News: CJ Exclusives

UNC System Athletics Subsidized With Student Fees

Subsidies range from 9 percent at N.C. State to 82 percent at UNC-Greensboro

RALEIGH — While the athletic departments at UNC-Chapel Hill, N.C. State University, and Appalachian State University prepare to collect extra revenue from the college football bowl games they’ll play, a recent study by The Chronicle of Higher Education and the Huffington Post, “Sports At Any Cost,” reveals that athletic programs do more to empty UNC students’ pockets than they do to beef up university bank accounts.

Ten of the UNC system’s 16 universities were surveyed in the study covering 2010-14, and every one spent more than it collected in revenues — often much more. Of the 10 campuses, only UNC-Chapel Hill and N.C. State covered more than 85 percent of their athletic budgets with revenues from ticket and merchandise sales, financial donations, endowment profits, broadcasting rights, or sporting-goods contracts. UNC-Chapel Hill’s athletic department required 11 percent of the budget to be covered by subsidies, while N.C. State subsidized 9 percent of its costs.

It’s a pattern repeated at public universities across the nation. Revenues cover only a sliver of athletic departments’ operating costs. The remaining deficits are closed with subsidies, quite often using student fees — which essentially amount to a hike in tuition, because all students must pay the fees, even if they do not attend athletic events.

UNC-Greensboro’s athletics were the most heavily subsidized in the system, with 82 percent of revenues coming from subsidies and 71 percent of those subsidies covered by student fees, which are charged in addition to regular tuition, room, and board from 2010-14. In the 2014 academic year, UNC-Greensboro undergraduates picked up nearly $9 million of the $14.7 million athletics budget. Each of the 12,350 full-time undergraduates paid $708.50 to subsidize sports.

Other notable subsidies include those at UNC-Charlotte, where the athletic department has subsidized $85,854,522 of its $116,678,876 total spending (or 74 percent) since 2010. Student fees comprise nearly three-fourths of those subsidies, adding up to $64,390,891 over the last four years.

College athletic programs continue to expand as universities use a variety of justifications for sports development, says economist Richard Vedder, director of the Center for College Affordability and Productivity. One recent example is the UNC-Charlotte 49ers football program, which was established in 2008 based in part on the argument that adding Bowl Championship Series-level football would be a magnet for both donors and students.

That’s a common rationale university administrators use to beef up athletics — but it’s not necessarily realistic, Vedder said.

“As I read the empirical evidence on this, by and large that’s not a very strong argument,” Vedder said. “In most cases there is little evidence that there is an increase in the donations that sports bring in. There is no evidence at all that they bring in more money. And when they do, sometimes the … incremental amounts of money they bring in is to support the sports program itself.”

In 2014, UNC-Charlotte’s athletics department received financial contributions of $4,420,363, as well as a total endowment and investment income of $271,738, roughly $1 million more than in 2010, when it received $3,276,840 in contributions, and $317,728 in endowments and investments. But that increase in donations over the last four years may not represent any real benefit to the school, Vedder said.

“That extra [money] is going to support the operations of the athletic department,” Vedder said. “So how does that help the university in a material way?”

College sports continue growing, not because they are of true value to universities, but because they are popular, Vedder said. That popularity is driving a kind of athletic arms race, and an immediate solution looks unlikely due to peer pressure among universities, he said.

“A basic problem is that people love sports,” Vedder said. “So this assumption that you can [use sports] to buy your way into donations by prominence and high reputation doesn’t work. Because one thing everyone forgets is what I call the Iron Law of Sports: Every time someone wins a game, someone else loses, and not everyone can win in sports.”

Andrew Zimbalist, professor of economics at Smith College, and co-author of the book Sports, Jobs & Taxes: The Economic Impact of Sports Teams and Stadiums, says the problem of expansion and over-spending in university athletics is one that has been escalating for more than two decades.

“What’s going on now in college sports is that there has, since 1984, been a trend toward sharp inequality,” Zimbalist said. “And that trend has been exacerbated in recent years by the formation of the [major] five conferences” — the Atlantic Coast, the Big 10, the Big 12, the Pac 12, and the Southeastern — so “everybody is trying to keep up with the big guys.”

Only about 20 of the more than 1,000 NCAA member schools ever see any surplus in their athletic budgets, Zimbalist said, because of the unique nature of college sports in the United States.

“The structure of these departments is unlike anything we know of in the U.S. economy,” Zimbalist said. “These are enterprises that are very competitive. But they don’t have any stockholders. And it’s a very competitive environment, so when one school upgrades [its] stadium with luxury suites, or when one school gets a new arena with a scoreboard, or when Duke decides to spend … $3 million [instead of] $1 million recruiting” for its basketball program, “then UNC feels like it’s got to do that.”

Before UNC deals with overspending and dependency on student fees, it first must change how it oversees the athletics operations of the university system as a whole, said former North Carolina Supreme Court Justice Bob Orr, who represented former UNC-Chapel Hill athletes in litigation claiming that the university committed academic fraud and the NCAA ignored it.

“There is not much transparency,” Orr said. “I think you’ve got to have transparency. The public needs to know where the money’s coming from. I think … the [UNC] Board of Governors … needs to have full access to see how these monies are being generated and spent. And then once you really understand the cash flow, you can start talking about reforming the system, whether it’s in the context of eliminating student fees to fund athletics … or actually sharing some of the profits with the people who are generating the money.”

Joni Worthington, spokeswoman for the UNC Board of Governors, said the board does offer oversight to the process of setting student fees, and that the BOG’s current four-year tuition plan for 2015-19 caps increases in tuition and fees at 5 percent.

Worthington also said that proposed increases for a particular fee may be revised downward after a review by the board’s members of staff, but that no review is underway at this time. Discussions of fees begin on each campus and must involve significant student input, she said.

On-campus complaints about high student fees haven’t been prominent in the past because they haven’t drawn much scrutiny, Zimbalist said. And while cutting student fees may not be practical for UNC right now, the schools would perform a public service by admitting the limitations of sports as a real investment in academic growth, he said.

“The point of it all is that there is no easy solution here,” Zimbalist said. “You can say that your school is going to opt-out, [that] you’re going to stop [chasing] the Holy Grail. That’s the wise thing to do. Drop down to a lower division, and play [other] colleges the way that they’re supposed to be played — which is as part of the educational experience.”

Kari Travis (@karilynntravis) is an associate editor of Carolina Journal.