Can Collegiate Athletic Programs Continue Excessive Spending?

By Joe Regan,
Sports Business Writer

Data shows that the collegiate athletic programs of public universities have consistently incurred more costs than their respective revenues brought in to the university. With this deficit, universities are forced to allocate institutional money back into these athletic programs to make up the difference, which begs the question; is this sustainable?

In 2015, the total revenue for schools in the power five conferences rose by $304 million. Unfortunately, the total spending increased by $332 million from the previous year. However, the issue of outspending the program’s revenue is not specific to the schools of the power five conferences, whose teams have significant budgets and the ability to sell-out arenas that rival professional sports venues. For the 178 public schools outside of the power five, revenues increased by $199 million but as the trend dictates, spending increased by $218 million.

Schools such as the University of Alabama at Birmingham have had to make significant cuts to keep their athletics programs afloat. UAB decided to cut their football program following a promising year in which the team became bowl eligible because the program was not sustainable.

The University of Cincinnati has been one of the most highly subsidized programs in collegiate athletics, as their deficit was over $23 million. UC expects a decrease in revenue over the next few years stemming from the collapse of the old Big East Conference and UC’s tenure in the American Athletic Conference, whose future is cloudy. With the expected decrease in revenue, Cincinnati has implemented strategies to cut costs, such as a ban on air travel to non-conference games, and a per diem cap of $45. These strategies are expected to save the university hundreds of thousands in the coming years.

Collegiate programs can only sustain their excessive spending if the program is worth the financial burden inflicted on the university. This is a question that must be asked at many institutions because universities typically do not enter into collegiate athletics solely to make a profit, as proven by the financial reports of public institutions around the country. Collegiate athletics provide greater benefit to universities than just the revenue they generate, such as exposure to different regions of the country. This exposure typically leads to an increase in applicants for the university, leading to increased revenues outside of the athletic program, which help generate interest in the school. If this occurs, the university can sustain the athletic programs through subsidization which in essence acts as an investment back into the university itself, as opposed to just the athletic program.

However, the current spending has created a bubble in collegiate athletics, and the future of collegiate athletics may cause the bubble to burst. One of the most debated issues in college sports is whether or not universities should be forced to compensate student athletes beyond scholarship money. This notion is one of the prominent changes that could cause a shock to the system and burst the college sports bubble. If college athletes are required to be paid, there is a high likelihood that the spending will be unsustainable for many universities, potentially leading to an unprecedented number of cuts from more established programs.

A version of this article appeared in the Tuesday, April 26th print edition.

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