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Thursday, March 30, 2006

Excerpts from an Article
By Mark Alesia in the
Indianapolis Star




‘Athletic departments at taxpayer-funded universities nationwide receive more than $1 billion in student fees and general school funds and services, according to an Indianapolis Star analysis of the 2004-05 athletic budgets of 164 of the nation's 215 biggest public schools. Without such outside funding, fewer than 10 percent of athletic departments would have been able to support themselves with ticket sales, television contracts and other revenue-generating sports sources. Most would have lost more than $5 million.

Additionally, taxpayers indirectly subsidize athletic departments because college sports are exempt from federal taxes, based on their tie to education. The exemption particularly benefits big schools, which receive up to 40 percent of their athletic revenue from donations, most of which are tax-deductible. At Indiana University, for example, donations constitute 21 percent of revenue; at Purdue, 27 percent.

Also untaxed is the massive amount of television money that fuels college sports. All told, that's hundreds of millions of untaxed dollars.

Critics find this inappropriate. They say college sports have largely become a business of mass entertainment -- such as this weekend's Final Four in Indianapolis-- that shouldn't receive an education-based tax exemption. In a time of rising tuition and stagnant state support for higher education, they say sports shouldn't be propped up by so much money generated outside athletic departments. Some students have fought sports-targeted fees, including at IU, which will discontinue the requirement for the 2006-07 school year.

"The subsidies grossly overestimate the role of intercollegiate athletics in higher education," said Andrew Zimbalist, a Smith College professor and leading sports economist. "This should be something that absorbs a much smaller share of outside resources."



…The average deficit [across schools] is $5.7 million. Among the money-losers were Indiana and Purdue, and two schools in this weekend's Final Four, UCLA and George Mason.

Economists who studied The Star's findings cautioned that comparing bottom lines is difficult because of inconsistencies in what schools report. They also stressed that no accounting form is perfect.

At the same time, many thought at least some of the deficits were probably greater. They were skeptical that athletic departments fully accounted for the use of services funded by the general university, including administrative time and services.



…College sports have been tax-exempt since schools began competing in the late 1800s. The NCAA was granted the same exemption in 1956, when it was just starting to learn about the commercial potential of televised football.

Now, critics say, sports have strayed too far from their nonprofit purpose of education to qualify as a charity. They note that the NCAA pays high salaries -- Brand makes $870,000 -- and competes with for-profit pro sports leagues in areas such as television and sponsorships.

"In the case of big-time college sports, the activity itself is becoming increasingly non-educational," said University of New Haven Professor Allen Sack, a starter on Notre Dame's 1966 national champion football team. "But as long as Myles Brand can argue that the University of Michigan is under the same umbrella as (small schools such as) Wesleyan University, he can cloak the issue."



…Questions have also been raised about the general university money that finds its way to athletics. Some economists and accountants are skeptical that everything shows up on the athletic budget -- for instance, use of the university attorney and rent for buildings.



…Zimbalist, who has published 14 books, including "Unpaid Professionals: Commercialism and Conflict in Big-time College Sports," said, "I don't think there's any empirical evidence that says the overall quality of a school improves as a result of having a Division I athletic team or even a successful Division I team." '