Like a five-star high school recruit in his senior year, college athletics is at a crossroads. Pressure from current players, former players and lawsuits means a system of paying college students to play sports is finally getting serious attention.
Those pushing to pay athletes argue that schools — and their coaches and administrators — take in billions while the students themselves are left with nothing. The NCAA and school officials have steadfastly rejected that argument, saying most schools can't afford to pay students and that doing so could tarnish the principle that players are students first.
But the contentious philosophical debate also leads to some basic math questions: Could schools afford to pay their athletes, and how much?
An examination by the Tribune of athletic department budgets over the past five years for Big Ten Conference schools shows that they generate tens of millions of dollars in operating surpluses.
The review found that many of the schools could compensate players beyond just the value of a scholarship if they dipped into their year-end athletic department surplus: They could afford some form of payment to members of the men's basketball and football teams, which are revenue-generating sports, and could even cover certain extra costs for all scholarship athletes.
Financial reports submitted to the NCAA were available for 10 of the 12 conference teams over five years and showed a wide variation among schools in cash flow, including losses in some years, but also large surpluses — the highest being $23.3 million for the University of Michigan athletic department in 2012. (Northwestern University, a private school, declined to share data, and public records laws don't require Penn State to disclose such information.)
A closer look at the 2012-13 school year, the most recent period for which all 10 schools' data were available, showed all but Purdue reported year-end surpluses.
Eight of the schools could afford to provide football and men's basketball players a few thousand extra to pay collegiate incidental expenses — costs that are not included in the free tuition and housing currently given scholarship athletes. Those eight institutions also would have enough money in their surpluses if the full cost of attendance were expanded to cover all full-ride equivalent scholarships in both women's and men's sports; the schools typically award at least 250, which each can be shared among multiple athletes.
The financial reports also show that seven of those schools could pay their men's basketball and football players annual amounts of $7,500 — a figure that mirrors what some minor league baseball players earn as they try to reach the majors. That would be in addition to tuition and housing.
These seven schools also could afford to pay those players $15,800 a year or the equivalent of a minimum wage based on year-round employment. That does not include the University of Illinois at Urbana-Champaign.
Should colleges turn to a pay system for its top athletes, it's unclear how such a system would be crafted.
But covering incidental expenses such as cellphone bills, extra food and transportation has been a starting point for some in this debate because it is intended to fill in the gaps for students' real-world college experience. NCAA President Mark Emmert even made an unsuccessful effort in 2011 to provide a $2,000 stipend to athletes.
"They could afford to pay stipends, maybe even to all student-athletes on scholarship," said Matt Mitten of the National Sports Law Institute at Marquette University Law School, who has studied the economics of college athletics. "If you took at the Big Ten, they're generating very substantial revenue. The real question is how many athletes would be getting the stipend."
The role of student-athletes in college — and how they should be treated — is being debated in a variety of ways, with huge implications for the future of college sports followed by millions of rabid fans.
A federal labor board recently found that Northwestern football players should be treated as employees because they spend so much time playing their sport. And the NCAA faces a litany of lawsuits, on issues ranging from player concussions to whether student-athletes should be paid for their efforts.
One act in this drama has been playing out in a federal courtroom in Oakland, Calif., site of a federal antitrust case brought by former UCLA basketball star Ed O'Bannon and a class of recent football players that accuses the NCAA and schools of price-fixing and profiting off players' likenesses in video games. Whatever the outcome, it is expected to be appealed and eventually wind up before the U.S. Supreme Court.
Meanwhile, some presidents from the 65 largest Division I schools with the richest budgets are pushing for NCAA authorization to implement rules separate from smaller schools, including increased stipends, long-term medical care and possibly payments to students. Without such autonomy, some presidents in the five major conferences — the ACC, Big Ten, Big 12, Pac-12 and SEC — have threatened to form a whole new division.
There isn't much debate that large sums of money are at stake — Ohio State's athletic department received about $20 million in television revenue alone in 2012-13 — but there are differing views about just how much. Even publicly available budgets can mask the true financial health of these programs because they provide general, sweeping views. It's even unclear how year-end surpluses are reinvested.
Still, the Big Ten budgets give a glimpse into the finances of these athletic departments, and the robust revenues of some schools match what many would expect. Schools that are sports powerhouses are generating the most net earnings — the surplus cash they have after all their expenses are covered.
For instance, leading the pack in 2012-13 was Ohio State with $15 million in net earnings, followed by Michigan at $11 million.
Over the past five years, the 10 schools — Illinois, Purdue, Indiana, Iowa, Michigan, Michigan State, Wisconsin, Minnesota, Ohio State and Nebraska — show a combined net income of nearly $200 million. About a third of that comes from Michigan, where the school's athletic program reported more than $70 million in net earnings during that time.
Shortfalls for any of these 10 schools are infrequent. In the last five fiscal years, their athletic departments reported having higher expenses than revenue only four times. In addition, Minnesota's financial forms showed expenses precisely equaling revenue in four of the last five years. Purdue reported a $3 million deficit in 2012-13. Still, the West Lafayette, Ind., institution finished with seven-figure surpluses in other years, and over five years had a net surplus of $10.4 million.
As it stands, 12 percent of these schools' athletic expense budgets went toward student aid, tuition and housing in 2012-13.
In calculating a living expenses stipend, the Tribune examined the difference between the cost of a full athletic scholarship and what an institution reported on financial forms as the total cost of attendance, as well as the school's own definitions. The amount depends on the school and the student, but it was typically no more than $5,000 annually. The smallest difference was at the University of Illinois, where the figure was $1,354 for both in- and out-of-state students.
The amount does not account for other forms of assistance, including federal Pell grants that students in need receive or the NCAA Student Assistance Fund. The only two of the 10 reporting Big Ten schools that may not have been able to cover the stipend, based on 2012-13 financial reports, were Iowa, which did not have a large enough surplus, and Purdue, which finished the year in the red.
But not only does the money seem to be there for most schools, there also is support from within some athletic departments to make such payments. That includes the University of Nebraska, Ohio State and Illinois. For a short time, Northwestern provided cost-of-attendance stipends after they were endorsed briefly by the NCAA, said university spokesman Paul Kennedy.
At Illinois, covering living expenses for the 98 men's football and basketball full rides would cost about $132,000 — an amount easily covered by the athletic program's nearly $455,000 in net earnings in 2012-13.
Ryan Squire, the University of Illinois associate athletic director for compliance, said the school supports the concept of helping student-athletes from all sports reach the cost of attendance.
Extending it to the 257 athletic full rides given for all sports would increase the cost to roughly $350,000, according to the Tribune's review.
Ohio State athletic director Gene Smith said the school's budget next year includes $1.6 million in case it can provide stipends. And although there may be other legal wrinkles to sort out, the process would not be the same as paying players, Smith said.
"I've never looked at it that way," said Smith, a scholarship football player from Notre Dame who has directed athletic programs for 30 years. "There's a population of young people who need it, who need additional support for miscellaneous expenses."
Doling out stipends over the course of two semesters typically would amount to less than $200 a week. So what if the levels were brought up to another benchmark? Since the basketball and football programs serve as a feeder system for professional sports, what if these athletes were paid like minor league baseball players?
These ballplayers can earn $3,000 to $7,500 for a five-month season, recent court documents show.
Once again, most of the 10 Big Ten schools examined could afford that. Based on net earnings, seven of them would have enough to pay their men's basketball and football players annual amounts of $7,500. Those schools, including Michigan and Ohio State, could also meet the demand of minimum wage, which is about $15,800 a year. Illinois would not have been able to afford either amount during 2012-13, based on financial records.
Squire declined to comment on any scenarios in which student-athletes would be paid beyond the cost of attendance. Predicting what kind of pay system would be put in place is difficult. Suggestions have ranged from the stipends, which amount to only thousands of dollars per player, to a free-market system that could generate six-figure salaries. But complicating matters is that payments would also raise questions about taxes, worker's compensation, minimum wages and collective bargaining.
Whether college athletes are paid also likely will be influenced by Title IX, the landmark federal law that requires female students be treated equally to their male counterparts. Some experts said that if a payment system were introduced and caused institutions to lose their status as not-for-profit educational organizations, then Title IX would not be applicable.
One model that could be lucrative for players — proposed by economists who are plaintiffs' witnesses in the O'Bannon case — involves splitting broadcast revenues, which is done in the National Football League and National Basketball Association.
It's unclear how much of that revenue could be distributed to players because the reports submitted to the NCAA allow for it to be consolidated into a broader sum of money it receives from the Big Ten payouts. But a much-discussed proposal would place the money into a trust that players could draw from upon graduation.
If O'Bannon prevails, the NCAA would be forced to lift its prohibition on college athletes financially benefiting from their likeness, potentially opening up other avenues of payment as well.
Sports economists caution that if athletes are paid, prices will be driven by the market. Schools, they say, would only provide compensation if they want to, or if competition dictates it. It's also possible that students would only earn money themselves — through endorsements, for example — without school involvement.
Andrew Zimbalist, an economist at Smith College who focuses on sports, said most schools cannot afford to pay players. But if they could, school officials would adjust by not paying coaches or athletic directors as much. Athletic departments would have to tighten their belts.
"It's not an easy thing to start finding money to start paying these players," he said. "There are ways where adjustments can be made and money can be liberated. But there's not a lot of leeway."
Generating more money is another way for athletic departments to compensate. Experts say one possibility is getting more money from alumni who support the teams.
Allen Sanderson, an economist at the University of Chicago who focuses on sports, likened the situation to the deregulation of airlines: Airlines distinguished themselves from competitors with in-flight food and other perks, but after deregulation the companies focused almost solely on the flight's cost.
In college athletics, the size of payments to a school's athletes could emerge as a deciding factor for recruits, rather than its facilities, reputation or famous-name coach.
"It's messy," said Sanderson, who supports paying athletes and recently wrote a law journal article explaining why. "But I'm not sure why students and alumni and universities should benefit on their Saturday afternoons while basically enslaving 85 guys down on the field for entertainment for three hours."
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