Skip to main content
Major College Athletics Reforms

Muffet McGraw, Notre Dame's women's basketball coach. Her team has made the Final Four in each of the last five seasons. Credit Michael Conroy/Associated Press

The clapping sound in the background comes from NCAA executives, university presidents, and athletic directors. They’re self-congratulating after adding a few thousand dollars to the annual stipend each player will receive for playing revenue-generating sports at major universities. The increases are pegged to the ‘real’ cost of attending school.

USA Today estimates that the new costs will add about $500,000 to the annual athletic budgets at most major schools. That’s not chump change, but it’s a fraction of the financial inflow colleges receive from playing revenue-generating sports. Consider just one example. At the end of the ’14 football season the bowls shelled out a half-billion dollars to schools for participating in the games—a $200 million increase from ’13.

While TV revenue and media rights are among the primary sources of money used to support university sports programs, there’s another funding stream in college athletics, one that doesn’t get as much attention: athletic donations.

Consider numbers associated with University of Michigan football—the all-time college win leader—for the 2012-13 year. The football team generated $82 million in revenue that year. $39 million came from ticket sales and another $11 million came via NCAA and conference distributions. $5 million came from playing as a visitor at other school’s stadiums. But another revenue source stands out: “contributions”—over $25 million dollars that year.

Of special note nationally is a particular type of contribution, the athletic endowment. Do a Google search for “athletic endowments” and you’ll get about 1,250,000 hits. You’ll see articles like this: “Endowments grow from the chalkboards to the sidelines.” That’s right. The academic endowment has been transplanted to fields of play.

Not long ago almost all collegiate philanthropy went for academic purposes—starting new programs, endowing professorships, constructing academic buildings, and the like. That work continues, but another strand of philanthropy targets athletics. Endowments (vs. one-time gifts) are important to institutions: endowments generate interest income, which can be spent annually in perpetuity, freeing up base budgets for reallocation.

College- and university-directed philanthropy is big in this country—over $50 billion of the $335 billion given in the 2013 tax year went to America’s colleges and universities (USA Today, 4/12/15). And athletic philanthropy, a subset of university giving, is growing. For example, during the 2010 fiscal year athletic donors at public institutions in America’s top six athletic conferences contributed almost $1 billion dollars to collegiate athletic programs.

Major College Athletics Reforms

Karen Keyes was a member of McGraw's first team at Notre Dame in 1987. She and her husband donated $5 million to endow the women’s basketball coaching position.

But that figure is the tip of the iceberg. It doesn’t include athletic donations made to private institutions. That exclusion is important for two reasons. First, private institutions don't have to follow the same reporting requirements as public universities. Second, private universities are places where athletic endowments gained traction initially and thrive. Public institutions are following suit.

Athletic philanthropy is especially big in the Ivy League and at other prestigious academic addresses—schools that occupy the top echelon in American higher education. Athletic investments are being made across the board—including sports that don’t always draw big crowds or make newspaper headlines (as football and basketball do), sports such as swimming & diving and gymnastics.

There’s a common storyline when it comes to establishing an athletic endowment. A student-athlete’s life is influenced significantly by a coach, school, and sport. Following graduation the student-athlete has a successful career outside of sports. Later in life he or she decides “to give back” to the place and people that made it possible. An athletic endowment follows.

That’s exactly what happened recently when Karen Keyes and her husband, Kevin, gave the University of Notre Dame $5 million to endow the head coaching position in women’s basketball. Karen played on Muffet McGraw’s first Irish team (McGraw is the current ND coach). Later, Karen served as McGraw’s grad assistant before going on to a high school coaching career. Husband Kevin, who works on Wall Street, played tennis at ND. “Out of all the people in my life, besides Kevin’s parents and my parents, (McGraw) had an incredible impact on who I am as a person,” Karen Keyes said at the announcement (NYT, 4/17/15).

What happened at ND isn’t an isolated case. Seven of eight head football coaching positions in The Ivy League are endowed. (The 8th was dropped at Brown—named after Joe Paterno, an alum—following the Penn State scandal.) Head football coaching positions are also endowed at other prominent academic schools, including Stanford, Northwestern, and Michigan. Northwestern even endows its athletic directorship.

The list goes on. And so does the trend.

When it comes to generating revenue in athletics, colleges do pretty much what they want and when they want. As with seat license fees, decisions are imposed on the public, de facto, as university administrative actions.

About a year ago ESPN’s Ted Miller wrote an article entitled, “Endowed Titles New Trend in Coaching.” His take? The concept is spreading across the country. And it’s not just about endowing head jobs; assistant positions are being endowed, too.

Scroll to Continue

Recommended Articles

The business of endowing coaches is priced in a market: so much $ will buy you this, and that amount “plus” $ will buy you more. Here’s an example from Duke:

  • $1,000,000 to establish an endowment for an associate or assistant coach
  • $2,000,000 to establish an endowment for a head coach in a sport other than football or basketball
  • $5,000,000 to establish an endowment supporting the head coach of football, men’s basketball, or women’s basketball, and
  • $5,000,000 to establish an endowment supporting the athletic director.

Do a Google search and you’ll see one solicitation after another—from colleges and universities (big and small) reaching out, encouraging donors to give to athletics.

But giving to athletic funds and endowments isn’t a voluntary option only. Season ticket holders at many major schools are required to give to an athletic fund if they want to buy prime season tickets for football and basketball (e.g., sideline seats in football). How? Baked into the overall ticket price is a “seat license,” an upfront fee that goes to athletics. At many major institutions the cost of the seat license (i.e., the right to buy a ticket) costs as much per seat, if not more, than the actual ticket.

What’s more—and this feature has been widely criticized—a portion of the fee is categorized as a charitable contribution. Why? It’s being made to a non-profit organization, i.e., a university.

Is all of this good for college sports? It depends. Athletic endowments can add immeasurably when schools don’t have big-time revenue sports to enhance athletic budgets. But it’s a different story when athletic philanthropy is targeted at major sports at major schools at major conferences, that is, in football and basketball, especially, at the national powers. That's because athletic philanthropy helps fuel an “arms race” in big-time collegiate sports.

It’s about winning. Winning means competing. Competing means keeping up, and exceeding, what peers do. All of that costs money, lots of it. The consequence? It adds up to an insatiable appetite for money: more money means more money and, then, even more money.

It’s a conundrum, though. Philanthropists have the right to invest money as they see fit—athletically or otherwise. That observation seems to resonate with the public, too. That preference was expressed clearly in Facebook comments made in response to a school’s announcement (Top 10 in football) that it had received a donor’s gift to endow a football coach.

To tell donors how much they can give, and to what they can give, seems misguided and unworkable—essentially un-American. But it’s not inconceivable to consider bounding athletic philanthropy in conjunction with the reform of big-time college sports.

Consider this. An analogue to athletic philanthropy in college sports is players’ salaries in pro sports. Pro leagues have salary caps, that is, how much (in the aggregate) a team can pay roster players in any given year. The 65 universities in the so called “Power 5” college conferences could initiate something similar: an annual philanthropy cap (say, no more than x% increase in philanthropy in any given year). It would be one way to begin regulating the money flow in big-time college sports.

Something has to be done. When it comes to generating revenue in athletics, colleges do pretty much what they want and when they want. As with seat license fees, decisions are imposed on the public, de facto, as university administrative actions.

And the public isn’t the only stakeholder. I’ve written previously that many issues in college sports, including the subsidization of athletic budgets at public universities, are ripe for public policy oversight. Federal and state officials are considering regulating college sports. That option has some appeal, even in higher education.

It’s time for significant reform of how we finance college athletics. That’s Reform with an upper-case ‘R.’ Bold change is needed—the type of change that addresses problems at the core. And a primary matter at the core is controlling unabated spending in college revenue sports.

frank-fear-175

Otherwise there seems to be no end in sight.

Frank Fear

Note: An earlier version of this article appeared at The Sports Column.