a long, windy road through the federal courts.

Northwestern football players won a victory today.  What remains to be seen is whether, upon further review, the decision is confirmed or reversed.

 

Follow Daniel at collegesportsbriefs.com and @Daniel Hare.

 

 

Preparing for a post-O’Bannon world

Stewart Mandel has a piece out today on SI.com describing the range of urgency athletics administrators are feeling regarding the O’Bannon v. NCAA case currently making its way through the courts.  For those of you who haven’t kept up with the case, I wrote about it in more detail here.  Essentially, former UCLA men’s basketball star Ed O’Bannon and his co-plaintiffs are suing the NCAA, and other defendants, for not sharing the revenue generated in part by student-athletes both while they are in school (e.g. TV) and afterwards (e.g. video games, archive footage).  If the O’Bannon plaintiffs were to win, or even settle the case in their favor, the current structure of college athletics will be forever altered.

Mr. Mandel profiled University of Southern California athletic director Pat Haden’s concern that the case is by no means a slam dunk for the NCAA, and how he and his colleagues should be preparing for the aftermath if it were to lose the case.  I appreciated Mr. Haden’s comments.  Up until now the little we’ve heard from administrators are the doomsday scenarios spouted off by the likes of Big Ten Commissioner Jim Delaney, who claimed his schools would rather de-emphasize sports and join Division III than go along with any type of pay for play scenario.

Mr. Haden is a lawyer.  He’s been reading the articles from legal analysts and scholars.  He knows the NCAA is vulnerable and the case is soft.  More importantly, he knows the stakes have never been higher.  It reminds me of this Family Guy/Star Wars clip, with Mr. Haden as Darth Vader and NCAA president Mark Emmert as the Empire’s henchman talking about the “invulnerable” Death Star (current NCAA structure).  Mr. Haden is right to be concerned.  He is right to be asking questions.  He is also right to be taking proactive steps to address the possible outcomes, or perhaps look at acceptable settlement options.

The contrast to Mr. Haden is University of Texas athletic director DeLoss Dodds.  He was also quoted in Mr. Mandel’s piece, but with much less concern or urgency than Mr. Haden.  Mr. Dodds seemed to think he and other athletics administrators have “more immediate things to worry about,” and “have no control over (the case).”  In my view, nothing could be further from the truth.  The case exists only because of how the NCAA and its members (of which the University of Texas and Mr. Dodds is one) have constructed the current college athletics model.  If those in power change the model, the case goes away.  And while Mr. Dodds might simply be one person in a massive bureaucracy, he leads arguably the most powerful athletic department in the country, and SI.com recently named him the 8th most powerful person in college athletics (notice Ed O’Bannon ranks #4).  My guess is others will listen when he speaks.

Last week much of the country’s attention was fixed on the Supreme Court’s hearing of two significant same-sex marriage cases.  Reading through much of the post-argument commentary from both sides, it seemed apparent that at some point in the future, though perhaps not as a direct result of these two cases, same-sex marriage will be legal across the country.  I get that same feel about the O’Bannon case and paying student-athletes.  It may not be this case or right now, but at some point in the future college athletes will be paid.  The only question is when the new era is ushered in, and how.  Pat Haden recognizes this and wants to take action; good for him.

Follow Daniel on Twitter at @DanielHare.

The Debate over Stipends for Student Athletes

Guest author: Mit Winter

Division I student-athletes are currently only allowed to receive financial aid based on athletics ability up to the value of their tuition and fees, room and board, and required course-related books.  In October of 2011, the NCAA Board of Directors approved a proposal to allow Division I members to give student-athletes a stipend of up to $2000 on top of the items listed above.  The idea is that the money will help cover the difference between the value of a full athletic scholarship and the actual cost of attending college.  As anyone who has attended college knows, students have everyday expenses that go beyond their tuition and fees, room and board, and books.  Things like laundry, transportation, toothpaste, and clothes (and cheap beer – my preference in college was Natty Light). An athletics scholarship is not allowed to cover these expenses.

But, the stipend proposal was tabled in January after more than 160 schools requested an override. These schools argued that the proposal was too expensive for them, that it would give the wealthier schools another advantage in recruiting, and that it equals “pay for play.”  Despite this opposition, the Board of Directors recently reiterated its support for the stipend proposal.

The activity summarized above brings up two areas of discussion.  1) The proposal itself, and 2) the opposition to the proposal.

First, let’s address the proposal.  While it moves things in the right direction, it doesn’t go far enough.  Here’s why:  non-student-athletes can receive merit based scholarships that cover their full cost of attendance.  As one example, the Charles Scholarship at Davidson College includes the recipients’ room and board, tuition and fees, books, a travel allowance that covers three round trip flights to Chicago (it’s a scholarship specifically for students from Chicago), a personal expense allowance, and special study opportunity funds.  Why shouldn’t student-athletes be able to receive scholarships that cover all of these expenses?

One of the usual arguments is that providing student-athletes with athletics-based money for personal expenses equals “pay for play.”  How can that argument be reconciled with the fact that schools are already providing non-athletes with merit-based money for personal and travel expenses?  It can’t be.  When a trombone player receives a full cost of attendance scholarship no one calls that pay for play.  No one complains that Davidson is paying the Charles Scholarship recipients to study.

Another argument that has been made against athletics-based cost of attendance scholarships is that schools will artificially inflate the cost of attendance figures for athletes.  But, federal regulations and NCAA bylaws already prevent this from happening.  Federal regulations only allow certain categories of expenses to be included in the cost of attendance calculation.  And NCAA bylaws mandate that the cost of attendance for student-athletes must be calculated in accordance with the cost of attendance policies and procedures for general students.

Those who argue against athletics-based cost of attendance scholarships also overlook their potential to address a big issue in college sports: third party influence.  It is well-known that agents, runners, and other third parties looking to gain influence with student-athletes often offer them money or other gifts.  Take the recent case ofKansasState’s Jamar Samuels.  Samuels was suspended the day that K-State played Syracuse in this year’s NCAA men’s basketball tournament.  His crime was accepting $200 from his former AAU coach.  Samuels allegedly needed the money for food.  The suspension forced Samuels to miss the last game of his college career.  Samuels likely would not have needed the money if he had received a full cost of attendance scholarship.

There are probably hundreds, if not thousands, of transactions like this occurring every year between third-parties and student-athletes.  Taking money from third parties is very tempting to those student-athletes whose families do not have the means to provide them with money for personal expenses.  Full cost of attendance scholarships won’t end third-party influence, but they will help.

Now, let’s go back to the stipend proposal.  The schools opposed to the proposal are generally the Division I members outside of the BCS conferences.  These schools mainly argue that they cannot afford to pay the stipends and, as a result, the schools with wealthier athletic departments will have yet another recruiting advantage.  While the argument does have some merit, the non-BCS schools are making this a bigger issue than it is.

The reason: non-BCS schools are not currently winning recruiting battles with BCS schools.  Even the worst BCS schools usually win in head to head recruiting battles with non-BCS schools.  The BCS schools already have many other recruiting advantages that are more significant than any advantage that would be gained by offering a $2,000 stipend.  Things like history and tradition, media exposure, fan support, facilities, and schedules filled with games against the traditional college basketball and football powers.

A good way to look at this is to assume that the non-BCS schools are the only schools allowed to offer the stipend.  How many student-athletes currently attending a BCS school would have gone to a non-BCS school instead?  Probably not many.  Would Matt Barkley have gone to Fresno State instead of USC?  No.  WouldOklahoma’s third string running back have gone to UTEP?  Not likely.  Would Kansas’ back-up point guard, Naadir Tharpe, have gone to Boston University(near his hometown)?  Negative.

Another thing to keep in mind in this debate is that the stipend proposal is not a novel idea.  NCAA members were allowed to give student-athletes $15 a month for personal expenses until the early 1970’s.  The stipend was eliminated in an attempt to trim the costs of running an athletic department.  But, the enormous media rights contracts that Division I conferences are signing and will sign (I’m looking at you football playoff), will bring in more athletics-based revenue to Division I schools than at any time in the past.  With this new money rolling in, schools should have the option of sharing some of that money with the student-athletes who play a large part in generating it.  The stipend proposal is a good start.  Once the Division I members give the proposal a try they will hopefully continue on to the logical end place:  the ability to award athletic-based cost of attendance scholarships.

NCAA Tables Stipend for Student Athletes

The NCAA announced yesterday that over 125 schools have called for an override of the legislation that would give schools the ability to provide a $2,000 stipend to student-athletes, which is enough to suspend the legislation until the NCAA convention in January.

The NCAA’s press release on the matter says the main reasons schools cited were: “how quickly it was implemented, perceived impact on competitive equity, application of the allowance for student-athletes in equivalency sports, and implications for Title IX.”

In January, the Board can proceed in one of three ways. First, it can choose to do nothing, which would keep the suspension in place until an override vote. Second, it can choose to eliminate the rule. Or, third, it can alter the proposal, which would create new legislation that would require a vote and would be subject once again to a 60-day override period.

Nearly 10,000 prospective student-athletes signed National Letters of Intent during November’s early signing period. Any allowances offered in writing to those prospective student-athletes will be honored. However, prospective student-athletes signing during signing periods in February and April cannot be offered the additional monies unless action is taken at the January meeting that allows the legislation, or similar legislation, to go forward.

Why College Athletes Will Never Be Paid

Today is the first in a series with Ruling Sports on the NCAA presidential retreat currently taking place. There are three major issues on the agenda: finances, academics and integrity. Today I’m posting on the financial discussion. Tomorrow, Alicia Jessop of Ruling Sports will write about academic issues, and Friday both Alicia and will post about integrity issues.

Yesterday, NCAA President Mark Emmert met with over 50 university presidents in the first day of a two-day retreat. The topic of the day was finance and it seemed there was a genuine desire to work toward revising NCAA regulations to allow for scholarships that cover full cost of attendance. To coincide with the discussion, I showed you how much it would cost athletic departments to increase scholarships to cover cost of attendance.

“There was an absolute, complete consensus that we would never move to pay-for-play. No one, including me, believes that paying student-athletes is even remotely appropriate in the collegiate model. We talked directly about that and there’s not a single president that I’ve ever met that thinks that’s an appropriate thing to do and certainly not this group here.”

Why the firm rejection to the idea of paying players? Perhaps because it would change the entire landscape of college athletics. I’ve been working through a chapter in my upcoming book, Saturday Millionaires: why college athletes will never be paid and other uncomfortable truths about college football, and I want to share with you something I’ve explored that I think effectively ends the discussion on pay-for-play (if Title IX wasn’t enough).

No one can say for sure, but somewhere not far beyond cost of attendance is employment status, either as an employee or as an independent contractor. The definition of “employee” varies according to various federal acts and also state legislation. It’s unlikely a court, Congress or the National Labor Relations Board would find a student athlete is an employee based on a scholarship that covers cost of attendance, as many academic scholarships and other financial aid cover up to cost of attendance. However, any amount paid over that amount could surely be used to make a strong case that a college athlete is an employee. 

If a court, Congress or the National Labor Relations Board ruled college athletes were employees, a host of new issues arise, as do costs. In addition to the compensation provided to athletes, as an employer the athletic department would have to pay the following for each athlete: Social Security at a rate of 6.2% on the first $106,800 of compensation (in 2011), 1.45% for Medicare, with no cap, federal and state unemployment tax and worker’s compensation insurance, which varies in expense by state by averages 2-3 percent. 

 The real cost, however, is in the athletic department losing its tax exemption under Internal Revenue Code Section 501(c)(3). Currently, athletic departments (which are generally a separate legal entity from the university), athletic foundations/booster clubs and bowl games enjoy tax exempt status because they “promote amateur athletics,” an exempt purpose under the Code. If college athletes were compensated and found to be employees, revocation of this tax-exempt status would surely follow.

This would also be the case if college athletes, instead of being compensated by the athletic department, were allowed to profit from endorsements. It would only take a finding by the Internal Revenue Service that these athletes were no longer amateurs (ad I’m sure they’d hate to add another revenue source). And if college athletes are no longer amateurs it’s not just athletic departments who lose their 501(c)(3) status, it’s bowl games as well. 

In addition to the taxes each athletic department would have to pay on any income, they’d likely lose large amounts of revenue as a result of donors no longer being able to make tax-deductible contributions. How would that impact athletic departments, which rely heavily on donor contributions to survive? A CFO at one FBS school told me a “very conservative estimate” would be athletic departments losing 50% of their current donations. I polled ten athletic department executives in total and the range was 25-50 percent. 

Not only would donors no longer be receiving a tax deduction for their donation, an important reason for donations, but they could be paying for the pleasure of donating to the university, because their donation could now be considered a gift. The Internal Revenue Code prescribes a gift tax on any transfer of property (including money) for which something of equal value is not received in return. Ticket-related contributions would likely be immune to the gift tax, at least partially up to the fair market value of the ticket, but any portion that is currently tax-deductible would no longer be.

Other donations for which nothing is received in return would be subject to the gift tax, payable by the donor. The Internal Revenue Code allows for gifts of up to $13,000 to be tax-free (according to 2010 rates), so the largest decline would probably be in gifts above that amount for endowments and capital campaigns. Gator Boosters, Inc. tells me approximately $2.5-2.7 million of last year’s contributions were from gifts totalling over $13,000 for endowments or capital campaigns.

For an idea of the impact reduction in contributions would make, first consider that contributions are generally a larger source of revenue than conference distributions and NCAA March Madness combined.

Another area where expenses would be affected by a loss of tax exempt status would be capital costs. Currently, most athletic departments use tax-exempt bonds to finance renovation and construction costs. The interest on tax-exempt bonds is exempt from federal tax, and sometimes from state and local tax. In addition, the interest rates are generally lower than commercial lending rates.

If the university were a tax-exempt entity, it could issue the bonds, or be the beneficiary of an issue, and build athletic facilities. However, that could impact a university’s ability to build academic facilities. There is a limit to the amount of bonds that can be issued, based on revenue stream, before the university’s rating is impacted.

Combining the added cost of obtaining commercial loans for facilities and no longer being able to solicit tax-exempt donations could cost an athletic department tens of millions of dollars each year, on top of the cost of compensation for the new employee athletes.

The school isn’t the only one with new expenses. With compensation come expenses for athletes. Not only will they be taxed on the new income, they’ll also now be taxed on the value of their scholarship. It is unlikely the scholarship would fall under the exception for work-related education, which requires what it implies, that the education be related to the work. Hard to argue you need classroom education on sociology in order to play college football.

In my book, I detail examples of costs to universities and students. In some scenarios the student-athlete would owe 50-150% of his new compensation in taxes (before any deductions or credit), because he’s also be taxed on the value of his scholarship.

And don’t forget, if college athletes are employees, there’s the possibility of collective bargaining, lockouts and strikes, as I detailed last month.

Is it a certainty that it would all play out like this if student-athletes were paid above and beyond cost of attendance? No, but it’s a possibility – one that’s far too risky for college athletics.

As I’ve said many times before, it’s not as simple as deciding tomorrow that student-athletes should be paid.

What Would Cost of Attendance Scholarships Cost?

It has been widely reported that both Jim Delaney, Commissioner of the Big Ten, and Mike Slive, Commissioner of the SEC, have made statements supporting the increase of scholarships to cover cost of attendance. Currently, athletes on full scholarship receive free tuition, room and board. Cost of attendance is often described as the amount necessary to cover all of a full-time student’s reasonable expenses for the year. It would cover things like gas or other transportation costs and laundry money.

Each school individually determines its cost of attendance. Some use figures from the federal government and some use student surveys to determine the amount. There’s also variance for expenses like health insurance or a computer, if the school requires students to have a computer. For example, University of Florida includes the cost of a computer and related equipment in its cost of attendance figure:

Computer costs built into student budgets are “annualized.” This means the figure is derived from one year’s monthly costs for purchase or lease of equipment (including printer, modem/ethernet, CD ROM drive) and annual software purchases/upgrades. These costs are figured over a two-year period.

Florida determines the transportation cost by not only calculating local transportation costs but also the cost of “three round-trips to Miami per two semesters”. Book costs are calculated “with 25% of books purchased used at 75% of new book price, and assuming resale of 50% of texts at 50% of cost.”

Housing is also a consideration when calculating cost of attendance. Obviously this figure is much higher at a school located in an expensive city like Los Angeles than one in Bowling Green, Kentucky.

One concern in raising scholarships to cost of attendance is the opportunity for schools to artificially inflate the figure to gain a recruiting advantage. This could be eliminated by creating some sort of standard for calculating cost of attendance.

The potential for artificially inflating the figure aside, cost of attendance increases would be considered a part of the athlete’s scholarship. The Athletic Financial Assistance requirement of Title IX requires that scholarships, both in terms of the number of scholarships and the value of scholarships, be allocated proportionately in accordance with the number of female vs. male athletes. Thus, increases in scholarships to cover cost of attendance would essentially be necessary across the board in the athletic department, with athletes in every sport being treated equally. Football isn’t treated differently just because it’s oftentimes the only profit-producing sport. Title IX doesn’t distinguish between sports based on profit.

This is where it starts to get expensive for athletic departments. At SEC Media Days in July 2011, Commissioner Mike Slive noted the difficulty some institutions would have if scholarships were increased to cover cost of attendance: “We recognize that this proposal may be a financial hardship on some, yet at the same time economics cannot always be the reason to avoid doing what is in the best interests of our student athletes.”

Only five of the SEC’s twelve member institutions are self-sustaining. That means that right off the bat over half of Slive’s members cannot afford to pay increased scholarship costs in their current budget.

USA Today recently posted figures showing the cost of increasing scholarships at each university. However, these figures are based on an average of in-state cost of attendance and out-of-state cost of attendance, so they’re not exact:

School Cost Per Scholarship Total Cost
SEC
Alabama $3,940.00 $1,020,145.00
Arkansas $3,576.00 $835,354.00
Auburn $5,432.00 $1,352,514.00
Florida $3,290.00 $826,119.00
Georgia $3,272.00 $813,419.00
Kentucky $2,610.00 $664,405.00
LSU $2,880.00 $715,824.00
Mississippi $6,008.00 $1,299,230.00
Mississippi State $4,800.00 $1,096,080.00
South Carolina $6,844.00 $1,678,080.00
Tennessee $6,482.00 $1,581,738.00

South Carolina, who would incur the most expense according to USA Today’s loose figures, already takes in over $2.1 million in student fees to balance its athletic department budget. If you were the AD, where would you get the extra $1.7 million for increased scholarships? As non-athletes to pay it via student fees? That seems absurd. Ask the university to cover it? According to the University’s audited financial statements, its operating expenses already outpace its operating income by $192.2 million. It takes state and federal appropriates and income from investments and endowments to get its financial statement back into the black.

How about eliminating sports? Cutting men’s indoor and outdoor track and cross-country, tennis and swimming would produce just enough savings to cover the $2.1 million in additional cost of attendance costs. Unfortunately, it would also put South Carolina below the required number of sports for Division I. If they had to cut one or more women’s programs, it could put them out of Title IX compliance.

Or, maybe it’s as simple as increasing football ticket prices.

Mike Slive said economic detriment to some members isn’t a good excuse for not looking into increasing scholarships to cover cost of attendance. So, if you were the athletic director at one of the seven SEC institutions that’s not self-sustaining, how would you find the money to cover this new expense?

You can see USA Today’s full charts on cost of attendance here.

Related pieces on BusinessofCollegeSports.com:

Sports: The Best Paid Internships For College Students

I’m often asked why I am not in favor of paying college athletes. It’s simple: they already get a pretty sweet deal. Note: I’m talking about just the athletes on full scholarship, and particularly college football players.

While I’m busy paying back over $1,000/month for the next 26 years for both my college and law school education, college athletes on full scholarship graduate with zero student loan debt.

One of the arguments I hear most frequently is that college athletes can’t get jobs like other college students. Maybe not, but I think they have the best paid internships of virtually anyone on campus. As a student, I interned for two law firms, for the WTA Tour, and for a judge. While I received invaluable career training, I still have those pesky student loan payments. The same is true for students who want to work in radio, accounting or dozens of other fields. Most do internships for little or no pay and perhaps school credit. Which means in the latter situation the student is actually paying for their internship in the form of tuition for those credits!

Meanwhile, the athletes on campus are getting paid anywhere from $56.25 to $83.25 per hour, at least that’s the calculation Jay Paterno came up with for Penn State’s student athletes. That’s not counting the value of a degree and their future earning power, or the value of the world-class strength and conditioning training or medical treatment they’re receiving.

A Division I strength and conditioning coach tells me he would charge at least $60 per hour if he were training in a private gym. He says in a group situation it would be $30/hour for each person at the absolute minimum. He tells the minimum number of hours per year a football or basketball player would spend training is 124 hours, with 145 hours being very possible. That would make the range of value anywhere from $3720 (124 hours x $30 discount rate) to $8700 (145 hours x $60 rate) for strength and conditioning training alone. And that’s if each workout is only an hour. Double those numbers for two-hour workouts.

Now that we’ve taken a glimpse at what a student-athlete would pay in the private sector for all he or she receives, let’s look at what an athletic department actually spends on each student athlete. Using the University of Florida’s audited financial statements, I have broken down some of the items the athletic department pays for on a per student basis using Florida’s figure of 547 student-athletes for the 2009-2010 school year:

Scholarship $14,810.00
Meals over break, postseason and training table meals $1,552.00
Training Room $5,359.00
Office of Student Life (career and academic counseling and support for athletes) $3,615.00
Strength  & Conditioning and Equipment Rooms $2,458.00
     TOTAL $27,794.00

That’s nearly $30,000 per student-athlete the athletic department writes checks for each year. Not included in the above is team travel, coaching salaries, compliance staff salaries, facilities (construction, improvement and maintenance), marketing, or administrative expenses and salaries, all of which are necessary in order for the athletic department to operate so each student-athlete can compete in his/her sport. Those numbers would greatly increase the amount spent per student.

My chart above also doesn’t include the world-class medical treatment received when a student-athlete sustains an injury. For example, renowned doctor James Andrews is a team doctor for both Alabama and Auburn. Dr. Andrews has performed surgery on famous professional athletes like Drew Brees, Michael Jordan and Roger Clemens.  

A friend who works in college athletics recently told me about a trip he took to visit a Division I football practice. He described the lavish breakfast buffet set up for the players (which included a carving station – we’re not talking about the powdered eggs and dry cereal you get at the local hotel breakfast buffet), the indoor practice facility to protect players from the heat, the world-class weightlifting equipment and the smoothie bar where athletes could get some refreshment between workouts. Tough life, huh? And this wasn’t even at what I would consider a top Division I football program. This athletic department isn’t even on the self-sustaining list

So why is public sentiment so strong that college athletes deserve to be paid above and beyond what they’re already receiving? The problem is the amount of money proponents of paying athletes believe each athlete is bringing into the school. However, this is not limited to college athletics. Plenty of interns do valuable work for companies. For example, during my time at one of my law firm internships, I spent months pouring over discovery. I flagged the documents that eventually led to the plaintiff settling the case for$2 million. The law firm’s cut was roughly $600,000. I received nothing but the experience. I believe that experience helped me succeed in law school and boosted my resume so I could obtain other jobs in the legal field as I continued down my career path. The value of most internships is in the experience, not the paycheck.

College athletes play for one of three reasons: (i) experience and exposure for a future career in the sport, (ii) a free education, or (iii) because they love to play. If it’s the first reason, they’re essentially doing an internship, just like I did and many other college students do each year. Many internships are unpaid, regardless of how much money the company makes. Athletes on full scholarship are getting tuition, room and board on top of access to some of the best facilities, strength and conditioning staff, medical treatment, academic support and sometimes far better lodging and dining than other students. Sounds like the best paying internship I’ve heard of.

Why then has the debate over paying college athletes reached an undeniable roar? Likely because of posts like this, where I showed you the profit made by the top football and basketball programs. Fans see those numbers and find it shocking that athletic departments are banking that kind of cash while the athletes go unpaid. Let’s not forget that football or basketball or any other profit-producing sport (of which there aren’t many others) is just one unit of an athletic department. Just like the Coca-Cola Company funds Mr. Pibb even though Coca-Cola is its best-seller, an athletic department uses funds from football and other profit-producers to fund golf and swimming and baseball.  

All that being said, I’m not completely opposed to paying athletes when there is a direct correlation between them individually and the school making money. If there’s a way to compensate them for jersey sales and other uses of their likeness without running afoul of Title IX, that makes sense to me. The rest of it is a lot of indirect correlation that can’t be measured. There might be one football player on a team who gets the most media attention, but no one football player gets a team to a bowl game or convinces Nike to sign a multi-million dollar contract with the school.

I’d also be in favor of allowing them to work (which the NCAA currently regulates) to earn extra money, but you have to find a way to allow it without opening the system up to abuse by boosters and other interested parties who overpay for a “job” or “internship” that doesn’t really exist. Skip Oliva at Saturday Down South had a great idea in a futuristic piece he set in the year 2021:

“It also helped that the National Football League, after years of ignoring the problems with its de facto developmental system, took an active role in changing college football. “The big question was always, ‘Do you pay the players?’” ACF’s Meyer said earlier this week. “What we eventually realized was, it’s not whether you pay the players; it’s whether you maximize their professional educational opportunities. And that’s when the NFL stepped in by creating the Spring League.”

Since 2016, the NFL Spring League has provided ten-week internships for college upperclassmen and recent graduates to play an exhibition schedule in NFL cities under the direction of longtime pro coaches. “The kids get paid a stipend for the internship without altering their ‘amateur’ status within ACF,” Meyer said, adding, “It provided a necessary safety valve to relieve the pressure built up under the NCAA.”

For more on this topic, you can read my explanation on why Title IX presents a serious roadblock to paying college athletes. Also, I’ll be posting something in the next week or two about the resources available for student-athletes who are struggling to get by, including the funds I mentioned in yesterday’s post about March Madness money (which, as a sneak preview, include funds for things such as attending family funerals or completing your degree after eligibility or after injury).

Collective Bargaining, Lockouts and Strikes: The Unintended Consequences of Paying College Athletes

Yesterday, my friend Lisa Horne over at FOX Sports published a really interesting piece on how paying college athletes could lead to them being classified as employees and capable of collective bargaining. Horne interviewed me for the piece several weeks ago, and I’ve been eagerly awaiting its publication.

As Horne says in her article, “If the rules-makers can’t stop a kid from trading pants for tattoos, how can they expect to prevent an 18-year-old — with maybe $100 in his checking account — from listening to a union rep’s lure of riches?” She makes an excellent point. If student-athletes were classified as employees, there’s no reason to believe they wouldn’t form a players association and collectively bargain for everything from safer working conditions to their share of the revenue pie.

And they would have every right to do so as employees. But can you imagine the impact of a strike or lockout in college football? It would make the NFL lockout look like child’s play. As I said in Horne’s article, every Saturday an average of 5 million fans pack Division I stadiums. Compare that to just 1.1 million on any given Sunday in NFL stadiums. Add in the economic impact to each city on gameday, which for top programs is in the tens of millions of dollars, and the numbers are staggering.

Increasing scholarships to cover cost of attendance is not going to trigger a reclassification of student-athletes as employees. However, any pay over that very well could. Here’s how it might go. Let’s say college athletes are being paid some amount, any amount, over cost of attendance. One or more players decide schools, conferences and/or the NCAA are violating antitrust laws. Essentially, antitrust laws disallow business practices that discourage competition or restrict an employee’s ability to make a living. So, for example, players could sue over the requirement that they sit out one year when transferring. Similar issues in professional sports have been considered by courts such as the franchise tag in the NFL and the reserve clause in Major League Baseball.

Restraints such as not allowing a player to reach free agency for a specified number of years are only allowed in professional sports because they’ve been collectively bargained. The product of collective bargaining between an employer and unionized employees is protected by the non-statutory labor exemption.

So, back to our scenario. One or more players sues a conference or the NCAA for a restraint like the rule regarding transfers. If players were classified as employees (which could be determined in a suit like this), it’s highly likely the court would find this to be a violation of antitrust laws. Much like we’ve seen in the history of each professional sport, the players would form a players association and collectively bargain these issues with the NCAA, assuming the NCAA was still the governing body for collegiate athletics. If not the NCAA, it would be whatever governing body we have for collegiate athletics.

What would collegiate athletics look like then? Maybe there would be a salary cap for each athletic department or even each football program. Players would likely get a share of licensing revenue. Health insurance and maybe even post-career benefits might be covered by schools or the governing body. Since schools would be receiving less revenue than they currently receive, they’d likely have to cut sports that don’t turn a profit in order to make the finances work, which generally means any sport outside of football and men’s basketball. And remember, Title IX still applies. Women have to have similar opportunities. This is true even if you take football out of the NCAA. As long as football is still associated with the school, Title IX (a federal law) applies.

Another area where you begin to see the system doesn’t work is when you talk about having a draft or trading players. Those things wouldn’t fit in collegiate athletics. It might be contrary to what you think, but I would imagine most players have an opinion about where they want to go to school. One that’s much stronger than say a prospect in the MLB draft who wants to play for his hometown team. Brett Hundley at UCLA is said to have chosen UCLA for its pre-med program. Because many of these athletes are taking advantage of the academic opportunities afforded to them, it doesn’t make sense to have a draft or allow trades. What if they ended up at a school that didn’t have their major?

None of this is to say that a system couldn’t be created that worked. However, it’s not as easy as simply deciding tomorrow that college athletes should be paid. There are a number of ramifications to that decision, from figuring out how to comply with Title IX, to finding the money in the majority of athletic departments who aren’t self-sustaining, to the myriad of issues that arise if college-athletes are reclassified as employees.

How Title IX Relates to Paying Players

I’ve previously written about some of the impediments to paying college athletes. One of the roadblocks I mentioned is Title IX.

Most of you know Title IX requires comparable treatment of women when it comes to collegiate athletics, and a great many of you also know about the so-called three-prong test for compliance. What some of you seem to not know, however, is that the three-prong test only covers one of three requirements for Title IX compliance.

The three requirement areas are Participation, Athletic Financial Assistance and Treatment of Athletes.

Let’s start with the three-prong test many of you now, which falls under Participation. This area basically measures the opportunities for female vs. male athletes. Institutions can show they comply with this area by meeting one of the following prongs:

  • Proportionality: the institution can show that it offers opportunities for females and males based on their respective enrollment numbers at the university.
  • History and Program Expansion: the institution can show that it has continued to offer new and additional opportunities as the needs of the underrepresented sex have risen.
  • Full accommodation of interests and abilities: the institution can show that the current offerings fully meet the interest level of the underrepresented sex.

The second requirement for compliance deals with Athletic Financial Assistance. The only express requirement under this section is that scholarships be allocated proportionately in accordance with the number of female vs. male athletes. There are two things to discuss here: (i) cost-of-attendance increases for scholarships, and (ii) other types of payment.

Here’s the bottom line for increasing scholarships to cover cost-of-attendance: if scholarships are increased to cost-of-attendance, as suggested recently by Big Ten Commissioner Jim Delaney and SEC Commissioner Mike Slive, they’ll have to be increased for all student athletes in order to stay in compliance with this requirement.

Ohio State already pays over $15 million back to the university for grants-in-aid. Could they afford a larger number? Sure, although it would mean pulling even more money than they already do from boosters or interest on their endowment, or it could even mean choosing to cut some of the non-revenue sports, most likely men’s sports. 

But what about a school like Western Kentucky? They already spend $5.6 million on grants-in-aid, and it takes $8.2 million from the University to balance their budget. How do they afford to pay players?

I use Western Kentucky as an example because I have their budget in front of me, but there are plenty of programs in AQ conferences who rely on assistance.  Virginia, for example, relies on over $12 million in student fees to balance their budget. Florida State? $6.9 million. How do those programs afford to pay players? And if they can’t find a way to afford it, how do they recruit against the programs who can?

Another wrinkle with increasing scholarships to cover cost-of-attendance is that it might actually disadvantage the student athlete financially. I recently spoke with a member of a compliance department who explained the situation like this:

If you took the federal guidelines for financial aid, schools are not allowed to award a student beyond their COA.  

But currently, a full scholarship student-athlete with an COA of say $20,000 and a full athletic grant-in-aid of $17,000 would be able to receive an additional $5500 in Pell Grant (if eligible) bringing his/her total scholarship/financial aid package to $22,500 without being in violation of federal law. Pell Grants are excluded and can allow a student to go over COA. Now if schools offered a 100% COA athletic scholarship, the same student would only be able to receive $20,000. They would have a shortfall of $2,500. In order to maximize this for the “good of the student-athlete” you would have to reduce the 100% scholarship in order to award the student his/her entitled Pell Grant.
 
This works differently with other grants, scholarships or loans. Under the same scenario but with a student who is not Pell Eligible, they would only be able to receive additional financial up to the COA.

For those who aren’t familiar with Pell Grants, they do not have to be repaid by the recipient.

What if players are paid in some other fashion outside of their scholarship? In the eyes of Title IX, it’s all really the same. The Office of Civil Rights has previously offered this interpretation with regards to boosters or other donors who donate funds for specified sports: a school cannot use earmarked funds as an economic justification for discrimination. The school can honor the sport-specific designation for such donated funds, but it still must comply with the proportionality requirement. It cannot dedicate  those funds to say football, throwing the proportionality out of whack, and then say they had to do so because the funds were earmarked. The excess funds that cannot be applied simply have to be put aside for the future. 

Similarly, those types of funds cannot be used to provide greater benefits to male athletes than female athletes under the next requirement: Other Program Areas.

Other Program Areas basically looks at how athletes of both sexes are treated in terms of facilities, support and benefits. The following eleven criteria are looked at in their totality for each sex:

  • Locker Rooms, Practice and Competitive Facilities: this factor is pretty self-explanatory. It looks at the facilities provided for both practice and competition from the locker room to the playing surface to practice facilities.
  • Equipment and Supplies: again, pretty self-explanatory. The quality, amount, availability, etc. of equipment and supplies will be reviewed.
  • Scheduling of Games and Practice Times: this factor looks at everything from opportunities provided for practice, competition, pre- and post-season to the time of day practices and competitions are held.
  • Publicity: this covers everything from the publications produced for each sport to the resources devoted to promoting each sport.
  • Coaching: this factor encompasses everything from the number of coaches for each sport to the expertise of those coaches, their compensation, etc. When compensation is considered they look to a number of factors, so don’t get carried away with the fact that football and men’s basketball coaches tend to make more. Not only are there a number of things considered under just this factor, but this factor is only one of eleven that are viewed in their totality.
  • Travel and Daily Allowance: this factor is another one that comes into play in the debate over whether athletes should be paid. Not only are the monetary figures considered, but also the length of stay before and after a game or competition.
  • Academic Tutoring: this factor considers the availability of tutors for men’s and women’s programs, the qualifications of those tutors, the compensation provided to them, the number of athletes tutored per session, etc.
  • Provision of Medical Training Facilities and Services: everyone from medical personnel to athletic trainers are considered under this factor. Also included is weight training and conditioning facilities. Expenses and the qualifications of such personnel are all reviewed. 
  • Provision of Housing and Dining Facilities and Service: this one is self-explanatory but covers everything from the type of housing provided, the number of people per room, the laundry services available, parking spaces allotted and housekeeping services.
  • Recruitment of Student Athletes: under this factor there must be equal opportunities to recruit for coaches of both male and female athletes. Monetary expenditures are reviewed as well as the overall treatment of athletes in the recruiting process.
  • Support Services: this factor reviews the administrative-type services provided to each men’s and women’s sport. 

Hopefully you can now see why Title IX provides an enormous road block to paying college athletes. Let me remind you that Title IX is a federal law, not an NCAA regulation.

Problems with Paying College Athletes

Heisman Trophy Winner Cam Newton

I recently attended a conference where I heard a very intelligent attorney contradict himself over the course of an afternoon. His diametrically opposed opinions are ones I think are not uncommon amongst college football fans. Early on in the day, he admonished college athletic departments for relying on direct institutional support and state government subsidies to in order to operate in the black. Later that afternoon, he made the case for why college athletes should be paid.

I’m not sure you can have it both ways.

The first question I ask people when they say college athletes should be paid is: where is the money going to come from? If you’re unaware, the NCAA released data showing that only 14 programs are turning a profit without having to rely on institutional support (like student fees or a check cut directly from the university coffers).

Although the NCAA did not list the 14 schools turning a net profit, Notre Dame is one of them. Athletic Director, Jack Swarbrick, has revealed that Notre Dame actually pours money back into the college’s coffers, to the tune of about $10 million in 2009. LSU tells me they are also one of the 14, having sent about $8 million back to the university last year.

Other schools that have been confirmed to be part of the 14: Alabama, University of Missouri, University of Texas, University of Florida, University of Tennessee and Ohio State University, and Nebraska. BYU’s athletic director also recently confirmed that BYU has operated in the black for the past three years.

So, where is the money supposed to come from to pay these athletes?

Even if we could get past this issue, I see a number of other problems. Here are some of my questions:

How do you decide which athletes are paid? Is it just in revenue-producing sports? Is it every athlete playing in those sports or just the elite?

Here is the second big problem. Actually, it’s probably the first, but I chose to focus on the issue of finances first. You cannot pay players without invoking Title IX. Safely assuming that any pay-for-play plan would pay male football and basketball players, you run into huge issues with federal law. More money will have to be devoted to women’s sports and it’s highly likely it’s men’s sports outside of football and basketball that will suffer. And, again, where is all this money going to come from?

Even if Title IX weren’t an issue (and let me just say, without revision to these federal laws, college athletes will never be paid), there are plenty of other problems standing between college athletes and their big pay day:

How much do you pay players? Is it one set amount for every athlete no matter the sport or the school in order to keep things fair? At least within a sport I think it has to be the same, otherwise schools with more money will have the advantage.

If you let athletes get paid for endorsements (which could avoid the first problem I outlined above), will it give some programs an unfair advantage? Playing for Alabama or Ohio State is bound to give you more endorsement opportunities (and more lucrative ones) than playing for Tulsa.

I see the same problem with allowing athletes to profit off merchandise sold with their name or number, like jerseys. Playing for Florida is going to give you greater opportunity to make money off merchandise than playing for Western Michigan.

Another way to pay player and avoid the first problem I outlined is to allow agents to pay players. Darren Heitner over at the Sports Agent Blog recently wrote a post advocating the lifting of all regulations against agents paying players. Heitner believes there would be no harm to the athletes from this situation and that it would allow the market to dictate what a player is worth.

Aside from the initial concerns I have regarding the influence these agents would have and the types of promises they could elicit from players about being paid back in the future, I have another bigger concern. Could these agents pay a player to choose a specific school? And what’s to stop a big car dealership in Athens from slipping money to an agent so he can encourage a player to attend the University of Georgia? (Thanks to @BrotherhoodSpt for pointing me to his blog on the subject, which included a link to Heitner’s piece.)

Will sports that pay athletes have to break from the NCAA? I think so. Tack on new administrative costs as those sports are forced to form new leagues to manage their sport.

There are far too many serious questions to answer for me to jump on the pay-college-athletes bandwagon. Without even getting into whether college athletes should be paid, I just don’t see a scenario where college athletes can be paid without allowing the gap to grow between the have and have-nots.