College Sports are Broken at Louisville

As I mentioned last week, the same day that the Kentucky legislature agreed to cut University of Louisville funding by 4.5% (roughly a $6.3 million annual spending reduction), the Athletic Department announced that football coach Bobby Petrino had been given a 7-year contract worth over $30 million. He'll be the 12th highest paid college football coach in the land, making over $4.25 million annually.

Today's sports section featured a story about the team hiring a new offensive coordinator at $607,000 per year in salary. The same story mentions that three other newly hired coaches are making about $600,000 per year in combined salary, meaning that these four assistant coaches are making over $1.2 million next year. Given that this is only a fraction of the coaching staff, the football coaches' total compensation will almost surely exceed the size of the state budget cut the rest of the University is facing.

As I wrote last week, new assistant professors make about $54,000 in my department at UofL. Even figuring nearly 30% in benefits, the University could hire 85 assistant professors for the cost of the football staff.

There's more recent news along these lines if you pay attention. For example, the front page of the February 4 sports section of the Courier-Journal carried news that the University is seeking $55 million to (again) expand the football stadium.

These stories highlight much that is wrong at my University and with big-time college athletics. Before I list them, I know the arguments that boosters make. Basically, they argue that big-time college sports are a competitive business and these salaries and stadium costs reflect "the market" conditions. Athletic Director Tom Jurich, for instance, defended his contract to Petrino with these words: "This is a very competitive business. There's a very, very small handful of great coaches in this country. I think that's very self-explanatory. It's obvious that we have one of them. So I'm going to do everything in my power to make sure that he stays with us, that he finishes his career with us." The same article claims that "None of this is money from the university, or taxpayers, or student tuition or fees."

Frankly, these arguments are laughable.

First, as more-and-more student athletes have been arguing, they are essentially underpaid labor in a business that strictly limits what they can be compensated. In a free market, the star athletes make a lot more than the coaches. As Taylor Branch wrote in The Atlantic back in fall 2011, college athletes do not work in a market environment:

College athletes are not slaves. Yet to survey the scene—corporations and universities enriching themselves on the backs of uncompensated young men, whose status as “student-athletes” deprives them of the right to due process guaranteed by the Constitution—is to catch an unmistakable whiff of the plantation. Perhaps a more apt metaphor is colonialism: college sports, as overseen by the NCAA, is a system imposed by well-meaning paternalists and rationalized with hoary sentiments about caring for the well-being of the colonized. But it is, nonetheless, unjust. 

Second, market competition is artificially restricted. New business cannot spring up to compete against NCAA division I football or basketball programs. These businesses have formed a cartel, as Joe Nocera has written: "the N.C.A.A.’s real role is to oversee the collusion of university athletic departments, whose goal is to maximize revenue and suppress the wages of its captive labor force, a k a the players." He continues:

The N.C.A.A. has neither an antitrust exemption nor a player’s union to negotiate with. In other words, it lacks some of the legal protections that shield professional sports from antitrust suits. What it has, instead, is a work force full of young adults dreaming of becoming pros and willing to sign any document, no matter how onerous, if it will help them reach that goal. The document the N.C.A.A. forces them to sign completely stacks the deck against them.

Third, college sports are highly subsidized by government taxpayers and students (as I've blogged previously). The "free market" in college sports is cash-rich partly because some revenues are guaranteed and some costs are paid by third parties who do not directly benefit from athletics. Only about a dozen big schools do not subsidize their athletic programs and about another dozen could survive without subsidies. Some programs receive tens of millions of dollars in subsidies. The total amounts involved are truly staggering: "Public universities poured more than $10 billion over the last five years into their athletics programs."

At Louisville, about 20% of subsidies come explicitly from student fees and the total amount of subsidies averaged about $10 million annually from 2010-2014 (for a total of nearly $50 million). Again, for emphasis, in recent years the University has transferred about $2 million per year in student fees to athletics. Athletics has at least sometimes transferred a similar sum back to the University, but that is often framed as a generous gift from athletics rather than a repayment for subsidies.

Fourth, college football and basketball depend upon television revenue that is itself distorted by non-market limits on competition. This is from Reason magazine, so it is admittedly the extreme version of the libertarian argument. Nonetheless, the point it makes about the cost of doing business is true:

In an ideal world there would be property rights in, and markets for, spectrum. Unfortunately, the federal government nationalized the airwaves in 1927 and since then only licenses their use. Today, wireless broadband providers like Verizon and AT&T must bid at auction for the spectrum licenses they use, and this bidding helps ensure that the valuable airwaves are allocated efficiently to their best uses. Television broadcasters, on the other hand, have never had to bid for airwaves. The Federal Communications Commission licenses spectrum to station owners in exchange for a promise that they will operate in the public interest—and that includes making their programming available for free over-the-air and supported by commercial advertising.

Basically, there's a lot of extra cash in TV because the networks don't pay market prices for the right to use the spectrum. It creates a lot of funny money when they sell ads for programs.

Beyond these free market arguments, there are other economic (and ethical) reasons to challenge UofL athletic spending.

Sports competes with academics for philanthropy and other funds. Athletic Director Jurich notes that the stadium expansion will be privately funded, but that just means that UofL academics will be competing with the rest of the University to find new funding to replace funds lost to budget cuts.

Finally, consider the top-dollar nepotism at work in UofL Athletics. Tom Jurich's son Mark Jurich works for the Athletic Association in a variety of capacities. The former campus baseball star makes over $160,000 per year.

Bobby Petrino's son Nick is now the wide receivers coach for his father's team and probably makes $150,000 since that seems to be the minimum UofL coaches make. Petrino son-in-law LD Scott makes $150,000, according to that USA Today database.

A few years ago, Rick Pitino's son Richard served as an assistant basketball coach for two years. 

There's nothing like strong family ties, amirite?


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Note: This is the third in a recent series about the political economy of the University of Louisville.

Part 1: It's Good to Be the King posted April 12, 2016, concerns President Jim Ramsey's lucrative relationship with Texas Roadhouse.

Part 2: Winner-Take-All in the University Setting posted April 15, 2016, discusses the stagnation in assistant professor salaries, juxtaposed against the explosion in university president compensation.


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