A PRICE TO PLAY | Where does the money go?
There is money -- lots of it -- being made in big-time college sports.
The question: Where is it going?
Everyone seems to have an answer, often depending on how much turns up in the coffers.
It’s going to many of the wrong places, according to a group of distinguished college professors in a recent letter to the Department of Justice asking for an investigation of the Bowl Championship Series.
Division I men’s basketball generates about 96 percent of the revenue that comes into the National Collegiate Athletic Association each year, the organization says. It is then distributed to the institutions and used to run 88 national championships while subsidizing all three NCAA divisions. “It is by far the dominant revenue stream for NCAA membership,” NCAA President Mark Emmert said on the PBS show “Frontline.” “Ninety percent of the revenue that flows into the NCAA comes from the media rights and ticket sales for the NCAA men’s basketball tournament.”
The BCS is not part of the NCAA. It only distributes money to the members of its group based on individual conference rules. It does not subsidize Division II or III.
“They spread revenue in a relatively equal fashion,” Emmert told “Frontline.” “So if you looked at the SEC (Southeastern Conference), all of the bowl winnings from SEC games are pooled together, and they are passed out in equal shares, so Vanderbilt gets as much as Alabama.”
Only 14 of the 120 Football Bowl Subdivision schools posted an operating profit for the fiscal year ended in 2009, an NCAA report said.
“We couldn’t do any of those other sports if we weren’t successful in football,” Emmert said. “In the NCAA, we can’t support anything else we love unless we’re successful in Division I men’s basketball. Whether you like it or not, it’s just a fact. But we have to make the case for what we do with those resources.”
There are many who claim the use of resources has been reckless and gone to favor certain groups, particularly executive directors of bowls (mainly from the BCS), conference commissioners, athletic directors and big-time college football and basketball coaches.
While money paid out to those individuals has increased, benefits to college athletes have been stagnant, and the NCAA said it cut $10 million from its budget for staffing, travel and operations last year.
In an April letter to the assistant attorney general at the U.S. Department of Justice, 21 college professors, including one each from SEC schools Florida and South Carolina, called for an investigation of the BCS.
They argued the BCS is the principal impediment to a playoff that would generate much-needed additional revenue for “all” schools, and that the financial reward the BCS doles out to the automatic qualifying schools in its six conferences does not correlate with consumer appeal. A significantly smaller amount goes to non-BCS schools in some cases.
Sports Business Journal, Playoff PAC, the Associated Press and others who examined IRS Form 990s from the major bowl games provide fuel for the critics.
Four of college football’s six powerhouse conferences paid their top executives $1 million or more, an AP analysis of tax records showed, far eclipsing the compensation of most university presidents.
The six conferences (Big Ten, Big 12, Pac-12, ACC, SEC, Big East) all receive automatic bids to the BCS games.
“I can’t imagine that the well-being and growth of student-athletes is of paramount importance when there’s that level of compensation,” Dave Czesniuk, senior associate director of Northeastern University’s Sports in Society, told the Associated Press.
Consumer advocate Ralph Nader, in a new role as founder of League of Fans, said athletic departments have become stand-alone empires at many Division I campuses operating under the guise of the university’s non-profit umbrella. He argues sports apparel companies and the like have become “de-facto co-athletic directors at big-time universities.”
Nader calls college players “entertainers,” not student-athletes.
Another problem is money that could be going to schools participating in bowl games lands in the pockets of bowl CEOs at an alarming rate, critics claim.
Comparing information from IRS forms 990, Sugar Bowl CEO Paul Hoolahan received $645,386 in fiscal year ended in 2009 to become the highest-paid BCS bowl executive. Outback Bowl CEO Jim McVay is the highest-paid bowl CEO with a salary of $808,032, according to tax records.
Playoff PAC, which began as six people between the ages of 27 and 32, said it has about 30 lawyers and accountants who volunteer their time.
The organization said it reviewed more than 2,300 pages of tax records and public documents. It reported the Sugar Bowl’s top three executives received $1,225,136 in 2009 out of a total revenue of $12.7 million, which means those three received nearly 10 percent of the bowl’s revenues.
The Sugar Bowl lost money despite receiving a $1.4 million government grant, and Hoolahan’s salary was about $25,000 more than the Rose Bowl’s top three executives combined, according to PAC.
The BCS bowls are 501(c)3 public charities and as such obtain taxpayer-funded benefits.
The Sugar Bowl IRS Form 990 showed it paid its CEO an increase of 42.8 percent from 2007 to 2009. By contrast, the Rose Bowl’s CEO earned $277,929 in fiscal year 2009.
Abuses in the Fiesta
In response to the AP, Sugar Bowl spokesman John Sudsbury said in an email: Hoolahan’s salary is set by the board of directors after a review that includes input from a professional compensation analyst and a compensation committee.
Sudsbury said his organization is audited every year by an outside firm and has always complied with IRS regulations. He dismissed the complaint as “rehashed information” routinely trotted out by those against the bowl system.
Bill Hancock, executive director of the BCS, said it’s up to each bowl to determine how much it wants to pay its CEO, and the BCS does not have any control over that. He said every bowl organization decides what is best for it.
The BCS’s biggest problem was the Fiesta Bowl, which was involved in a scandal over several years that involved alleged improper use of funds that resulted in the firing of CEO John Junker.
A Fiesta Bowl report released earlier this year cited numerous abuses, including alleged improper campaign contributions and using Fiesta Bowl funds of $30,000 for Junker’s 50th birthday party, membership in four private golf clubs and $1,200 for a strip club in Phoenix.
Playoff PAC said other BCS bowls, namely the Sugar Bowl and Orange Bowl, might also have committed infractions, and it filed complaints with the IRS claiming they violated their tax-exempt status with excessive spending.
Appearing on the “Dan Patrick Show” last June, Hancock dismissed the talk, calling it unfair criticism.
“I don’t think it’s fair to paint innocent people with that same brush,” Hancock said.
The bowls contend they are in complete compliance with IRS guidelines.
One of the biggest expenses for bowl teams is that they are usually required to purchase a large segment of tickets at full price, which often leaves them in the red.
The ticket purchases in many cases involve schools paying for band members to attend.
In the 2010 Outback Bowl, the University of Iowa had to pay $65 per ticket for each one of its 340-plus band members, said Mick Walker, assistant athletic director for business operations at Iowa.
The band performed for free at halftime.
This story was originally published August 18, 2011 at 12:00 AM with the headline "A PRICE TO PLAY | Where does the money go?."