By Staff
INDIANAPOLIS -- The NCAA today released an interim report on the effects of spending within college sports that challenges a number of commonly held assumptions about intercollegiate athletics, including new information on the financial returns of athletics spending and the so-called "arms race."
The association also announced that it will work with the Andrew W. Mellon Foundation to continue the research and analysis represented in the preliminary report.
The NCAA study, entitled "Empirical Effects of Collegiate Athletics: An Interim Report," began two years ago and was authorized by the Division I Board of Directors Task Force as part of the Board's academic and athletics reform efforts.
The Task Force commissioned three independent economic researchers to develop the most comprehensive database collected to date and to test the validity of 10 hypotheses about college athletics.
Heading the data-collection and analysis team for the preliminary study were Robert Litan, vice president for research and policy at the Kauffman Foundation in Kansas City, Missouri and senior fellow in economic studies at the Brookings Institution in Washington, D.C.; Jonathan Orszag, managing director of Sebago Associates, Inc., in Washington, D.C.; and Peter Orszag, the Joseph A. Pechman Senior Fellow in economic studies at Brookings and a senior director at Sebago. The interim report also received critical peer review from economists with expertise in various areas of higher education who supported both the methodology, as well as the analysis.
The interim study provides new perspective on the economic impact of intercollegiate athletics in a number of areas. The research is based in large part on a comprehensive database of school-specific information collected as part of the Equity in Athletics Disclosure Act (EADA) and other sources, including the Integrated Post-Secondary Education Data System (IPEDS) managed by the Department of Education. The study also relies on a detailed survey of chief financial officers from 17 Division I institutions.
In fact, the study shows:
While the interim report does confirm a growing inequality in football and men's basketball spending among Division I-A institutions, the big spenders are not the same over time.
More than two-fifths of the schools that were in the top quintile of Division I-A football spending in 1993 were no longer in the top quintile by 2001. Nearly 60 percent of the schools in the middle quintile in 1993 were no longer there in 2001. More than one-third had moved up and more than one-fifth had moved down.
Net revenue also exhibited some mobility. Among the schools in the middle quintile for football net revenue in 1993, about two-thirds were no longer there in 2001.
Although the results in many instances run counter to conventional wisdom, the researchers are quick to point out that more work is needed to improve the database and to extend the timeframe of the study.
Under the EADA, institutions are required to report the total revenues and expenses attributable to the institution's intercollegiate athletics activities, as well as the revenues and expenses attributable to certain sports (for example, football and men's basketball). But a significant shortcoming in the EADA data involves capital expenditures.
Two substantial problems arise with regard to the data on the capitol assets used to support intercollegiate athletics. First, the value of the outstanding athletics capital stock is not recorded anywhere on the EADA forms. Second, new capital expenditures are not adequately reflected in the EADA data. For example, in the survey of 17 Division I-A chief financial officers, about half indicated that all athletics capital expenditures were captured by the EADA report, and the other half indicated that at least part was not.
Isch noted that more than half of all Division I-A schools have either opened a new football stadium or undertaken a major renovation of their old stadium since 1990, and the interim report includes few of those expenditures.
The additional research being supported by the Mellon Foundation study will examine 10 NCAA institutions. The study, according to Isch, will examine replacement-cost estimates and/or detailed insurance information for these 10 institutions. The estimates from such schools would then be used, to the extent possible, to provide estimates for the replacement cost of the intercollegiate athletics capital at other schools based on a variety of factors, including square footage of playing fields and seating capacity at stadiums.
In addition, the NCAA is working to collect more data through a task force consisting of NCAA and National Association of College and University Business Officers (NACUBO) representatives. That group will explore a more consistent means of accounting for and reporting on athletics finances, particularly in overall compensation from all sources and capital expenditures.
The effort would also focus on ensuring that new intercollegiate capital investments are properly reported in order to allow researchers to examine trends over time and to facilitate updated replacement-cost estimates in future years.
Brand noted that for the public, the most significant lesson might be that spending on college sports is not nearly as out of line with other spending in higher education as conventional wisdom would have had us believe, even though there are extreme instances that have been sensationalized through media reports.