College Athletics Need To Cut Costs, Borrow To Survive Without Football

Aug 14, 2020

College athletics across the country are in jeopardy. This week, the Pac 12, Big Ten and others have suspended football seasons, including Boise State. More could follow.

The Ivy League was the first to cancel its fall football season more than a month ago. Schools and conferences with large endowments and little reliance on television revenue from football seemed less encumbered to make decisions regarding the ability to carry out a safe athletic season.

Credit BSU Blue Thunder / Flickr

The loss of football revenue is a substantial one at schools everywhere, and according to Dr. Andrew Zimbalist, part of a triple threat in college athletics, alongside compensation questions and social justice issues. Dr. Zimbalist is an author and Robert A. Woods Professor of Economics at Smith College in Massachusetts. He spoke with Troy Oppie about the economics of no football this season and how schools like Boise State might be able to buoy the ship and ride out the storm.

Read the full transcript:

TROY OPPIE: College athletics across the country are in jeopardy. The Ivy League was the first to cancel football more than a month ago. Now, schools with large endowments and little reliance on television revenue from football seemed freer to make fast, unencumbered decisions. Just this week, the PAC-12, Big Ten and others have suspended football, including at Boise State. The loss of that revenue is a substantial one at schools across the country, And according to Dr. Andrew Zimbalist, part of a triple threat coming against college sports, alongside compensation questions and social justice issues. Dr. Zimbalist is an author and Robert A. Woods, economics professor at Smith College in Massachusetts. He joins us now on Boise State Public Radio. Dr. Zimbalist, good morning. How do schools survive this?

Dr. ANDREW ZIMBALIST: Well, first of all, it's difficult to talk about college athletics as a monolith. It's lots and lots of different entities, right, within Division one. We have FBS, FCS and division one without football. And we can go further because when you look more closely at the financial situation within the power five, you notice that there really only half of those 65 schools that are able to pay their own way on an operating basis. But as a general matter, college sports have a tremendous amount of excess in waste. They don't operate like normal commercialized entities do in our society. A normal commercialized entity is a company that has owners, and owners want to see profits so that they can have higher stock prices or they can get more dividends. An athletics department, even though it's a commercial entity, does not have stockholders. It has stakeholders: they care about wins. And so whenever an athletic director sees some more money coming in because they sold more tickets this year, or because they have a better television contract, the athletic director immediately deploys that revenue. So it's a vicious cycle. There's no reason by normal market criteria to spend the kind of money that is being spent. What all of these programs have to do, to get back to the original question you asked, all these programs have one very simple thing to do, and that is to cut costs. The other thing that these programs have is an option. At least some of the programs have as an option is to put up their television contracts as collateral and borrow money.

OPPIE: So adding debt when many departments may already be carrying long term debt tied to facilities. We're speaking with Dr. Andrew Zimbalist, economics and sports business professor at Smith College in Massachusetts. About half the Boise State athletics budget comes from football revenues. Some of it, of course, is university funds. But the university on paper at least, has operated this department in the black. Not every school can say that. Curt Apsey, the athletic director at Boise State said yesterday they have about a $20 million loss this year without football. But within the conference, Boise State is a big fish in a medium pond, And that feels like maybe it's a better position to be in than to be a smaller program in a bigger conference

ZIMBALIST: Well, schools that are more successful on the field or on the court will always have over time accrued a more substantial backing than schools that are less successful. Programs can go to those backers when they're in financial distress, which obviously everybody is right now. So in that sense, I think that Boise has somewhat of a cushion that they'll be able to deploy that in a way that other schools in Mountain, in the Mountain West and other schools in Big Sky Conference and so on won't be able to do. They have nominally, as you point out, nominally, they have they have a surplus. And I suspect that they'll be able to make more successful recourse to others and that will enable them to get through the crisis more easily.

OPPIE: If you're an athletic director or advising an athletic program right now, what are you telling that program to do?

ZIMBALIST: The first thing they have to do is to look at coaching salaries. This is a difficult thing to do for an individual conference because if the 'group of five' conferences got together or just the schools within Mountain West got together and they said, 'hey, there's no reason why we should pay our coaches, football coaches $2 million,' or whatever that number might be. The first problem with that is that if Mountain West does that and other group of five conferences don't do it, then then all you're doing is shooting yourself in the foot because you're going to lose your football coaches. So you need to have something done on a much larger basis. If you tried to do it for all Group of five or if you tried to do it NCAA-wide, then you bump up against the antitrust exemption. You can't do that it's known as price fixing. It's companies that compete with each other to say, hey, we're not going to pay an engineer more than X amount that you're price fixing. You're not allowed to do that. What we need is a limited antitrust exemption that enables us to have the kind of cost. And this is, by the way, this applies not only to college coaches salaries, but it applies to salaries, it applies to commissioner salaries, but it also applies to how much you're spending on training facilities, how much you're spending on renovating your football field or your basketball arena. It applies across the board. We need to have some rational cost cutting. And it's very hard to do that if you're doing it by yourself because then you're exposing the quality of your program. I would not my first move would not be to cut teams. I think that college athletics, when done properly, are enormously valuable to the participants. So I think that there's a very deep set of reforms that's waiting there, waiting to happen. None of them are the kind of thing you can do on your own, none of the kind of thing that you could do overnight. The crisis that we're in right now, I think heightens the necessity for these reforms. And it creates a greater ability for groups like the NCAA to engage in coordinated and orchestrated behavior. The short term fix is to cut back as much as you can. All of this is going to be incrementally cutting back, maybe by going to the coaches and saying, 'will you take a 10% salary cut this year?' You got to do things like that. But you also have to go to the credit markets, I think, and be able to borrow money to keep your head above water.

OPPIE: Worth noting, perhaps, the Boise State and Idaho's football and men's basketball coaches are among the highest paid state employees. Dr. Andrew Zimbalist is professor of economics and sports business at Smith College. He is the author of many books on the business of sports as well. Thanks for being with us this morning.

ZIMBALIST: All right. Take care. All the best. Bye-bye.

Follow Troy Oppie on Twitter @GoodBadOppie for more local news.

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