View From the Ramparts: Fool's gold
California attempt to force colleges to pay athletes ignores Econ 101
The California Athlete Protection Act might better be titled the California Athlete Extinction Act, so divorced is it from the economic reality facing the vast majority of university athletic departments.
California Assembly Bill 252, which passed the state Legislature’s lower house on June 1 and awaits a vote in the state Senate Education Committee, is apparently based on two popular yet easily disproven myths:
College sports teams generate huge profits for their schools
Athletes are risking their health for free
The 36-page bill would require both state and private universities and colleges bringing in more than $10 million a year in media rights to pay athletes half of any increase in future media.
This being California, the bill wouldn’t be complete without creating a new state agency — in this case, a 21-member CAP Panel. The CAP Panel has the task of determining the “fair market value” of athletes — one number for males, one for females. (How that difference doesn’t violate the equal protection clause of the 14th Amendment is an open question.)
But while the $10 million per year threshold will likely exempt many smaller schools, particularly those without a major football program that can generate huge local radio licensing deals, the reality remains that the overwhelming number of colleges lose money on their athletic programs.
How many are losing money on sports?
Between 97 and 98 percent of them.
Mark J. Drozdowski has been tracking this issue on the Best Colleges website for several years now, and points out that maybe two dozen universities so much as break even on their sports programs.
In fact, out of the roughly 1,100 schools in the three divisions of the National Collegiate Athletic Association (the largest university athletic governing body), only 25 make money or break even.
How much does the average school lose on sports? Just under $16 million per year. (And that does not even include the roughly 250 schools in the smaller National Association of Intercollegiate Athletics, or NAIA, nor the 90 schools in the National Christian College Athletic Association, or NCCAA.)
If we only include the NCAA schools, fewer than 3 percent are in the black financially. If we include the two smaller associations, that number drops below 2 percent.
While the sports media focuses on the billions of dollars being thrown at college sports by TV and streaming networks, a fundamental rule of economics remains: If you spend more than you bring in, you are still losing money.
The constant competitive need to upgrade facilities — stadiums, arenas, weight rooms, dorms — and the ever-spiraling salaries given to coaches mean that the vast majority of colleges continue to spend even more than the bushels of cash that come their way.
Getting directly to the point at hand, all of the public universities in the Golden State are already losing money on their intercollegiate sports programs.
Take UCLA for starters. That school’s leadership voted to leave the Pac-12 Conference for the Midwestern-based Big Ten to try to pay down its estimated $63 million athletic department debt. But if this bill becomes law, UCLA will lose half of any bump in conference payments.
Which brings us to the second myth mentioned above, that athletes are being used as a sort of indentured servant class, basically toiling for free.
Or, as Ramogi Huma, president of the National College Players Association (which helped push and craft the bill) told the Wall Street Journal recently, paying athletes is a matter of correcting an “injustice.”
“Injustice” is an interesting choice of words to describe a group of students who are able to graduate debt-free thanks to their athletic skill at what are purportedly academic institutions..
Tuition at the University of California campuses is about $13,000 a year for residents; $43,000 for out-of-state students. But scholarship athletes also get room and board as part of their scholarship, and generally no-cost tutoring as well. Plus all books and lab fees are also covered.
The California State University system, which includes San Diego State, Fresno State, etc., charges just over $8,000 a year in in-state tuition. If you’re not able to live at home while going to college, add in another $20,000 a year for on-campus room and board, almost assuredly more if you live off-campus.
So the average star athlete getting a full-ride scholarship is already receiving a compensation package totaling about $30,000 per year, minimum, or $120,000 over a four-year college career.
Nor does that include any Name, Image or Likeness payments they may be able to negotiate with the college’s alumni boosters.
About that concept of “injustice.”
While the costs of a college or university education, even at a state school, continue to rise beyond the means of most working-class California families and even a growing number of middle-class households, non-scholarship students are being saddled with an ever-rising array of “fees” that are used to underwrite those money-losing athletic department budgets.
Some 80 percent of schools currently assess these fees, and all too often they are not disclosed during the application or acceptance process.
These fees range from under $100 per year at some campuses to more than $2,000 annually at James Madison University.
It’s a bit much for athletes who are already getting their college education paid for to talk about the “injustice” of not getting paid on top of their scholarships.
Because if AB 252 becomes law, universities in California will have to find the money to pay those newly mandated salaries from somewhere. The TV networks aren’t going to pony up any more money. In fact, the San Diego Padres’ TV broadcast partner recently declared bankruptcy and reneged on a scheduled payment, which is pretty good evidence that just maybe the sports broadcast market is saturated. ESPN’s continuing layoffs to cut costs suggests the same thing, as does the Pac-12's ongoing inability to negotiate a new broadcast contract.
The only possible source for that funding will be non-athlete students — whose fees to subsidize athletic department budgets will almost assuredly go up.
The only injustice associated with AB 252 is that students who are studying to become doctors, teachers or scientists are expected to underwrite the compensation of people who are mostly on campus due to their ability to hit, kick or throw a ball.
Of course, on some campuses it will not come to that. Last month, Saint Francis College in Brooklyn, an NCAA Division I school, announced it will no longer sponsor intercollegiate sports.
At all.
It is difficult to imagine it will be the last college to make that decision.
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Let’s not forget the “deep pockets” of all the California taxpayers.
Oh-boy.