Tuesday, December 2, 2014

College Football is Uneconomic

The University of Alabama-Birmingham is reportedly to shut down its college football program. This is big news, because college football programs are rarely terminated. Since 1920 only 9 other universities (in the highest division) have dropped their football programs(Clotfelter 2011, p. 50).

One of the reasons that UAB has given for ending football is the dismal finances of the program. According to USA Today, in 2013 the school's athletics program required a subsidy of more than $18 million representing about 64% of its total budget (with "subsidy" defined as "students fees, direct and indirect institutional support and state money").

Interestingly, of the top 230 schools 33 schools required a greater subsidy than UAB in absolute dollars and 124 in terms of percentage. So from a comparative perspective, UAB's finances do not appear particularly unusual in the context of college sports.

More generally, of those 230 schools, their athletic programs received revenues of more than $8.1 billion, mostly from football and basketball. Of this total, more than $2.4 billion, about 30%, was subsidized. College sports, overall, are simply uneconomic. They require socialized support to sustain. Historically, securing such support has not been difficult, as big-time athletics is valued on college campuses and communities.

In 2013, only 7 schools (of the 230 in the USA Today survey) received no subsidy for their programs. Given this state of affairs, losing money is probably not going to fly as a good reason for terminating the UAB program. I'd expect a vigorous debate to ensue on the UAB campus and in the Birmingham community.


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