The NCAA Racket: $10 Billion ‘Non-Profit’ Organization

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The NCAA Racket by Andrew Syrios, Ludwig von Mises Institute

Americans certainly love college sports, particularly football and basketball. After all, what is better than cheering on student athletes competing for the love of the game? Unfortunately, behind this facade the National Collegiate Athletic Association and university athletic programs are simultaneously running two seemingly diametrically opposed rackets; one taking advantage of the players and the other ostensibly giving them unfair benefits.

The NCAA is a tax-exempt, non-profit association that oversees the athletics of just under 1,300 universities. While the NCAA is not technically a government organization, it might as well be. It’s a burdensome bureaucracy that regulates the athletics of public universities, which are substantially funded and strictly regulated by the government. And like any government, the NCAA regulates in an attempt to restrict competition. As Lawrence Kahn noted, “Most economists who have studied the NCAA view it as a cartel that attempts to produce rents by restricting output and limiting payments for inputs such as player compensation.”[1]

And don’t let the term “non-profit” fool you. Some non-profits can be quite profitable. Indeed, the NCAA recently agreed to a $10.8 billion, fourteen-year contract with CBS and Turner Broadcasting to televise games. NCAA chairman Mark Emmert was rewarded for his efforts with a cool $1.7 million last year.

And that’s just scratching the surface of the massive, government-subsidized business known as college sports. It’s not just the NCAA that makes out like a bandit. As Marc Edelman notes,

The college sports industry generates $11 billion in annual revenues. Fifty colleges report annual revenues that exceed $50 million. Meanwhile, five colleges report annual revenues that exceed $100 million. … Head football coaches at the 44 NCAA Bowl Championship Series schools received on average $2.1 million in salaries. The highest paid public employee in 40 of the 50 U.S. states is the state university’s head football or basketball coach.

Yet somehow that’s not enough and these colleges need to soak tuition-paying college students and taxpayers alike. The college game isn’t plagued with quite as much cronyism as the pros, where $32.2 billion in taxpayer money has been spent on stadiums. Still, most universities have to pull money from the students and taxpayers to subsidize their athletic programs. Gregg Easterbrook notes that despite enormous revenues, only around a half dozen college football teams are self-supporting. For example, he notes “The [state supported] University of Maryland charges each … undergraduate $400 a year to subsidize the football team.” Cal-Berkley recently finished a $474 million stadium with most of that money coming from students and taxpayers. Various states also provide tax breaks and subsidies to the NCAA for various events. For example, Texas provided millions of dollars from a taxpayer-supported trust fund to help host the NCAA Final Four in 2013.

One would think that with $10 billion in revenue and massive support from various donors, these programs could actually turn a profit instead of leeching off the taxpayer. And this shortfall is even more ridiculous when you consider the massive salaries of coaches and administrators (Nick Saban, for example, has a base salary of $5,545,852) comes in a rather stark contrast with the players that make this industry possible.

During last year’s NCAA tournament, UConn star Shabazz Napier complained that “there are nights that I go to bed starving.” In other words, state governments, universities and donors can spend untold millions building extravagant facilities that would make Marie Antoinette blush, but can’t pay for a players’ food. And then, to add insult to injury, the NCAA will suspend players for being given free tattoos, or receiving $200 from a childhood friend, or getting a $4500 loan or giving out too many signatures.

It’s so ridiculous that not long ago, offering a player a bagel with cream cheese violated NCAA regulations. Offering him the bagel was fine, as was the cream cheese. But offer both and you have crossed the line. Buried away in the NCAA’s myriad of nonsensical rules was a stipulation that snacks could be provided to players, but meals could not be. Bagel = snack. Bagel and cream cheese = meal. Got it?

That rule was fortunately changed, but it highlights the degree of insanity required to suppress paying these players what the free market would bear. Indeed, the NCAA has a gargantuan 500-plus-page manual of illogical and often unenforceable rules.

Not surprisingly, such rules haven’t prevented universities from cheating to get the athletes they recruit to qualify as “student” athletes, and thus, the second racket. In what is almost certainly emblematic of an epidemic amongst this nation’s colleges, the University of North Carolina was caught giving out some rather generous grades to its student athletes. The following term paper, which I will quote in its entirety, was awarded an A minus:

On the evening of December Rosa Parks decided that she was going to sit in the white people section on the bus in Montgomery, Alabama. During this time blacks had to give up there seats to whites when more whites got on the bus. Rosa Parks refused to give up her seat. Her and the bus driver began to talk and the conversation went like this. “Let me have those front seats” said the driver. She didn’t get up and told the driver that she was tired of giving her seat to white people. “I’m going to have you arrested,” said the driver. “You may do that,” Rosa Parks responded. Two white policemen came in and Rosa Parks asked them “why do you all push us around?” The police officer replied and said “I don’t know, but the law is the law and you’re under arrest.

Other athletes at the North Carolina skipped even writing 146 word essays and simply attended fake classes to get their diplomas. Back in 2001 Georgia basketball coach Jim Harrick was caught providing players with A’s to classes they never attended. In 2007, approximately twenty Florida State football players were involved in a cheating scandal and now Notre Dame is investigating four of its athletes for academic fraud.

I went to the University of Oregon, where just after I graduated, Phil Knight bestowed on my alma mater a $41.7 million, 37,000 square foot, state-of-the-art, glass-encased monstrosity called the John E. Jaqua Center. It exists for almost the sole purpose of tutoring student athletes. Phil Knight can, of course, spend his money however he likes. But one might wonder why he would spend it on a building that can only be used by some 470 of the 20,000 plus UO students? And it becomes much more questionable when you learn that the UO spent $8.5 million out of the general fund from 2002 to 2010 to pay for academic support to student athletes.

Such buildings are about the closest philanthropists like Phil Knight can come to just paying the players, which is probably why such lavish facilities are built in the first place. Still, such a massive expenditure for an “academic center” for student athletes is telling. Virtually every university offers extensive tutoring programs for its student athletes. The word “tutor” being used very loosely and borderline euphemistically, of course. Mike Abu wrote an enlightening piece for Vice Magazine about his time at the University of Utah that echoes a similar scandal at the University of Minnesota as well as many of the rumors I’ve heard about what these tutors actually do. As he writes,

For years, I willingly did homework for a number of student athletes. … The students would pay $10 for a “slip” from the tutoring center. They’d give me that slip at the end of each session and I’d turn it back into the tutoring center and wait for my measly check. … After a while, I started getting more and more requests from football players. … Then, one day, an offensive lineman cut straight to the chase. His tutoring slips were covered by his athletic scholarship, so the slips didn’t have any monetary value to him. Because of this, he was more than willing to give me three hours worth of tutoring slips if I’d just do his homework. After all, it would take 15 minutes for me to do it myself, versus the two hours it would take me to explain … I didn’t even hesitate before saying yes. … I did homework for guys like him all semester long … [and did] the coaches know about the cheating. How could they not?”

Yet it’s hard to blame the coaches and administrators for trying to get around such academic requirements. What other choice do they have if they want to field competitive teams? In fact, it’s an absolute absurdity that the NCAA expects every college-worthy athlete is also capable of being a good college student. In 2012, 30 percent of Americans over the age of 25 had a Bachelor’s degree. Is athleticism so directly correlated with academic skills that every last college-level athlete should fall in that 30 percent? Or shouldn’t we expect that about 30 percent of athletes good enough to play in college should also be attending college? (And that assumes too many people aren’t going to college already, which they are.)

While it would seem that these scandals go in opposite directions, they are really one in the same and the latter makes the former that much more outrageous. That’s because many of these kids get next to nothing out of their scholarship and very few make it to the next level. College sports are the highlight of most of these individuals’ career, and the government-subsidized, monopolistic NCAA cartel has made it so they earn a grand total of zero dollars. If a free market actually existed for college athletics, the mere idea that players would not be paid is too ludicrous to even merit refutation. And somehow a bagel and cream cheese just doesn’t seem to amount to a sufficient consolation prize.


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