by Kent Sterling
Talking about sports used to be so easy. Who won? Who lost? Why did one team win, and the other lose. Is Peyton Manning the best quarterback of all time? Will the Pacers win a championship? Will an Indiana team earn a spot in the NCAA Tournament?
Questions without black and white answers are wonderful for yipping and yapping, but I’m a fan of people being paid commensurate to their value, so I was compelled to talk about the business of collegiate athletics.
My feelings about paying the supposed student-athletes is, in my mind, well-founded and logical. It’s a conversation I’ve had a thousand times.
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I went a little outside my comfort area in talking about where the enormous sacks of cash generated by the football and men’s basketball team wind up, and since my day filling in for the great Dan Dakich ended at 3p, I have been researching the question as to where the money goes and why. Now, my brain aches.
There is a very good reason, my grade in A211 (accounting) at Indiana University was not very good. I get dizzy looking at columns and rows filled with numbers, and the last four hours have been filled with numbers.
The term “transfer pricing” is now engrained in my head, and to be honest, I would love to scrub it out – or at least turn back the clock to a simpler time when I had never read about it.
During the show, a question was asked whether the profits from the athletic department are funneled into the general fund. That’s where the work started, and why my head hurts.
Transfer pricing governs the interdepartmental fees that athletics pays the university for use of facilities, the marching band, office of legal affairs, library renovations, and bunches of other various buckets where the university decides extra cash needs to fall.
That makes the athletic budget a zero sum game at a lot of universities, and figuring out exactly how much money should fall in which buckets is the purview of each individual university.
Where the money allocated for the rent of the arena might go is anyone’s guess. To be honest, the whole thing sounded like a complicated scheme for laundering money. I mean no offense to the accountants who devised this system, but when I see money going from here to there, and then disappearing without a simple explanation, I see nefarious practices devised to game the system.
Balancing a checkbook is difficult for me, so describing the interdepartmental shifting of funds is as far beyond my intellectual means as understanding why “Two Broke Girls” is still on CBS.
The point of the conversation is that college football and men’s college basketball generates millions and millions of dollars for the 65 universities that belong to the five major conferences, and the money generated by football dwarfs that of men’s basketball. This is Indiana, so we include basketball.
If there are millions of dollars floating around, why shouldn’t the players get a taste for participating? Calculating exactly how much profit is generated is impossible because the game is rigged by transfer pricing that is totally at the discretion of the university. For example, in a ridiculously simple fake scenario, if the University of Mars takes in $100 million, and wants to show no profit, it can charge itself outrageous amounts for rental of the stadia, arenas, natatorium, snow removal, band fees, and legal advice. The deals are all negotiated between two departments under the same umbrella, so anything goes.
That makes the calculation of net revenue impossible to accurately assess.
Hey, maybe I did learn something over the past four hours.
It can work the other way too. If a school wants to perpetuate the belief that cash from athletics provides for academic good, the amounts for transfer pricing can be reduced, and a $65 million lump sum can be donated to build a new Science Building. Is that good or bad? Hell, I don’t know. The money came from somewhere, and science buildings are good, so I guess it’s good.
The only clarity in the fiscal scene of a university’s athletic department, and the value it places on football and basketball, can be derived by the amount of cash it pays a coach. A coach makes $ millions, the players deserve a cut.
That’s all I was trying to say.