Educate me on the economics of American university athletics

I just read an article in my university’s newspaper about the measures that are being taken to address anticipated cuts in state funding. The governor, according to the article, has told universities to expect 10-20% cuts. The president and chancellor are discussing layoffs, cuts in student aid, increasing tuition, and other cost-cutting and revenue-increasing measures (e.g., taking away faculty members’ copying privileges). However, no one is discussing whether we needed a multi-million dollar renovation to the facade of our football stadium, or whether we need to pay our coach $1.5 million/year. It makes it a little difficult to take the administration seriously when they start banging the tin cup.

Thus, my question: Why are cuts in athletic programs–coachs’ salaries, equipment, etc.–never discussed? Is it that the $1.5+ million we’re giving our coach and his staff is paltry in comparison to what they bring in? If so, could any of that “sports money” be diverted to university salaries and operating expenses? Or is sports a separate accounting entity from the university proper?

Even some people I know whose jobs may be on the line this year don’t seem at all concerned that shaving off half of Coach’s salary could allow them to work until retirement. It’s as if athletics–football, especially here in Texas–is the Holy of Holies, not to be touched.

So, please, help fight my ignorance.

Your mention of living in Texas is the answer to your question. BTW, I believe the coach’sssalary gets paid for VERY quickly, especially at big-time football factories.

I would say this is true and its importance cannot be overestimated. Regard this as the essential core value, and don’t waste your time and energy trying to question it, much less change it.

For a number of schools, sports are money-makers. Whether any of them allow sports money to help out any other part of the school, I don’t know (though it wouldn’t surprise me if the answer is “no”).

Football teams that do well probably bring in way larger donations from alumni to the endowment fund. It probably is money well spent.

Coaching salary cut --> can’t compete for best coaches --> recruitment & gameplay suffers --> fewer football wins and bowl games --> TV revenue and alumni contributions fall --> net $ lost for university.

How to fix this? Convince alumni donors to contribute money based on academic measures rather than athletic team performance. Best of luck with that.

A very high percentage of coach’s salaries comes from non-state funded sources. High profile coaches have “shoe contracts”, coaches shows and other methods from which the bulk of the their funding is derived.

Also, successful programs can raise the profile of a college and make recruiting (even for non-athletes) easier. See this article about UConn, for instance. It’s had a lot of success in basketball and now is getting lots of applications from outside the state. (When I was in high school, it was derided as a cow college and a safety school.)

Our state has a website that lets you look up all state employee salaries. Mine’s even on there, as a lowly PhD student. According to this website, my school’s coach makes $1.5 million. But he also does some coach’s shows. So I’m guess that $1.5 million is a lower bound.

What are “shoe contracts”?

BC experienced a similiar jump in application/enrollment after the Doug Flutie era.

That’s an interesting article. Kind of a “rising tide lifts all boats” thing–more sports money leads to more money for academics and a higher profile, leading to more enrollment and prestige.

This really does amaze me, though; no kidding. I’m usually pretty empathetic, but try as I might, I cannot understand how someone would choose to go to a school because of sports. I know it happens, probably more often than not, but I still don’t get it. I chose a SLAC for my undergrad because I liked the idea of small class sizes, and I chose my current university because of the program and the proximity to my parents who are getting up in years. I’ve never been to any games, nor do I ever watch them. It’s something that’s just completely off my radar, except now when the dreaded budget cuts are coming.

Sorry for the brain fart. I just re-parsed this in my brain and I’m guessing it means exactly what it says–coaches being paid to endorse certain types of shoes (Nike, Reebok)?


Without knowing what school you’re talking about I can’t tell you how your coach is paid or where the money comes from. Just because he is listed on a list of state employees does not mean his money comes from the same place that other state employees get their money.

While I know nothing about Texas, I know that in many states when it comes time for budgeting programs are paid for in one of three ways:

  1. General Revenue (any tax revenue or similar things raised by the state)
  2. Direct Revenue
  3. Federal Funds

The term Direct Revenue probably has a more accounting-specific term but I’m reaching as to what it is actually called. Basically, “direct revenue” is money that a state organization generates on its own.

I’ll bring up a much simpler operation than a state university.

Think instead of a state park, now imagine a state park that rents out cabins, camp sites, and other such things to individuals or groups.

When it comes time for the state legislature to decide how state parks are funded, the very first thing they’re going to look at doing is saying “alright, you can take all of this money you’re generating in direct revenue to fund your operations.” That isn’t something that, by statute, is required. It is very possible and even often the case that programs or entities at the state level that generate direct revenue are not funded by that revenue. Meaning their revenue just goes into general revenue and is part of the blob of money that everything gets small slivers of.

Depending on the program and the state, sometimes the direct revenue is enough to cover its operations entirely, and sometimes even generate additional revenue for the state. Imagine a highly successful state parks department that generates excess revenue, in that case they actually aren’t taking any money “from” the state general revenue. So you might look up the manager for a state campground and see he’s making $45,000 a year; but that doesn’t mean your taxes are paying his salary. In my scenario he’s actually being paid out of the direct revenue that is given to his department to operate.

Universities are usually complicated beasts financially. However, in many states, major universities generally generate the lion’s share of the money required to operate themselves. Mainly because given the financial situations in most states, these universities simply wouldn’t operate unless they were generating a huge amount of money all on their own. In my state, I believe the last time I heard anything about it, state colleges and universities tended to receive something like 10% of their funds from the state’s budget. That’s obviously significant, but it also shows the state is a “little brother” when it comes to covering the costs of operating a major university.

The Federal government is probably a bigger player albeit indirectly (via subsidized student loans which allows a huge portion of a public state university’s students to attend.)

Since universities are very large organizations, it is rare that they are managed to a meaningful degree by state government. Instead, they are self governed (with typically the governor having the ability to appoint a board of regents/trustees to maintain some governmental control over state schools), that means at the end of the day budgetary measures are primarily handled by the university itself. When a university needs more money than it can generate, then it will go to the state legislature and obviously at that point the legislature can, if it wishes, scrutinize their spending.

However, within the university itself, if the athletic department is almost or even nearly self-funded, it’s very unlikely that the legislature or the university administration would look to make cuts there. Why would they? If the athletic department is self-funding, there’s not much of a reason to make cuts. In a self-funding athletic department a $1.5m/year coach isn’t the reason a professor is having to suffer “austerity measures.”

Since coaches are typically going to be paid out of athletic department money, that is part of the university money, and universities are usually given control of their direct revenue (the revenue they generate) and universities typically give athletic departments control of the revenue they generate, it also isn’t the case that your tax dollars are paying the salary of the football coach. He’s most likely paid via a combination of “guaranteed endorsement contracts” and money from direct revenue.

My understanding is that most athletic departments are either actually self-funded or “supposed” to be self-funded at the major schools. However, I believe only 14 actually are self funded (meaning they genuinely bring in entirely enough revenue to cover any and all expenses.) The rest are varying degrees of “mostly self-funded” I think the average subsidy across the top athletic division is $10m (meaning the average athletic department at a major sports school costs the school around $10m dollars after settling everything up.) How that gap gets filled is obviously complicated and has many, many different answers.

What I can say is that lowering your coaches salary doesn’t really help anything. The reasons are multiple:

  1. For whatever reason the big name alumni really seem to love sports. Even when they give tens of millions to academic programs they’ll often throw just as much if not more at sports facilities and et cetera. Even though an athletic department may be a net negative on the ledger, if you piss off guys like T. Boone Pickens your whole university is worse off because you’re getting fewer alumni donations.

  2. If the athletic department was only football, it’s most likely the case it would be entirely self funded. All the money brought in by a major football program can get eaten up very quickly buying new practice facilities for money-losing sports, new equipment and et cetera. So by lowering the salary of the coach you probably just made your football team less competitive and generate less revenue, thus exacerbating the financial drain of the athletic department as a whole.

  3. Every FBS coach I’m aware of operates under contract, meaning you can’t lower his salary. You could of course ask him to renegotiate his contract and accept a lower pay. He would tell you to go pound sand. The university could dismiss him citing that they can’t afford to keep him around, but most coaching contracts in FBS have massive buyouts, so terminating the head football coach without cause usually will result in the school having to pay a buyout equal to typically multiple years of the coach’s salary. Unfortunately most other employees of the state of Texas don’t operate under a formal contract negotiated by high priced lawyers, so their compensation and benefits have far fewer protections (although state employee unions aren’t anything to sneeze at, either.)

I was never much of a sports fan either, but my freshman year at Rensselaer, our hockey team won the NCAA national championship, and it was exciting, even for me. College games are fun when everyone is wearing the school colors and participating in the traditions (the chants, the songs, etc.).

I don’t know what you mean by an SLAC, but for most people, no one school is clearly superior to any other. So if you’re trying to choose between two schools that are more or less similar, you might choose the one that’s got the big-time football or basketball program.

SLAC = Small Liberal Arts College.

Which means the finances are likely to be different than at a big division I university. Swarthmore cut its football program in 2000 due to its large cost and because it’s difficult to fill a team from a student body of under 1500. Football didn’t bring in any direct revenue (no ticket sales), but many alumni, especially those from back before the school was known for its academic rigor, made noise about halting their contributions. This coincided with a large endowment campaign, so I don’t know that there was any noticeable decrease in contributions.

Tommy Tuberville at Texas Tech earns every bit of his $1.5 million salary, considering that Mack Brown at University of Texas makes $5.1 million.

Tuberville’s salary is a step down from $1.7 million that his predecessor, Mike Leach, made at Tech. Besides, Tuberville is under a 5 year contract, that started last year. The university can’t touch it. I doubt you or your boss have a 5 year contract.

IFRC, when I was at Florida State in the early 90’s…some of the glory years of FSU football…the team brought in lots of money. Besides doing stadium renovations and supporting some of the other athletic programs, revenue from football was going to fund a few of the libraries.

There was a reference above to only a few programs that are self-sufficient financially - I wouldn’t be surprised if FSU was in that list, at least back then.


I think the OP also needs to fundamentally understand that American colleges are not in the education business but are profit-making entities devoted to the bottom line. Once you understand (and accept) that, everything else makes much more sense.

You’re thinking “Oh! But so many Ivies and top-tier schools have offered free rides to families making less than X dollars in income!” They do this for headlines, prestige - to encourage more donations from alumni for their cause. They are not, nor are they ever - doing this out of the kindness of their hearts. They’re doing it to raise the profile of the university and hopefully raise more money down the line.

I always laugh when people lament an idiot jock getting into a decently high profile school (with a full ride) because of athletics. People don’t get that a decent school running back literally makes back his 4 years of tuition dollars in one appearance. The rest is pure profit.

No college president gives a hoot about football/basketball; they love them because they bring in the bucks, via ticket sales and big time donors. Every halfway decent college president is good at two things: bringing in donations and kissing ass. #2 is less important than #1, if #1 does excellent work.

This has given me quite a bit to consider. Thanks!