Amateur

Exploring Alternative Athletic Finance Options In A Post-COVID World

COVID-19 has drastically affected athletic revenues, beginning with the cancellation of the NCAA Men’s Basketball Tournament and with spring sports being cancelled across the country.  Many conferences have now postponed fall sports, including football. The strategies available to athletic directors to make up for these budget shortfalls appear to be limited; many institutions have chosen, for example, to cut sports, leaving student-athletes and supporters with no recourse. Other programs have managed to trim down expenses and make other cuts. In drastic times, there are not only drastic measures such as cutting sports available–there are other solutions to consider. This paper will discuss two such options: gender-neutral pay and a spending/salary cap.

 

Athletic Finances Prior To COVID

 

The debate surrounding spending in intercollegiate athletics began long before anyone had heard of COVID-19. Conference realignments and new television contracts drastically increased the income available to athletic programs beginning in the 1990s, particularly in the Power Five conferences (ACC, SEC, Big 10, Pac 10, Big 12). In 2015, the Washington Post published an expose on facilities spending in college athletics, noting a huge spending increase from 2004 to 2014 and that spending on facilities is “one of the biggest reasons otherwise profitable or self-sufficient athletic departments run deficits.”

 

Along with facilities spending, salaries for head coaches, particularly in football and men’s basketball, have drastically increased since 2000. According to the most recent data from the Knight Commission, public Football Bowl Subdivision programs spend more on compensation on average ($1.4 billion) than they do on student-athlete scholarships ($1.1 billion). For most Football Bowl Subdivision programs, compensation comprises 18% or more of expenses. The numbers are even more significant for private schools: at private Football Bowl Subdivision institutions, compensation is 36% or more of total expenses, making it the single largest expense category on average at this level.

 

There have been no major changes to the roles and responsibilities of the NCAA football head coach in the past 15 years; the squad size and length of season remain primarily unchanged. Yet in 2006, only eight head coaches made $1 million+, and only two made over $2 million. Fast forward to the 2019 season, and 83 coaches earned over $1 million, 67 over $2 million, and 10 earned over $6 million. While compensation packages in football have grown across the broad range of institutions, only seven schools have been crowned as national champions in the 15-year period since 2006. This stands in stark contrast to the 13 different universities to receive the final number one ranking in the previous 15-year period (acknowledging the co-champions of the voting era). All coaching salaries are up, but competitive balance is down. Only a few teams enter each new season with significant prospects to make the College Football Playoff.

 

The COVID-19 pandemic caused a sharp drop in university revenue whether it be from loss of athletics revenue due to the cancelation of the winter and spring post seasons or because schools would have to return tuition and room and board to students. The loss in revenue due to a slowed economy will likely also be felt at the state and federal level, which means legislative funding will also be reduced. The aggregate loss of revenue will mean athletic administrations will need to be prepared to enact plans on shoestring budgets. These plans will need to address all aspects of spending in creative ways to maximize return without sacrificing the safety and well-being of student athletes, coaches, and the university community.

 

We propose athletic administrators consider a couple of potential financial options that promote sustainability and competitiveness going forward.

 

Gender-Neutral Pay

 

Gender-neutral pay is a concept that has been studied in a limited way in intercollegiate athletics. The most prominent study was published in 2016 by the Women’s Sports Foundation: Creating Gender-Neutral Coaches’ Compensation and Employment Systems: A Resource Manual.

 

We have conceptualized one method through which the gender-neutral pay model could function. The proposal centers on institutional figures with added incentives after the first year of the new system. In this model, base salaries will be determined using the head and assistant coaching salaries currently in place at each institution. For example, for men’s and women’s soccer, the two head coaching salaries would be compared. Regardless of the gender of the team or coach, both coaches would begin receiving the lower of the two amounts under this system. For example, if the coach of the women’s team had a base salary of $100,000 annually, and the coach of the men’s team had a base salary of $200,000 annually, both would now have a base salary of $100,000. Due to the effects of COVID, there would be no incentives during the first year of the system. However, beginning in year two, there would be several possible incentives, including number of years coaching, incentives based on performance (number of wins, conference championships, etc.), incentives based on academics, incentives based on attendance and/or revenue, as well as other possibilities.

 

The balancing of the salaries between male and female coaches to a gender-neutral state across sport will result in significant savings and will be the signal that the era of ever inflating coaching salaries without reason or justification has come to an end. The balancing of these salaries, combined with the institution of incentives-based earning, will create a system that is financially more responsible, and sustainable, while increasing the onus on each coach to create value in their program through merit and student-athlete development.

 

The top concern among athletic directors relating to gender-neutral pay would likely be that it would be all but impossible to sell among the coaches already in place. But would it? Since the financial ramifications of COVID began to surface, many coaches agreed to salary reductions to assist in the fiscal health and stability of their athletic department and institution generally. There is general recognition that COVID has changed the way that athletics function—and there is a possibility that some institutions may lose athletics altogether because of finances. In order to salvage a football season, conferences are enacting compromises, including reductions in schedules, exclusion of fans and the cancellation of historic rivalry games, at least for this season. If those types of compromises have been accepted, nothing is impossible, particularly if it can help guarantee the long-term financial stability of intercollegiate athletics.

 

A Salary Or Spending Cap

 

Most sports leagues, in the United States and internationally, have some type of cap or limitation which affects either salaries specifically or spending generally. Could one of these options work in the NCAA? One of the most recently instituted caps is in Formula One. In fall 2019, the 2021 cap was unanimously passed by the governing body of F1; each team would be able to spend only $175 million annually, with some line item exceptions. According to Ross Brawn, F1’s managing director of motorsport, “It is absolutely essential for the future of F1 that we control spending. We tried to capture the areas that make a difference between the teams, where they can gain a competitive advantage.” Ferrari (the biggest spender) was the most vocal of the cap opponents. In May 2020, Brawn announced that the cap would be cut to $145 million because of COVID and its effects; additionally, it was announced that mid field prize money would be increased, which would theoretically reduce the resource gap between high budget teams and mid budget teams. Brawn stated, “The initial objectives [of the budget cap] were a more competitive field and I think with the situation we have now, economic sustainability is the priority, and I think that counts as much for the big teams as it does for the small teams.”

 

Formula One’s spending cap began as a measure to make the sport more competitive; the cap evolved because of COVID to ensure the sport’s sustainability. There are quite a few comparisons that can be made between Formula One and intercollegiate athletics, particularly football, relating to dominant teams and spending. Could this type of cap work in intercollegiate athletics as well? If not, is a salary cap for head coaches a more viable option?

 

The implementation of coaching salary caps would help to create an environment in college athletics that is more competitive, financially sustainable over time, and focused on the student athlete and fan experience. A 2010 study, Salary Cap Regulation in Professional Team Sports conducted by the University of Zurich, concluded that a cap creates a more balanced league, decreases aggregate salaries and “always enhances financial stability of win-maximizing clubs.” Additionally, the salary cap for collegiate coaches would have little to no effect on the fan experience but would enhance the player experience by allowing the savings to be directed to student athlete experience and health of the overall athletic department.

 

Salary caps for college coaches would not be in direct violation of any of the three major U.S. anti-trust laws. The Sherman Antitrust Act, specifically, has shaped the cap structure in most professional sports leagues. Major League Baseball has a standing exemption, but the NBA, NHL and NFL have had tenuous relationships between their players and owners based on these laws. A salary cap for college coaches would not be subject to the Sherman act because it allows for competition in the form of other competitive leagues, such as the NJCAA and NAIA, and it would not impact the consumer or constituency pricing for the sports fan. These other organizations would be free to vie for the services of college coaches via open salaries and that competition means there is no violation. Since the product is collegiate athletics, and not coaching salaries, the cap would in no way fix the price of sports, stifle competition, or create unfair mergers.

 

Questions from institutional stakeholders relating to coaching salaries have existed for some time; recently, there has been some discussion of the matter in Congress. In January 2020, Representative Donna Shalala (D-Fla), former president of the University of Miami, introduced house bill H.R. 5528, calling for the assembly of a commission, The Congressional Advisory Commission on Intercollegiate Athletics (CACIA), to oversee and investigate the current coaching salaries of coaches at public institutions. While the proposed bill has yet to make it to the floor, supporters of the measure are hailing it as the last hope to protect college athletics.

 

Conclusion

 

In an ever-changing environment like the one being experienced as a result of the COVID-19 pandemic, one perfect solution for all financial woes is an unrealistic expectation. Perhaps more importantly, we can agree that the current fiscal concerns of university athletic programs pre-date the pandemic. The current system is not working for many institutions, and the rapid and exponential increase in coaching salaries without check has many schools on the brink of financial disaster. The collective unchecked spending of member institutions has brought us here, and it will be the creative strategies and efforts of our athletic leadership teams that will navigate the departments into a new future built on sustainable financial choices and enhancing the student athlete experience.

 

Source

MVP

Leave a Reply