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Professional leagues, and hedge funds, with educational institutions attached.

At one time, trading a scholarship for athletic performances made sense. There wasn’t much money available in college sports even in the revenue producing sports of football and basketball. But as TV money seeped into the industry, coaches were paid more and more money and colleges felt they needed to spend more money to get the best available coaches to recruit and instruct. State legislatures approved astronomical raises for coaches and in many states where public colleges are part of the college sports industry, the football or basketball coaches are the highest paid public employees… Millionaire coaches like Syracuse’s Jim Boeheim bristle at the idea of paying college players even though the industry is flush with money from television and marketing partners…

College sports are not-profits. The industry has a blanket antitrust exemption that allows schools who play in college football bowl games to skip paying taxes from bowl game earnings. Yet NCAA members are getting billions from TV, and hundreds of millions alone from the Final Four weekend. At the same time, players are no longer content with missing out on their earnings. Dr. Harvey Schiller may have predicted the future for the industry, becoming a professional entity because there is too much money at risk for it not to happen.

The professionalization of our academic McDonalds (billions and billions sold) continues, with increasingly insistent arguments being made against the maintenance of non-profit status for athletics money, and for endowment money. Because it’s the same thing, isn’t it? Athletics and endowment?

If Harvard University generates a thirty-five billion dollar endowment (a number of other Ivies are not far behind), all of it in very significant ways protected from taxation… And if because of this astronomical profit people like Harvard investment managers get multiple millions in salary each year from the institution, and people like coaches get multiple millions in salary each year from the institution, but very little of the billions left over are spent for academic purposes (Harvard notoriously hoards its endowment; revenue sports players aren’t paid), why should we be surprised that communities surrounding McDonald’s schools are constantly challenging their tax exempt status in court? That Felix Salmon’s much quoted statement has it that Harvard is “a hedge fund with an educational institution attached“?

All of this is a small element of the immense income inequality debate in America today. CEOs like Gilead’s John Martin taking home almost $100 million each year are the real attention-getters in this debate. Yet America’s John Martin problem is a straightforward one: It is about capital markets and unlimited greed. Easy to grasp that.

And of course most of the people in this country have no trouble – applaud, in fact – one man or woman pulling in any amount imaginable for themselves. Ten years from now, Martin’s yearly compensation with be five hundred million. Bravo! Job well done. No upper limits, and people who question upper limits are jealous losers who have to be restrained by the state or the next thing you know it’s Kristallnacht.

Fine, okay, but does the same psychology pertain to high-minded non-profit universities becoming greedy billionaires? Even in America, there’s some vestigial sense that universities are different from John Martin. That sense could grow, could come to understand itself more clearly. And if that happens, there’s trouble ahead for the most profitable McDonald’s franchise-holders in the land.

Margaret Soltan, April 6, 2014 7:09AM
Posted in: the university

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