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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Winner-Take-All in the University Setting

Recently, Thomas Piketty gained tremendous attention for his academic work on inequality. "Piketty summarizes this complicated theory with the formula “r > g” where “r” is the rate of return on capital and “g” is the rate of growth in the economy." Put simply, the wealthiest individuals, who benefit from their investments or other linkages to the financial economy, have been grabbing an ever-larger share of the nation's wealth. This chart reflecting nearly 100 years of income data is quite telling:




Financier Steven Rattner pointed out a few years ago that similar inequality has been mirrored in sectors of the economy that are not directly linked to free market returns on investments. Specifically, he noted that even university presidents are beneficiaries of the "winner-take-all" society that is now the United States:

Recently, thanks to data compiled by The Chronicle of Higher Education, I saw these macro trends reduced to the micro level in a perhaps unlikely setting: institutions of higher learning. 

In 2010, the 10 top-earning private college and university presidents made an average of $2.1 million. That’s up from $637,000 in 2000, a stunning average annual increase of 12.6 percent... 

And just as in corporate America, those who preside over these institutions have done far better than those who populate the armies that labor below them. Over the decade that ended June 30, 2010, average faculty salaries at the 50 wealthiest universities rose by 14 percent, while that of presidents increased by 75 percent.

When I was hired at University of Louisville in 1991, I made $31,000. That was considered a fairly modest starting salary -- it was certainly not at the high end of the pay scale. Using the CPI to adjust that to current dollars, my 1991 starting assistant professor salary would be worth $53,900 in 2015. The political science department has hired a handful of beginning assistant professors in recent years and all arrived making around $54,000. In short, 25 years after I was hired at a relatively modest salary (compared to what peer institutions offer), UofL is still offering the same beginning salary. The $54,000 figure is considered modest, competitive if adjusted for cost-of-living, but well below amounts offered by other schools.

University of Louisville President Donald Swain made $155,000 in 1991. He had been serving as UofL President since 1981, so he was in midst of his 11th year. Using the same CPI adjusted rate, that salary would be worth $270,000 today.  I have found some archival evidence that Swain also received modest deferred compensation payments, equivalent to about 10% of his salary. So maybe Swain made $300,000 in 1991.

Has the winner-take-all problem emerged at UofL? As I blogged earlier this week, Jim Ramsey, who is in his 14th year as the top administrator, makes more than a million dollars annually from his job leading both UofL and its Foundation, including about $1.67 million in annual salary, deferred compensation, and other perks (UofL pays his taxes, for instance, which accounts for $600,000 to $800,000 additional payments each year). A consulting firm retained by the University reported that Ramsey made $2.5 million from UofL in 2014. Note that the state of Kentucky reports that Ramsey makes about $350,000 from his job as president. That figure, however, does not include Foundation payments -- salary, deferred compensation, tax payments, etc.

Put simply, the intro political science faculty salary has been flat over 25 years. The University President compensation has apparently increased 5- to 8-fold, adjusted for constant dollars.

Incidentally, the Board membership at Texas Roadhouse is presumably tied to Ramsey's current position at UofL, but the external compensation is not figured into those earnings figures. As noted Tuesday, he's made millions of dollars more just from the common stock compensation he has earned from that service.

There is no common stock compensation for faculty, of course.

I am not posting this to argue that Ramsey has been a bad president of the University. He has performed his job and has helped move the school forward in many ways. Incoming student ACT scores are significantly higher than they used to be and student retention has improved. Despite his former "insider" status in state government**, Ramsey has not staved off incredible cuts in state funding. He has been successful in raising private funds and convincing the state to allow the University to increase tuition substantially. Some academic programs that make UofL (and Ramsey) look good were actually started by previous UofL leaders.

Could others have done his job just as well, perhaps for much less compensation? No one can know the answer to that counterfactual, but the "winner-take-all" mentality generally magnifies small differences in performance with large differences in compensation.

Yesterday morning, anyone tuning in to the budget livestream on the Health Science campus could hear about 5 minutes of live mic broadcast before the event started (it has since been edited out). An administrator (I believe from the medical school) was lamenting that he had already nearly forgotten his mid-semester vacation in Cabo because it had been 10 days since his return. A top-level financial administrator complained about the level of negativity she's constantly heard on the Belknap campus.

News alert: the inequity in financial compensation, illustrated by the mid-term vacation in Cabo as well as President Ramsey's compensation package, very much helps to explain the level of negativity on the Belknap campus.

Update: Yesterday's announcement of a new contract for the football coach won't help, but that's a matter for another day. He's going to be paid more than $30 million for 7 years of coaching. The Kentucky legislature, earlier in the day, approved a 4.5% budget cut for UofL. Given the current funding level of $140 million from the state, this will amount to a $6.3 million annual cut.

Here's a counterfactual: How many wins could the football team achieve with a coach paid $375,000 instead of $4.375 million annually?


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** Readers can judge for themselves what role Ramsey played in the current budget situation as he was state budget director for Governor Paul Patton when the state diverted $30 million from pension plans for other spending purposes. This was apparently a seminal move to divert such funds and it was replicated often over the next 15 years. Current Governor Matt Bevin is cutting University funding to pay for the past diversion of pension funds.


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Orange Bowl

Kansas has won the 2008 Orange Bowl and obviously deserves strong consideration for #1 or #2, particularly if LSU beats Ohio State. If that were to occur, all the BCS contenders would have two losses each -- except for Kansas and Hawaii (which was destroyed the other day).

The Jayhawks defeated BCS #3 ranked Virginia Tech and finished the season 12-1. The final tally was 24-21, but Kansas had the ball inside the Tech 1 yard line and let time expire rather than run up the score.

Some critics say that the KU schedule was soft, but the team beat five schools that played in bowl games (Central Michigan, Oklahoma State, Texas A&M, Colorado and VT). Its lone loss was to Missouri, which destroyed Arkansas in its bowl and lost only to Oklahoma (twice).


Update: Kansas ended up #7 in the polls, but #2 in Jeff Sagarin's computer formula -- and in several other computer systems used by the BCS as well. Unfortunately, the human voice carried greater weight.


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BC$ football

Top-ranked LSU lost its football game yesterday, meaning that the winner of today's matchup between #2 Kansas and #3 Missouri will likely be the #1 ranked team in the polls on Monday morning. The computer-weighted BCS may have a different one loss team on top -- West Virginia, maybe, or even Ohio State -- should Missouri beat Kansas.

As a fair-weather KU football fan, this is unbelievable -- and pretty clearly unfair.

In football, teams are not required to play an equal number of home and road games. Outside of their conference, teams can play all home games if they can arrange enough visiting opponents. This season, Kansas played 4 home games before the Big 12 season began.

Moreover, there's very little effort at scheduling parity. Indeed, outside of conference games, program athletic directors (likely in consultation with the head football coach) make their own schedules.

Presumably, these administrators try to maximize wins and revenues, which must be correlated. After all, Kansas-Missouri will be played at 8 pm on ABC-TV tonight. My guess is that broadcasting this particular game on national prime-time TV was not planned back in August.

Non-conference high profile program matchups like USC-Nebraska only make sense because of the revenues they generate. Otherwise, good teams have an incentive to play weaker opposition and rack up wins. The BCS computer is supposed to compensate for this by awarding teams for beating quality foes, but it still gives great weight to the voters in the polls and the 2007 Kansas record proves that, ultimately, wins are better than losses under any circumstance.

This year, Kansas played and crushed Central Michigan (7-5, first in MAC West), Southeastern Louisiana (3-8), Toledo (5-7), and Florida International (0-10).

Effectively, this schedule created few risks for Kansas (though KU did lose to Toledo last season). The team only had 8 regular season games against major conference schools -- all within the context of their regular Big 12 schedule. Due to the luck of the draw, they played Baylor, Texas A&M, and Oklahoma State in their three games versus the Big 12 South.

Note that the list includes neither Texas nor Oklahoma. Luck of the draw in 2007!

Of course, to be fair, note that Texas lost to A&M and Kansas will play OU for the Big 12 championship if both teams win this weekend.

In any event, college football is obviously a big business and the idea that athletic directors of major programs can engineer their own schedules so as to maximize winning (and thus profit) is anti-competitive.

Incidentally, this same critique applies to college basketball. Through the first week of January, the local University of Louisville Cardinals will play 9 home games, one true road game, and three games on neutral courts (two in a tournament and one just up the road in Indy's John Wooden Tradition).

Through the end of December, Kansas plays 10 basketball games in Lawrence, another in KC, and two on the road. Anyone wanna bet that KU will be ranked in the top five in hoops entering the first week in January?


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Culture update: November 2007

Thanks to the writer's strike, there are no new episodes of "The Daily Show."

Baseball is long gone now, and the hot-stove news is depressing.

What to do?

I watched "LA Doublure" ("The Valet") this week and I would recommend it to anyone who occasionally enjoys French farce.

Also, checking this website is quite entertaining to me -- at least this week.

Rock chalk.


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Football? Football!

I am not a football fan. It has been at least 20 years since I followed any team very closely or with much enthusiasm.

That said, the current Kansas squad is starting to attract my attention. I've actually watched significant parts of several of their games this season. Today, at the office, I kept checking the score of their game against Nebraska, even though the result seemed to be determined by halftime.

From the 1969 season until 2005, Kansas lost 26 straight games against Nebraska. For the four years I was on campus, KU lost four games by a combined score of 179-15. They scored all 15 points in one game, so that includes three lopsided shutouts.

Today, Kansas beat Nebraska 76-39. In fact, the AP reports that the Jayhawks "scored touchdowns on 10 straight possessions and rolled up the most points ever scored against Nebraska in its 117-year football history."

I guess the team let out a lot of pent up frustration today.

Entering today's game, Kansas was 8-0 and ranked #8 in the country in most polls -- and even in the Bowl Championship Series standings.

Their remaining games: at Oklahoma State, at home versus Iowa State, and versus 9th ranked Missouri in Kansas City. Dare I even think about the Big 12 championship game -- a place no Kansas team has been before? So far as I can tell, no KU football team has ever exceeded 10 victories. Most recently, the 1995 team was 10-2, 1905 was 10-1, and 1899 was 10-0.

Only two other KU squads reached 9 victories: the famed 1968 team (featuring John Riggins and Bobby Douglass) was 9-2 and 1908 was 9-0.

Hmmm. Maybe the hoops season will start later this year...

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