From the issue dated October 23, 1998
Finances of Big-Time College Sports Take a Sharp Turn for the Worse
NCAA study finds that expenditures grew at a faster rate than revenues, on average, in 1997
By JOSHUA ROLNICK
The financial health of Division I and II sports programs took a sharp turn for the worse from 1995 to 1997, on average, according to a National Collegiate Athletic Association study released this month.
Expenditures grew at a significantly faster rate than revenues in the average N.C.A.A. program during fiscal 1997, resulting in smaller profits -- or larger deficits -- at programs in both divisions.
At universities in Division I-A -- those with football programs that compete at the association's highest level -- average expenditures in 1997 rose by 21 per cent and average revenues by 15 per cent, a combination that cut the average profit margin for those sports programs to $437,000 in 1997, down from $1.1-million in 1995.
Programs in all other divisions were losing money, on average, even with institutional support.
Despite the soaring deficits, big-time football and men's basketball continue to be profitable on the whole, the study found. Seventy-one per cent of Division I-A football programs showed a profit in 1997, up four percentage points from 1995. The average profit turned by those programs was nearly $5-million. Meanwhile, the 29 per cent of programs that lost money had an average deficit of just over $1-million, up from $969,000 in 1995. Those patterns suggest a widening gap between the winners and losers in big-time sports.
Daniel L. Fulks, director of the accounting program at Transylvania University, in Kentucky, has conducted the study for the N.C.A.A. every other year since 1993. He distributed the 1997 survey to all 901 N.C.A.A. members, asking for information on total revenues and expenses in football, basketball, and other sports; the sources of all expenses and revenue; and a breakdown of all data by gender. He got responses from 737 institutions. The study did not examine Division III; information on that division will be available this fall.
Mr. Fulks's previous studies found that, excluding institutional support, programs had deficits, on average, throughout Divisions I and II. But increases in the deficits from 1995 to 1997 were steeper than those he found from 1993 to 1995.
The study does not offer explanations for why the average athletics program is losing more money than in previous years. Mr. Fulks said growth in revenue from ticket sales and television may have not kept pace with increasing costs. For athletics programs outside Division I-A, on the other hand, student-activity fees, not ticket sales, are the leading source of revenue.
He also speculated that colleges' efforts to expand women's sports offerings to comply with federal sex-discrimination laws may have contributed to the financial drain. The report indicates that women's teams are increasing their share of Division I-A budgets, although their share is still far below that of men's teams.
As a result of the expansion in women's programs, the total number of participants went up in every division. The higher level of participation is another reason that expenditures went up, Mr. Fulks said.
As universities expand their women's athletics programs, the deficits will continue to rise, said Richard G. Sheehan, a professor in the department of finance and business economics at the University of Notre Dame. The author of Keeping Score: The Economics of Big-Time Sports (1996), he said investment in women's sports may pay off in the long run. "The question is, Will those additional expenditures lead to more revenues 10 or 20 years down the road?"
Murray Sperber, a professor of English and American studies at Indiana University at Bloomington and author of College Sports Inc.: The Athletic Department Versus the University (1990), had a different interpretation of the study's findings. He said that the deficits had not grown -- but that the athletics departments' accounting had become more honest. "They're doing the books straighter and straighter. They've been under a lot of pressure, and a lot of people like me have attacked them for [misleading accounting]."
In the past, Mr. Sperber has accused athletics departments of shifting expenses to other areas in the university budget. For instance, colleges could lump athletics scholarships in the same category as academic scholarships.
Mr. Fulks said he did not believe that misleading accounting had had a significant impact on his previous studies, but that some expenses, such as insurance and facilities maintenance, were "suspect."
"We need some uniformity in the accounting and reporting," he said.
The report is available for $4 to N.C.A.A. members, and $8 to non-members, from N.C.A.A. Publishing, P.O. Box 7347, Overland Park, Kan. 66207-0347.
Copyright © 1998 by The Chronicle of Higher Education