Who Will Pay the Penn State $60,000,000 NCAA Fine?

Looking around the net, some say it will be the Pennsylvania taxpayer. Other believe tuition paying, and borrowing, parents and students will pay most of it. Another popular theory is that the athletic program is self-supporting and has the $60,000,000 to pay this, although that still leaves the question of who would have gotten $60,000,000 and won’t now have it.

I can think of some other ideas, such as lower employee pay, fewer scholarships and graduate student assistantships, higher student-faculty ratio, cheaper cafeteria food, deferred maintenance, and the endowment (although the last two just delay the ultimate payment).

I suppose that the final answer here may somewhat depend on the extent to which people will pay good money to see games of a soon-to-be less-than-good football team. And the immediate, today, July 23, 2012, answer may be that nobody knows yet. But before long, the Straight Dope should be available, and I’m wondering what it is. (And as a Pennsylvanian without any tie to Penn State, I’m hoping the answer isn’t the one in the first sentence.)

And what happens if they don’t pay it. To me it seems unreasonable that the penalties extend at all beyond athletic ones. And even that, the athletes didn’t do anything wrong. Why should they pay the penalties? The administrators and coaches should pay.

My guess would be that it will be paid out of the university’s multi-billion dollar endowment.

The endowment looks to be approximately 1.8 billion. Of that 1.8 billion how much is actually available for athletics/civil penalties, I don’t know.

Not that this answers the question but they will pay it off in installments over a number of years.

This question probably belongs in Great Debates, but the short answer is that they benefited from the football program.

Based on the OP, it seems that there is no definitive answer to this yet, so let’s move this to IMHO for now.

General Questions Moderator

Nearly all NCAA sanctions hurt primarily players who did nothing wrong. Reggie Bush screwed over a whole bunch of honest players at USC. Penn State players and fans should know who to blame, and it isn’t the NCAA.

The administrators and coaches will probably have to pay civil, and maybe even criminal penalties. That’s not what the NCAA sanctions are about. Those are about the effect on the game. In sports if a competitor is caught cheating he is disqualified even if the cheating was inadvertent.

Endowments are typically, by nature, unrestricted funds.

60 million sounds like a lot, but its really drop in the bucket to Penn St., especially when stretched out over 5 years.

But, yeah. I wouldn’t want to pay it!

The trustees are the biggest to blame. The didn’t foster an environment where the administration and the coaching staff turning a blind eye was even questioned as something they shouldn’t be doing. The reputation of the football program was the highest priority…not doing the right thing.

The current athletes have the choice to go and play for other schools.

The institution made their bed, and now they must lie in it. They have an opportunity to fix it and come back…that choice will be the current leadership.

I don’t think that’s really true. Generally, the endowment funds themselves are required by the donors to be held in perpetuity and cannot be spent. It’s the income earned by the endowment funds that can be used to fund operations. Occasionally, endowment principal can be spent after a certain amount of time has passed.

And even the entire earnings are not necessarily available to be spent on just anything. Often, the income is restricted in use as well. A donor may give endowment funds with the restriction that the income be used to fund scholarships, or professorships, to maintain a memorial, or perhaps go to a dean’s or department head’s discretionary fund. Some of the income may go into the school’s general fund, perhaps even most at a private school. But I think to say that endowments are typically unrestricted is misleading.

I’m sure you’re right but their website seems to indicate that you can give “program specific” endowments. I’m also not sure of the legality of dipping into gifted money that is intended to provide future earnings. Are the original gifts held in some sort of trust?

The cynic in me thinks it will work out the way these things always do. The athletics have a budget, now that they have to pay a huge fine they’ll need to make room in their budget to pay it. The less profitable women’s sports programs will see cuts while the men’s football program that had everything to do with the fine being imposed will maintain a similar budget.

The University President has stated:

It’s worth noting while it won’t pay the bill, it will factually probably cost less to run the football program over the next 5 years. No bowls means no bowl trips (and oftentimes bowl trips, despite the big advertised payout, actually don’t bring revenue to the attending schools as all that money is split amongst the conference and the teams can end up paying out the pocket for any unused seats allocated to their school, and the travel and hotel expenses are large for bowl games), and a cap meaning effectively 65 scholarship players a year also means 20 fewer players a year that PSU is paying to go to school and covering all expenses for athletic trips.

As an aside, what happens to the scholarships of the football team? Will they be honored?

Not necessarily twenty fewer players, just twenty fewer scholarships. Not all players get scholarships.

I heard that if a player chose to stop playing football at Penn State their scholarship would still be honored.

And those that want to can transfer without penalty. Usually a transferring student loses a year of eligibility.