Friday, December 06, 2013

Financing Education By Exploiting the Disadvantaged?

-- Posted by Neil H. Buchanan

When people see numbers with a lot of zeroes, they become very confused.  When those large numbers are preceded by a dollar sign, people become very confused and angry.  Exhibit A, of course, is the national debt.  Just say the words "trillion dollars," and watch the eyes roll back in people's heads.  When it comes to college football and TV, you can almost see people's minds turn off as soon as they learn that billions of dollars are involved.  They are sure that something is wrong, but they are not sure what, or who, exactly is the problem.  But boy, is that a lot of money!

In my Dorf on Law post yesterday, I returned to the fraught financial relationship between American universities and their football players.  I argued there (as well as in yesterday's Verdict column and previous writings, links to which appear in yesterday's post) that college football (and men's basketball) players should not be paid in cash, even though their labors allow universities to earn ever-increasing amounts of money (amounting to billions of dollars) from TV contracts, ticket sales, sweatshirts, and so on.

In all of my writing on this subject, I have consistently viewed the "business" of big-time college sports as a part of our system of higher education.  That is, even though many cynics are all too willing to say that the tail should (or, in any case, will inevitably) wag the dog, I believe that universities' core purpose is still educating students; and if we are thinking about possible changes in that system, we need to ask how any proposed options will affect the health of our system of higher education (not merely its athletic programs), compared to its current imperfect state.

One way to think about the money that comes from college sports is that the games (and all of the money that comes from them) amount to an elaborate fund-raising system for higher education.  That is, even if we insist on saying that college players are "entertainers" who help to generate huge amounts of money for their universities, it would be not at all worrisome that the universities are "keeping all of the money" if that money is being used to support the universities' core, nonprofit purpose.

By comparison, imagine a nonprofit entity that wants to hold a fund-raiser.  Often, such entities will be able to find a star entertainer who is willing to provide a benefit performance, the proceeds of which are then used by the nonprofit to support its good deeds.  But imagine that Rutgers (aka, The State University of New Jersey) learns that native son Bruce Springsteen is willing to play a series of concerts to raise funds for the university, but that he will only do so if he is paid a large amount of money.  (Assume that Bruce is so popular that his greed does not threaten his standing with the public.)  Rutgers might still have good reason to decide that it makes senses to pay Bruce, and to use the rest of the money for education.  If Bruce would be willing to play for free, then that is obviously all the better, but even paying him might still be worth it for Rutgers.

When people refer to football players as "entertainers," and thus deserving of the money that their performances generate, they are surely thinking about people like Bruce Springsteen and the stars who earn unimaginable sums by virtue of being a star.  They are not thinking about how poorly paid most musicians and other entertainers actually are.  If, in my hypothetical example, Bruce agreed to perform with a band of amateurs, all of whom would be more than eager to play with The Boss in front of thousands of people, there would be no shortage of people who would be willing to be the unpaid members of that band.  And the simple fact is that he could easily assemble an awesomely talented group.

In Ohio, native son Urban Meyer is a superstar, too.  His talents lie in recruiting and coaching young men to win college football games.  The Ohio State University pays him millions of dollar every year to make that happen for the Buckeyes.  If Meyer were willing to work for free, that would be even better for the university, but they are still making seriously good money by holding fund-raisers with a football team 13 or 14 times a year.  Before Meyer arrived, in 2011-12, the football team netted $24 million.  We can safely assume that, with Meyer on board (and after two straight undefeated seasons, following their 6-7 campaign in 2011), the increase in revenues is even greater than the coach's $4.6 million salary this year.

Now, let us assume that my argument in yesterday's Dorf on Law post and Verdict column is dead wrong, and that college football players are literally "paid nothing."  What would that mean?  In part, that depends on what the football powerhouses like OSU do with the extra money.  Disappointingly, it turns out that most universities partition their finances, allowing their athletic departments to be their own fiefdoms, keeping any excess money that they generate, rather than turning it over to their universities' central administrations.  As it turns out, however, all but a tiny fraction of top-division universities have athletic departments that are running annual aggregate deficits, even when the athletic department is formally separated from the university at large.

This means that there are a large number of universities with football and men's basketball teams that partially subsidize other men's and women's sports, with the universities topping up the overall athletic budgets.  For a few others, the football teams make more than enough money to fund the entire athletic departments, and the remaining funds can be used to support other parts of the universities.  For a very few, even the excess money from the most successful sports programs stays in-department, subsidizing not just the coaches' salaries but the increasingly lavish training facilities and living expenses of the athletes.

I strongly support a fully integrated financial and institutional structure, especially because the separation of the athletic department can lead to extreme dysfunction (which, for one horrific example, seems to have been a contributing part of the scandal at Penn State.)  But my larger point here is that there is nothing inherently wrong when universities receive large amounts of money.  It depends on what they do with the money, after paying the expenses necessary to raise the money in the first place.

Again, even though college players are compensated by being provided access to a completely free college education, let us continue to imagine otherwise.  The standard, cold-blooded economic retort is: "Well, did anyone hold a gun to their heads?"  I find such reasoning highly problematic on many levels, but we can at least think about things in that cramped way for a few minutes.  Just as Springsteen's would-be co-performers could "choose" to perform for free, so can Meyer's jocks.

And who are Meyer's jocks?  The anti-poster child of the exploited college athlete is currently Johnny Manziel, last year's Heisman Trophy winner from Texas A&M University, who is from a very wealthy family.  (That he is also, by all evidence, a spoiled brat and an entitled punk makes him all the more problematic as a leading case for paying athletes in cash.)  In order to make the case for paying college athlete's in money instead of in scholarships, the argument is usually framed as a matter of exploitation.  These poor kids are being used to generate millions for the greedy university presidents and coaches like Meyer, we are told, and we cannot put up with that any longer.

As a final analogy, compare the arguments for using state-run lotteries to fund K-12 education.  The argument there is that, even if lotteries really are a "tax on stupidity," they are voluntary in the sense that no one holds a gun to anyone's head when money is collected from lottery customers.  This is supposed to be a good thing, because the lottery money will be used to support education, and the lottery participants are happy to do what they are doing.

It seems to me that a person who is not worried about the morality of exploiting the people who play lotteries should not be worried about exploiting young men who are desperately anxious to play football.  (In fact, in the most cold-blooded of all ways of thinking about it, it does not even matter whether the money supports public education.  Profits are always morally right, under that view!  But we can put that sociopathic extreme aside for present purposes.)

If we stipulate, as I have done repeatedly, that college football players should be provided with adequate health and disability benefits, then the remaining question is whether it is acceptable to finance a valuable public good by taking advantage of people's willingness to pay money (lotteries) or provide free labor (amateur sports).  If anything, the lottery-like aspect of playing college sports is at least slightly better, because the chances of being "discovered" and ending up in a highly paid professional football gig is considerably better than the chances of winning the Super Lotto.  But even if there is no difference on that dimension, the idea of exploiting the less fortunate to support a public good is hardly unique to college football.

For those of us who are repelled by both forms of exploitation, of course, it actually matters whether and how we are using and compensating people.  Personally, I think that state-run lotteries are irredeemable, whereas big-time college sports could be improved substantially.  As it stands, however, it is infuriating to see people claim that the current system categorically provides nothing to the student-athletes.  (And yes, it turns out that most of them are students, too.)  If we use the money from sports to provide educations to athletes, many of whom would not otherwise go to college, and also to non-athletes, then the large sums of money that come from college football's popularity could and should be seen as a good thing, not as some kind of evidence of inherent corruption.