Sports and Taxes

Apparently all overblown college athletic programs are not created equal. According to a report by the Center for College Affordability and Productivity, the cost of college sports has gone up, a lot, in recent years but that means different things depending on the school. As the paper, by Richard Vedder of the Center for College Affordability and Productivity and Matthew Denhart of Ohio University, explains:

Rich, famous and athletically well-known schools have only been trivially impacted at the institutional level by the explosion in [Intercollegiate Athletics] ICA costs, while a significant number of schools that are, on average, poorer, less prestigious, and athletically more marginal have been clobbered. We can say that athletic subsidies are a tax on other revenues, a tax diverting resources from traditional academic purposes, and this tax is highly regressive, hitting the poor more than the rich. The explosion in college costs is a burden on the poor to finance entertainments that largely are consumed by the middle and even upper classes.

The study looked critically at 99 public colleges with National Collegiate Athletic Association Division I football teams. The important thing to consider here is that while colleges often use their athletic teams in an effort to improve their overall institutional status (see the Flutie Effect or, well, SUNY Binghamton), sports are generally money losers. Apparently the University of Michigan is one of the few football programs that actually turn a profit. Colleges generally fund athletic programs by simply leveling the fee by charging students directly or by cutting other recourses, what Vedder and Denhart call an “athletics tax.”

Oddly for public schools, however, it looks like colleges mostly fund their athletic programs not through normal fundraising (or even through state subsidies) but through these “athletics taxes.” The smaller the school—and the less prestigious the program—the greater the tax. For example, as the paper explains:

Compare the University of Michigan with Eastern Michigan University (EMU). Both institutions share a nearly identical geographical location. Yet, the contrasts between the two institutions are remarkable. At EMU the students on average are poorer…. However, the huge $20 million subsidy at EMU for sports is equal to nearly 16 percent of tuition revenue. By contrast, at the relatively well-to-do (not only in terms of student body but also in terms of university endowment) University of Michigan, that ICA tax is zero.

And that’s because the University of Michigan can afford its athletic program. Eastern Michigan University, in a strictly monetary sense, can’t. This whole situation seems unquestionably odd.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer