Andy Schwarz does a terrific job of exposing the bullshit behind the insistence that big time college athletics are almost universally run in the red. (If the economics are truly that dire, why do schools keep making the jump to D-1 sports?)
Even better, he makes three proposals for more honest accounting.
Step 1: Split athletic departments into two parts, one for football and basketball, one for everything else.
In essence, this splits profit generation from how those profits are spent, and quickly disentangles the false connection between football profits and field hockey expenses.
If the two departments were split into, say, the Football and Basketball Department (FBD) and the Olympic Sports Department (OSD), the schools themselves (and Congress, if it so chooses) could make better decisions about whether FBDs were being run efficiently enough to generate sufficient profit, or whether the people in charge of the FBDs were wasting money, perhaps by paying themselves too much…
Step 2: Cash accounting only.
Schools should use, and publish, cash-based accounting for their FBDs. No accrual accounting, no cost allocations, and no transfer prices. Unless an activity results in cash flowing out of the university (and not just from one university department to another), the FBD pays nothing for it.
Note: that means paying nothing for scholarships. Why? When the school charges the athletic department for a scholarship, no actual money leaves the university. The price it assigns for managerial purposes is ripe for funny-money bookkeeping…
Step 3: Provide honest incentives and use public scrutiny to keep things that way.
Once we have true measures of cash flow generated, schools should base the salary of their FBD directors on how much money they hand to the university in cash flow each year–or better yet, on a five-year average to avoid short-term gaming. To wit: the University of Texas’s FBD director could earn base pay of $50,000 per year, plus, five percent of all cash flow above a minimum target…
All of that is good. When you’re spending public dollars, the more transparency, the better. There’s one little problem, though.
Much as H.L. Menken advised that no one ever lost money underestimating the intelligence of the masses, I think it is nearly impossible to overestimate the power of profit-sharing on an administrator’s desire to show profits. Right now, if the choice is between handing your school $5 million in profits or $1 million in losses–and the latter lets you hand out raises to everyone in your department (including yourself) without affecting your tenure in any way–it’s hard to avoid the temptation to spend every dollar in your budget. Such is the oft-wasteful reality of use-it-or-lose-it budgeting: costs rise to whatever level is allowed.
Well, unless you’ve got a reserve fund to tend to, I guess. But the overall thrust of what’s there is laudable. If nothing else, it’s a valid platform from which to discuss meaningful reform. When the Coalition to Save Collegiate Sports comes calling with its proposals, perhaps it’s a starting point worth raising in response.
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