REPORT OF THE ATHLETICS ADVISORY BOARD AD HOC SUBCOMMITTEE ON THE COST AND VALUE OF THE URI INTERCOLLEGIATE ATHLETICS PROGRAM

Submitted to the University of Rhode Island Athletics Advisory Board

February 23, 2004

At the initiative of its chairperson, Professor Judith Swift, the Athletics Advisory Board at its November 2002 meeting created an ad hoc subcommittee to pinpoint the actual cost of the University of Rhode Islandπs intercollegiate athletics program and to assess, to the extent possible, its offsetting value to students, alumni, fans, citizens of the State of Rhode Island, and the University itself as a going concern. Appointed to the subcommittee were: Yngve Ramstad, Chair (Professor of Economics), Sue Bergen (Associate Director of Athletics for Finance), Mark Higgins (Professor of Accounting), Art Mead (Professor of Economics), and Tim Tyrrell (Professor of Environmental and Natural Resource Economics). The subcommittee was instructed to pose its own questions and to answer them to its own satisfaction.[1]

Overview

In this report we convey our understanding of the net cost to the University of its NCAA sports program. By net cost, we refer to the amount remaining after revenues occasioned by the operation of that program are deducted from its total cost. We also estimate net cost on a sport-by-sport basis. Tables 4 (page 10), 5 (page 11), 8 (page 17), 9 (page 18) convey our principal findings in regard to the programπs net cost. Tables 1 and 2 are included only so that our estimates can be juxtaposed against data previously available to the campus community. Because we have become convinced that there is no single, ≥correct≤ standpoint regarding what is properly interpreted as a cost to the University and is properly interpreted as athletics-engendered revenue, we have chosen to present alternative estimates consistent with alternative interpretive frameworks.

We found it far more difficult to ascertain the monetary value of various beneficial effects that are often averred to derive from the operation of a NCAA sports program. We discuss each of the possibilities in the section of the report beginning on page 16. If the beneficial effects that legitimately stem from the NCAA sports program are to be assessed meaningfully vis-‡-vis the net cost to the University of ≥producing≤ them, their ≥value≤ must somehow be converted to a monetary equivalent. Unfortunately, we did not discover a practical method of converting many plausible value dimensionsãsome, in our minds, significant and others probably insignificantãinto a quantitative estimate. In areas where we did generate quantitative estimates, they were often little more than guesswork. A summary of the ≥values≤ we conjecture to derive from the Universityπs NCAA sports program is provided in Table 12 (page 33) of the report. A recapitulation of our findings is provided on page 35.

Important Caveat

The subcommittee was not asked to make recommendations about any aspect of the athletics program, only to identify its cost and, if possible, its value. Accordingly, nothing in this report should be construed as pointing to a particular conclusion regarding the continuance or non-continuance of any sports team or of the entire NCAA sports program at the University. We want to emphasize that we have developed our estimates by taking for granted the current ≥market niche≤ the University has carved out within the larger higher education marketplace.

We know of no major state university that does not operate a substantial NCAA sports program. There is consequently no example or empirical research we can look to for evidence regarding the likely consequences of a discontinuation of the Universityπs participation in NCAA sports as a Division I program. And we discovered no way of calculating, even approximately, whether an enrollment loss (or, in principle, enrollment gain) would likely result from a complete ≥go it alone≤ elimination of athletics at the University. Yet, we believe it would be irresponsible to take for granted that the Universityπs market niche would in fact remain unchanged if a significant alteration of its NCAA sports program were to be instituted. Indeed, while the signaling consequences of eliminating an entire athletics program are simply unknowable, we do not dismiss the possibility that they might be significant. Hence, it should be understood that our estimate of the net cost to the University of conducting an intercollegiate athletics program is not intended, pari passu, to be an estimate of the amount the University would permanently save by discontinuing it. To repeat, we have no way of knowing what that amount would be and, in fact, have no basis for concluding that the University would not instead suffer a net reduction in the amounts available for other activities by discontinuing its NCAA sports program.

We wish to add that we discovered nothing in our inquiries indicating funds are being wasted or improperly utilized within the Department of Athletics and Recreational Services. However, we did see clear signs that Athletics is subject to the same budgetary strictures imposed on the rest of the University. That is, we perceive that Athletics is under-funded relative to what is required to operate a multi-sport program in a competitive athletics conference (the A-10) with excellence.

Activities, Complicating Factors, and the Approach Taken

At our first meeting we agreed to meet on a weekly basis, and we continued to meet weekly throughout both the Spring and Fall 2003 semesters. We began with a review of the Universityπs athletics programs. We next reviewed University financial statements providing detailed information, albeit in highly varied formats, about relevant costs and revenues. Discovering quickly that club sports are operated more or less on a self-sufficient basis, we decided to focus our attention primarily on the NCAA sports component of the Universityπs athletics program rather than equally on the NCAA component and the club sports component. Information concerning the net cost of the club sports program in AY 2001-02 is provided in Appendix B.

We next developed a spreadsheet allowing us to create a team-by-team expenditures-incurred and revenue-generated profile, and thereby an estimate of net cost to the University. We then discussed the difficult matter of what costs and offsetting revenues we were going to include. We decided not to include capital costs due to the general dual use nature of most athletics facilities for both intercollegiate sports and recreationãfor example, Mackal Field House is both a site for recreational sports and home to the gymnastics team and the menπs and womenπs indoor track teams. We similarly decided not to include operating expenses such as utilities and janitorial services for the same reason. The numbers presented below should therefore be understood as close estimates of the net operating cost, not as ≥exact.≤

Even though we agreed we would not attempt to estimate the capital expense of the sports program, we decided we would try to study how the financing of one capital facility, the Ryan Center, ≥interacts≤ with Athletics spending. We have chosen to address that issue in a separate report to be completed and made public at a later date.

Early in our discussions we came to an agreement that we would try to identify on a team-by-team basis the net cost to the University of operating its NCAA sports programãthat is, the total cost of operating the program minus offsetting athletics-engendered or, as it is often referred to, ≥self-generated≤ revenue. We agreed that this is the amount that in principle could be made available for other activities and hence constitutes the relevant ≥cost≤ of the NCAA sports program to the University. However, once we began to review actual budget numbers we came to recognize that the conventional way of characterizing ≥earned≤ revenue is misleading. The Universityπs NCAA sports program is financed in part by direct and indirect fan-generated revenues, in part by donations from alumni and sports-team ≥boosters,≤ in part by mandatory student fees, and in part by what is termed ≥institutional support.≤ The first three sources of funding are conventionally combined and thereby implicitly presented as being revenue generated by Athletics itself. Our concern was with the aptness of interpreting student fees as ≥revenue.≤

In AY 2002-03 (the year corresponding to our cost and revenue estimates), the full-time undergraduate student who attended this University paid a $779 per semester Student Services Fee, of which $ 255 was earmarked for the support of the NCAA sports program. Different fee scales apply to student in other categoriesãgraduate students, part-time undergraduates, and so on. We asked: Should these student athletic fees be interpreted as revenue flowing into the Universityπs accounts because it operates an NCAA sports program and hence as an offset to the cost of operating that program? Or should this revenue flow rather be interpreted as an arbitrary allocation out of a mandatory ≥up front≤ payment (tuition plus fees) a student must pay in full before he or she is admitted into the University and therefore as revenue that would continue to be received by the University whether it operates an NCAA sports program or not? Given that a student would have to go to considerable trouble to learn that one-third of their Student Activities Fee goes to support the NCCA sports program (that fact is not mentioned in the discussion of ≥student fees≤ in the University Manual or on the University web site), we agreed unanimously that the latter is the correct interpretation. As a result, in deviation from the practice followed on all relevant University reports of which we have knowledge, we do not treat student fees as revenue derived from the operation of the NCAA sports program and interpret them to be camouflaged institutional support. In other words, we do not include student fees as sports-derived revenue in our conception of ≥net cost.≤ However, we do contrast our findings with those that would obtain if the convention of including Athletics and Title IX Fees under the category ≥athletics (operating) revenue≤ had been followed.

There were two additional complications that we had to address before we could proceed to estimate the NCAA sports programπs net cost to the University. The first arises out of the fact that some costs of operating the NCAA sports programs are payments-in-kind or internal transfers. To illustrate, what is the cost to the University of providing a scholarship athlete with a tuition waiver? If one assumes that a ≥cost≤ to the University occurs only when there is an outflow from one of its accounts to an entity legally separate from the University, the tuition portion of athletic scholarships (technically, ≥grants-in-aid≤) should not be treated as a cost to the University. However, if one presumes that an ≥opportunity sacrificed ≥ (to spend elsewhere) is a more relevant conception of ≥cost,≤ a scholarship athleteπs tuition would be conceived as a cost if the University is operating at capacity, as is presently the case, where one could safely presume that a slot occupied by a scholarship athlete would otherwise be filled, at least in the short term, by a tuition-paying student.

A similar complication is encountered in determining how to compute the ≥self-generated≤ revenues to be offset against total cost in determining the net cost of the Universityπs NCAA sports program. It arises out of the fact that a large majority (approximately 80%) of those participating on University NCAA sports teams are not awarded a full, tuition-paid scholarship and therefore pay the University a full or discounted tuition (≥discounted≤ in those cases where a full scholarship is divided among two or more athletes). These student-athletes presumably would not attend this University were they not being afforded the opportunity to participate in their specific NCAA sport (analogous reasoning would apply to club sports also). Should the tuition received from these student-athletes be interpreted as a revenue flow occasioned by the NCAA sports program itself and hence as an offset to the cost of operating that program? If the University were not at full capacity, it would clearly be reasonable to make that argument. Even if it were at full capacity, if one chooses not to embrace the ≥opportunity sacrificed≤ conception of a cost it would be logically consistent to interpret the tuition paid by non- or partial-scholarship athletes as athletics engendered revenue.

Recognizing that reasonable people can disagree about these matters, we have chosen to produce alternative estimates of the cost to the University of its NCAA sports program. In other words, we are not presenting ≥a≤ estimate of the University ås NCAA sports programπs net cost to the institution but rather alternative estimates premised on divergent conceptions of what is properly included under the concepts ≥costs incurred≤ and ≥revenues engendered.≤

A final matter. We originally developed net cost estimates for AY 2001-02. Since more time than intended has passed while this report was being written, we have repeated all our calculations for AY 2002-03. The only AY 2002-03 data we have been unable to obtain is that relating to the net cost of club sports teams. Therefore, we will present AY 2001-02 data regarding the total cost to the University of its sports and athletic recreation programs. All other data in the report pertain to AY 2002-03. We wish to state that one would not gain a meaningfully different impression of any issue with which we have been concerned if AY 2001-02 cost and revenue data had been presented instead.

Estimated Net Cost of the Universityπs NCAA Sports Program

Table 1 (page 6) presents an abridged version of the Department of Athletics and Recreational Services budget for AY 2002-03. This is the primary document through which the University community is provided with authoritative information about the amounts expended by the University for its athletics and sports recreation programs. Neither the total cost nor the net cost of the Universityπs NCAA sports program is made apparent by that document.

Table 2 (page 7) presents an abridged version of a report, ≥Statement of Intercollegiate Athletics Revenues and Expenditures,≤ that the University submitted, as required, to the NCAA for AY 2002-03. The cost totals in this reports are not equal to those presented in Table 1 because the NCAA requires inclusion of specified athletics-related activities budgeted outside the Department of Athletics and Recreational Services (for example, the cost of our NCAA compliance officer, who reports to President Carothers rather than to Athletics Director Ron Petro). As the numbers provided in this report include both Athletics (NCAA sports) and Recreational Services (recreation and club sports), they also fail to reveal either the total or the net cost of the Universityπs NCAA sports program. Nonetheless, this document suggests that the Universityπs overall sports and athletic recreation program generates revenues equal to approximately 62% of its $14.0 million total cost. One would infer from that document, accordingly, that the net cost to the University of operating its overall sports program is equal to the $5.3 million of ≥institutional budget support≤ needed to cover the remaining 38% of total cost.

More detailed accounting data is maintained by the Department of Athletics and Recreational Services. That data allows for a division of the total amount expended into amounts specific to each of the three major program areas operated by the Department of Athletics and Recreational Services program areasãNCAA Sports or ≥Athletics≤, Club Sports, and Recreational Servicesãand within the first two areas, the amount expended by specific teams or activities. As noted previously, we developed our own spreadsheet

Table 1

Department of Athletics and Recreational

Services Budget, AY 2002-03

(Abridged)

REVENUES

Athletic Fees $4,000,453

Title IX Fees 1,124,235

Total Student Fees 5,124,688

Concession Revenues 5,000

Corporate Sponsorship Revenue 100,000

Athletics Guarantee Revenue 294,000

Athletics Admin Revenue

A-10 excess funds distribution 160,000 NCAA Scholarships/Grants-in-Aid 135,000

NCAA Sports Sponsorships 120,000

NCAA/A-10 SA Opportunity Funds 44,000

Miscellaneous income 17,443

Subtotal Admin Revenue 476,443

Ticket Revenue

Football 140,000

Menπs Basketball 450,000

Total, all other sports 20,000

Subtotal, Ticket Revenue 610,000

Total Self-Generated Revenue 1,485,443

Grand Total $6,610,131

EXPENSES

Athletics Administration $ 594,719

Sports Teams 3,885,550

Support Departments 1,458,322

Total Athletics Expenses 5,928,591

BUDGET SURPLUS $ 681,540

FRINGE BENEFITS (not included in numbers above) 992,008

SCHOLARSHIPS $4,374,063

MACKAL REVENUE $1,465,785

MACKAL EXPENSES 1,323.065

Net Mackal Income $ 142,720

FRINGE BENEFITS (not included in Mackal numbers above) $ 142,720

Table 2

Statement of Intercollegiate Athletics Revenues

and Expenditures (Report to NCAA)

AY 2002-03

(Abridged format)

Reported
Amount

Operating revenue

Ticket sales $ 818,413

Guaranteed fees 239,283

Radio and TV rights -

Student and user fees 6,784,487

A-10 distribution 216,126

NCAA Distribution 303,447

Others 302,411

Total operating revenues 8,664,167

Operating expenditures

Personnel services 5,959,695

Travel

Team 1,111,835

Recruiting 164,764

Other 78,711

Student aid 4,348,843

Equipment purchases 14,339

Property rentals 23,173

Insurance 87,591

Telephone 107,951

Facilities maintenance 596,303

Utilities 248,322

Supplies/Uniforms 334,624

Other 912,225

Total operating expenditures 13,988,376

Institutional budget support 5,324,209

Deficiency 68,508

to work with those amounts. Our spreadsheet for AY 2002-03 is attached as Appendix A, and our spreadsheet for AY 2001-02 is attached as Appendix B.

An issue not previously discussed merits consideration at this point. It is often argued that operation of the NCAA sports program generates positive financial effects within some of the Universityπs auxiliary operations. For example, fans and parents attending sports contests or visiting the campus will often purchase URI-labeled merchandise from the University operated bookstore. Similarly, campers at coach-organized sports summer camps will often stay overnightãat a feeãin University dormitories. We were unable to discover any reliable method of dividing bookstore sales into ≥regular≤ versus ≥sports-induced≤ amounts. We presume there is some gain for the University from this source, but the inclusion of that amount (were it possible to estimate it) would in no way change the general character of the net cost estimates that we are forwarding herein. Based on our discussion with auxiliary personnel, we infer that, on average, housing is provided to campers at a daily rate approximating marginal cost and, hence, that the University more or less breaks even on this activity. We did not examine the possibility that Food Services may also ≥earn≤ a surplus from catering of Ryan Center and other NCAA sports-related events. We presume again here that inclusion of the relevant net surplus would only slightly alter our estimates.

Table 3 (page 9) contains our own itemization of relevant financial data for AY 2001-02 (all other data is for AY 2002-03) pertaining to the entire Department of Athletics and Recreational Services, as well as a breakdown between the three major program areas mentioned in the preceding paragraph. This table is organized in a manner that will make it relatively easy to estimate ≥net cost≤ from different standpoints. In order to compare our estimate with that provided in Table 2, the $2,643,543 separately designated for the

tuition portion of athletics scholarships would have to be added to the $12,132,443 shown as expenditures. The total cost of the Universityπs sports and athletic recreation programs for AY 2001-02 thereby obtained is $14,775,986. If we were to assume that Club Sports duplicated its AY 2001-02 expenditure and revenue levels in AY 2002-03, the total cost for the latter year would have been $15,902,109. This is approximately $2 million more than the estimate of total cost shown on the NCAA report.

We assume that few would disagree with our contention that the $51 per semester Recreation Fee levied on full time undergraduate student is in principle a user fee. That is, the Fee, on average, represents a payment for service received. (However, we submit that the Athletics Fee and the Title IX Fee are not user fees.) If we embrace that interpretation, then it can be inferred from Table 3 that Recreational Services essentially ≥breaks even≤ (non-student user fees of $457,556 plus student recreation fees of $1,024,343 more than offset the operating costs of $1,406,979). It can be seen that Club Sports is also essentially a break-even operation; indeed, if the approximately $2.5 million of tuition we estimate to have been remitted in AY 2001-02 by club sports athletes is interpreted to be part of offsetting revenue, Club Sports is a huge revenue producer for the University. Clearly, it is the NCAA sports component of the programs operated by Department of Athletics and Recreational Services that requires substantial ≥institutional support.≤ Hence, our remaining remarks pertain to the NCAA sports program as a hypothetical ≥stand alone≤ operation.

Table 3

Programmatic Apportionment of Athletics

Revenues and Expenditures

AY 2001-02

NCAA Club Rec.

Sports Sports Svcs. Total

Expenditures (including

non-tuition scholarship cost) $10,253,596 $ 471,868 $ 1,406,979 $12,132,443

Revenues 2,653,981 515,739 457,556 3,627,276

Unadjusted net

cost to University 7,599,615 (43,871) 949,423 8,505,167

Scholarships 2,643,543 - - 2,643,543

Non-scholarship athletesπ

tuition payments 2,099,338 2,500,000 (est) - 4,599,000 (est)

Designated student fees 4,907,439 - 1,024,343 5,931,782

Table 4 (page 10) provides a more detailed AY 2002-03 financial overview relating to the operation of the NCAA sports program. Despite the seeming precision of the numbers presented in this report, we remind the reader that there is no single, unambiguous answer to the question: After accounting for offsetting athletics-engendered revenue, what is the net cost to the University of its NCAA sports program? The data presented in Table 4 is drawn from our AY 2002-3 spreadsheets, which were developed jointly by Sue Bergen, Mark Higgins, and Art Mead. The spreadsheets are organized in a manner allowing for a calculation of ≥net cost≤ from each of the different standpoints regarding ≥cost incurred≤ and ≥revenue engendered≤ discussed earlier. Here are the various interpretations of the NCAA sports programπs net cost to the University that we provide:

1. Conventional interpretation: Adheres to the standard practice of interpreting student fees as athletics engendered revenue and the tuition portion of athletics scholarships as a cost of operating the program. We have stated previously our belief that this is not a valid interpretation.

2. Cash inflow-outflow interpretation: Does not include tuition waivers provided to scholarship athletes as a cost. Includes all tuition from non-scholarship athletes as revenue occasioned by the operation of the Universityπs NCAA sports program. Does not include student fees as revenue.

3. Strong opportunity cost interpretation: Includes tuition portion of scholarships as a cost on the assumption that athletes are displacing non-

Table 4

NCAA Sports ProgramãRevenue and Expenditures

AY 2002-03

(Subcommittee spreadsheet totals )

Actual

Amount

Expenditures

Salaries/Wages & Benefits $ 5,143,101

Operating expenses 4,446,543

Non-tuition cost of scholarships 1,744,364

Total expenditures $11,334,008

Revenues

Booster revenue $ 1,329,612

Foundation revenue 112,255

Self-generated revenue

Ticket sales 808,268

Tournaments 165,325

Guarantee fees 239,283

Radio & TV rights -

A-10 distributions 216,125

NCAA distribution 303,447

Others 147,231

Total revenues $ 3,321,546

Student fees

Athletics $ 4,129,327

Title IX 1,159,799

Total student fees $ 5,289,126

Tuition portion of scholarships $ 2,632,660

Non-scholarship athletesπ tuition payments $ 3,009,877

athlete applicants. Does not include tuition from non-scholarship athletes as revenue since, by accepting more of the applicant pool, the University can replace student-athletes who would choose to leave the University if their sport were discontinued (we note, however, that this might have a marginally negative impact on the overall quality of the student body). Does not include student fees as revenue.

4. Modified opportunity cost interpretation: Includes tuition as a cost. Does not include student fees as revenue. Assumes that one-half of the tuition paid by non-scholarship athletes cannot be immediately recaptured and hence constitutes a relevant revenue sacrificed. (We previously noted that if NCAA

sports as a whole or a specific sport were discontinued, affected athletes might transfer from the University in order to play sports elsewhere. This approach assumes student-athletes who are becoming seniors would not transfer and that, under present market conditions, incoming freshman athletes could easily be replaced by admitting more freshman non-athletes. Thus only those becoming sophomores and juniors would transfer, and hence approximately one-half of the total tuition currently being paid by student-athletes would be lost to the University.)

Table 5 (below) provides our estimates of the NCAA programπs ≥net cost≤ from each of these perspectives. To repeat, we do not believe that Method 1 is defendable, and we present it only because it is implicit in the established practice for reporting athletics financial information to the NCAA. As stated, we believe reasonable people can differ regarding which of Methods 2-4 is the most felicitous.

Table 5

Alternative Estimates of Net Cost

of the Universityπs NCAA Sports Program

AY 2002-03

Standpoint*

1 2 3 4

Total cost of program $14.0 m $11.3 m $14.0 m $14.0 m

Offsetting receipts 8.6 m 6.3 m 3.3 m 4.8 m

Net cost to University $ 5.4 m $ 5.0 m $10.7 m $ 9.2 m

Percent of total cost self-funded 38.3 44.1 76.4 65.7

1 ≠ Conventional standpoint

2 ≠ Cash inflow-outflow standpoint

3 ≠ Strong opportunity cost standpoint

4 ≠ Modified opportunity cost standpoint

* See text for explanation of each standpoint

As Table 5 shows, standpoints 2, 3 and 4 generate highly divergent conceptions of the net cost to the University of its NCAA sports program. If the cash outflow-inflow standpoint were adopted, one would estimate the NCAA sports programπs true net cost to the University in AY 2002-03 as approximately $5.0 million (which, in turn, is approximately equal to student athletic fees). On the other hand, if the strong opportunity cost standpoint is adopted, one would estimate the NCAA sports programπs true net cost as $10.7 million. The latter amount is roughly equivalent to 5.7% of the $189 million AY 2002-03 unrestricted (Ledger 2) budget, out of which it is provided.

Table 5 makes clear one point regardless of which cost-revenue standpoint one considers applicable: The University plays a major role in funding its NCAA sports program. From the cash outflow-inflow standpoint, the University itself shoulders approximately 44% of the programπs cost (on the assumption that tuition received from athletes is properly treated as offsetting ≥revenue≤ flowing to the University only because it operates an NCAA sports program). From the opportunity cost standpoint, that share rises to approximately 76% of a significantly larger estimated total cost

It is important to understand that in making this statement we are not suggesting there is anything unusual about level of support obtaining at this institution. It is difficult to make valid comparisons due to institution-by-institution differences in accounting procedures, but it seems to us that the level of institutional support for athletics at this University is well within the range observed to existãassuming student athletics fees are includedãat other A-10 Conference institutions.[2]

In our spreadsheets we were able to assign every NCAA sports program expenditure to a specific team or a specific non-team activity. Examples of the latter would be the athletics training room, the sports information office and the athletics equipment room. Table 6 (page 13) shows our estimate, from the four standpoints we set forth previously, of the net ≥direct≤ cost (direct expenditures incurred minus revenues directly engendered) to the University of operating each NCAA sports team. The amounts itemized in this table include only expenditures directly occasioned by the team itself (coach salaries, team travel, uniforms, and so on) and revenues resulting from the teamπs own activities (ticket sales, booster donations, earmarked NCAA distributions, and so on). The amounts shown in this table represent the net amount, from each standpoint, that the university would in principle ≥recapture≤ for other uses should it decide to

Table 6

Alternative Estimates of Direct Net Cost

of Individual NCAA Sports Teams

AY 2002-03

Standpoint (see text)

Nr. of Nr. of

Athletes Schol.

1* 2 3 4

Men

Football 99 55.57 $1,204,907 $1,222,950 $2,270,318 $2,151,824

Basketball 16 13.00 ( 99,519) 573,036 750,777 750,777

Baseball 37 2.50 92,101 (211,156) 178,032 5,381

Golf 12 4.29 105,499 55,871 177,999 149,774

Soccer 32 9.41 234,229 1,011 380,353 263,803

Swim 26 2.93 72,883 (188,933) 100,931 ( 16,160)

Tennis 13 0.00 19,451 (134,951) 19,451 ( 57,750)

Track 43 3.63 158,806 (141,555) 299,227 103,996

278 91.33

Women

Basketball 15 13,00 119,334 802,606 992,990 992,990

Field Hockey 20 6.10 99,330 39,114 248,974 191,985

Gymnastics 15 11.00 154,943 253,878 453,882 428,121

Rowing 43 5.77 104,780 (205,316) 273,346 88,058

Soccer 26 9.23 154,330 50,726 359,530 302,492

Softball 18 8.24 168,285 84,920 305,992 280,909

Swim 26 4.10 72,548 (176,314) 132,490 16,906

Tennis 11 2.00 8,407 ( 65,611) 33,713 ( 10,962)

Track 48 17.92 283,720 100,520 617,442 498,370

Volleyball 13 12.00 113,880 355,656 463,540 463,540

235 89.36

513 180.69

Note: Column 1 assumes student fees allocated among individual sports in proportion to expenses incurred.

Note: Parenthesis indicates a surplus of revenue engendered over costs.

1 ≠ Conventional standpoint

2 ≠ Cash inflow-outflow standpoint

3 ≠ Strong opportunity cost standpoint

4 ≠ Modified opportunity cost standpoint

discontinue a given sport. We use to the qualifier ≥in principle≤ since secondary effects brought about by the actual discontinuance of a sport are difficult to foresee. For example, there is anecdotal evidence that the University of Vermont, which discontinued its football program in 1974, still is being told by potential donors that the decision to discontinue football so angered them that they are unwilling to donate to the university.

It can be seen from Table 6 that, no matter which standpoint is embraced, the football team had the largest net cost to the University of the eighteen NCAA sports teams it currently operates (Department of Athletics accounting practice collapses the menπs and womenπs cross county, indoor track, and outdoor track into single teams; if they are each considered a separate sport, the University operates twenty two NCAA teams). However, the different approaches yield significantly different estimates of the amount of that net cost. The football team had the equivalent of 44 ≥walk on≤ players on its roster in Fall 2002. The players paid tuition to the University totaling $336,988. From the cash inflow-outflow standpoint, this amount is interpreted as offsetting revenue. The 55 remaining players received scholarships relieving them of the requirement to pay approximately $710,000 of tuition to register for their classes. From the cash inflow-outflow standpoint, this amount is not a ≥real≤ cost to the institution since no cash outflows were necessitated (this assumes that those 55 players were distributed among various courses in such fashion that the number of sections taught was unaffected by their presence). Given these determinations, the direct net cost of the football team in AY 2002-03 would be estimated to total approximately $1.2 million. However, the opportunity cost standpoint interprets the tuition portion of athletics scholarships to be an includable cost and the tuition of non-scholarship athletesπ not to be includable as offsetting revenue. Accordingly, from this standpoint the estimated AY 2002-03 direct net cost of the football team totals almost $2.3 million, approximately $1 million more that the alternative estimate.

Womenπs basketball experienced the second highest AY 2002-03 net cost from each of the three standpoints, approximately $800,000 from the cash inflow-outflow standpoint and $1 million from the opportunity cost standpoint. Menπs basketball experienced the third highest net cost, slightly less that $575,000 from the cash inflow-outflow standpoint and approximately $750,000 from the opportunity cost standpoint. What our data show, then, is the reality that among all the NCAA teams, the highest profile teamsãfootball and menπs and womenπs basketballãoperate at the highest net cost to the University.

We thought it would be informative to convert the data regarding net direct cost per sport into the net cost per participation opportunity for each sport. The latter data is shown in Table 7 (page 15). As the table makes evident, the net direct cost to the University of providing a student athlete with a participation opportunity, that is, the amount remaining after accounting for all revenue directly generated by the team itself, varies dramatically from team to team. For example, an opportunity to participate on the womenπs basketball team in AY 2002-03 came at an estimated net direct cost to the University of $53,500 using the cash inflow-outflow interpretation and $66,200 using the opportunity cost interpretation. The analogous amounts for menπs basketball were $35,800 and

Table 7

Alternative Estimates of Direct Net Cost

Per Athlete, by Team

AY 2002-03

Standpoint (see text)

Nr. of Nr. of

Athletes Schol.

1 2 3 4

Men

Football 99 55.57 $12,171 $12,353 $22,932 $21,736

Basketball 16 13.00 ( 6,220) 35,815 46,924 46,924

Baseball 37 2.50 2,489 ( 5,706) 4,811 145

Golf 12 4.29 8,792 4,656 14,833 12,481

Soccer 32 9.41 7,319 32 11,886 8,243

Swim 26 2.93 2,803 ( 7,267) 3,881 ( 622)

Tennis 13 0.00 1,496 ( 10,381) 1,496 ( 4,442)

Track 43 3.63 3,693 ( 3,292) 6,959 2,419

Women

Basketball 15 13,00 7,956 53,507 66,199 66,199

Field Hockey 20 6.10 4,967 1,956 12,449 9,599

Gymnastics 15 11.00 10,329 16,925 30,258 28,541

Rowing 43 5.77 2,437 ( 4,775) 6,357 2,048

Soccer 26 9.23 5,936 1,951 13,848 11,634

Softball 18 8.24 9,349 4,718 17,000 15,606

Swim 26 4.10 2,790 ( 6,781) 5,096 650

Tennis 11 2.00 764 ( 5,965) 3,064 ( 997)

Track 48 17.92 5,911 2,094 12,863 10,383

Volleyball 13 12.00 8,760 7,358 35,657 35,656

Note: Column 1 assumes student fees allocated among individual sports in proportion to expenses incurred.

Note: Parenthesis indicates a surplus of revenue engendered over costs.

1 ≠ Conventional standpoint

2 ≠ Cash inflow-outflow standpoint

3 ≠ Strong opportunity cost standpoint

4 ≠ Modified opportunity cost standpoint

$46,900. For football, they were $12,350 and $22,900. For baseball, on the other hand, a participation opportunity was afforded the athlete at an estimated net cost of only $4,800 from the opportunity cost standpoint, and if one adopts the cash inflow-outflow standpoint, the average member of the baseball team paid the University a net tuition of $5,700 after deducting their share of the full direct cost of operating the baseball team. The table shows that from the cash inflow-outflow standpoint, the 199 athletes participating on seven of the Universityπs eighteen NCAA sports teams made tuition payments to the University, on average, exceeding the per-athlete direct cost of providing them with their participation opportunity. That ≥surplus≤ disappears, of course, if one employs the opportunity cost standpoint.

Although they are indicative of the amounts the University could ≥recover≤ for other uses if it chose to discontinue specific NCAA sports teams if one assumes there are no additional revenue consequences of doing so, the amounts shown in Table 6 do not capture the full cost to the University of operating individual sports. The Department of Athletics and Recreational Services operates a training room only because the members of NCAA teams require trainer services. Similarly, it operates a sports information office primarily because there are NCAA sports to be publicized and reported upon. And indeed, Department administrators are predominantly occupied with matters related to the operation of the NCAA sports teams. We therefore concluded that if we were to portray accurately the full cost of operating specific teams, it was necessary for us to assign the costs of non-team activities, totaling approximately $3.6 million, and also the revenues ≥captured≤ by those activities (primarily unrestricted donations from athletics boosters), totaling approximately, $500,000, to individual teams. There is no objectively correct way to do so. We chose to allocate the expenses and revenues that from an accounting point of view were incurred or captured within non-team Department of Athletics entities to individual teams in proportion to the direct expenditures incurred to operate each team.

Table 8 (page 17) presents our estimates, under the various standpoints, of the allocated total cost of each NCAA sports team. We emphasize again that the amounts shown in this table are not indicative of the amounts that could be diverted to other uses if a single team were discontinued. If the University discontinued its menπs soccer team, for example, it could not simultaneously close 5% of its training room, downsize the athletics directorπs office by 5%, and so on. Table 5 provides our estimate, from various standpoints, of the ≥true≤ net cost to the University of its NCAA sports program. It is our view that the amounts shown in Table 8 analogously present the ≥true≤ net cost to the University, from the same standpoints, of its individual NCAA sports teams. In Table 9 (page 18), we again convert team costs into the team-by-team net cost per participation opportunity.

On the Value of the Universityπs NCAA Sports Program

Introductory remarks. As noted, we perceived it to be an important part of our mandate to estimate the ≥value≤ to stakeholders resulting from the Universityπs NCAA sports program. That magnitude can presumably be contrasted with the programπs net cost in order to assess the felicity of the University allocating scarce monies for its support.

Table 8

Alternative Estimates of Allocated Total Net

Cost of Individual NCAA Sports Teams

AY 2002-03

Standpoint (see text)

Nr. of Nr. of

Athletes Schol.

1 2 3 4

Men

Football 99 55.57 $1,745,850 $1,763,891 $2,811,259 $2,642,765

Basketball 16 13.00 330,604 1,103,159 1,180,900 1,180,900

Baseball 37 2.50 137,910 (165,347) 223,841 51,186

Golf 12 4.29 152,275 102,654 224,782 196,558

Soccer 32 9.41 314,686 81,482 460,810 344,260

Swim 26 2.93 89,745 (172,071) 117,793 ( 702)

Tennis 13 0.00 15,088 (126,662) 27,740 ( 49,461)

Track 43 3.63 222,002 ( 78,359) 362,423 167,191

278 91.33 $3,008,196 $2,208,745 $5,409,556 $4,534,112

Women

Basketball 15 13,00 366,130 1,049,402 1,239,786 1,239,786

Field Hockey 20 6.10 133,840 73,624 283,484 226,495

Gymnastics 15 11.00 224,650 323,585 523,595 497,828

Rowing 43 5.77 149,802 (160,294) 318,368 133,080

Soccer 26 9.23 208,765 105,161 413,965 356,927

Softball 18 8.24 201,219 117,854 338,926 313,843

Swim 26 4.10 91,565 (157,297) 151,507 35,923

Tennis 11 2.00 15,991 ( 58,027) 41,297 ( 3,378)

Track 48 17.92 361,528 178,328 695,250 576,178

Volleyball 13 12.00 195,988 437,764 545,648 545,648

235 89.36 $1,949,474 $1,910,095 $4,551,821 $3,922,327

Note: Column 1 assumes student fees allocated among individual sports in proportion to expenses incurred.

Note: Parenthesis indicates a surplus of revenue engendered over costs.

1 ≠ Conventional standpoint

2 ≠ Cash inflow-outflow standpoint

3 ≠ Strong opportunity cost standpoint

4 ≠ Modified opportunity cost standpoint

Table 9

Alternative Estimates of Allocated Total

Net Cost Per Athlete, by Team

AY 2002-03

Standpoint (see text)

Nr. of Nr. of

Athletes Schol.

1 2 3 4

Men

Football 99 55.57 $17,635 $17,817 $28,397 $26,695

Basketball 16 13.00 20,663 68,947 73,806 73,806

Baseball 37 2.50 37,27 ( 4,469) 6,050 1,383

Golf 12 4.29 12,690 8,554 18,732 16,380

Soccer 32 9.41 9,834 2,546 14,400 10,758

Swim 26 2.93 3,452 ( 6,618) 4,530 ( 27)

Tennis 13 0.00 1,161 ( 9,743) 2,134 ( 3,804)

Track 43 3.63 5,163 ( 1,822) 8,428 3,888

278 91.33 $10,821 $ 7,945 $19,459 $16,310

Women

Basketball 15 13,00 22,409 69,960 82,652 82,652

Field Hockey 20 6.10 6,692 3,681 14,174 11,325

Gymnastics 15 11.00 14,977 21,572 34,906 33,189

Rowing 43 5.77 3,484 ( 3,728) 7,403 3,095

Soccer 26 9.23 7,799 4,045 15,922 13,728

Softball 18 8.24 11,179 6,547 18,829 17,436

Swim 26 4.10 3.522 ( 6,050) 5,827 1,382

Tennis 11 2.00 1,454 ( 5,275) 3,754 ( 307)

Track 48 17.92 7,532 3,715 14,484 12,004

Volleyball 13 12.00 15,076 33,674 41,973 41,973

235 89.36 $ 8,296 $ 8,128 $19,369 $ 16,691

Note: Column 1 assumes student fees allocated among individual sports in proportion to expenses incurred.

Note: Parenthesis indicates a surplus of revenue engendered over costs.

1 ≠ Conventional standpoint

2 ≠ Cash inflow-outflow standpoint

3 ≠ Strong opportunity cost standpoint

4 ≠ Modified opportunity cost standpoint

We assume that the direct value of the NCAA sports program to non-student ≥fans≤ and businesses using the program as a marketing vehicle is reflected in the amount they pay to the University to be spectators at staged competitions or to have their corporate name placed in the public eye via those competitions, and more indirectly, by the Universityπs share of the NCAA ≥March Madness≤ television revenue. We therefore presume that the direct value of the NCAA sports program to fans and sponsors was $3.3 million in AY 2002-03, as reflected by the total amount of athletics-engendered revenue flowing to the University in that year (ticket sales, corporate sponsorships, and also A-10 and NCAA disbursements). After that $3.3 million is deducted from the total cost of operating the NCAA sports program, the remaining net cost to the University is either in the vicinity of $5.0 million or $10.7 million (see Table 5), depending on the standpoint one takes regarding relevant costs incurred and revenues engendered.

The central issue, therefore, is whether there is an equivalent flow of related beneficial ≥non-revenue≤ consequencesãthat is, ≥values≤ flowing to students, alumni, citizens of the State of Rhode Island, and the University itself as a going concernãensuing from the Universityπs annual investment (net cost) in an NCAA sports program. Student-athletes, for example, benefit from the Universityπs NCAA sports program by receiving an opportunity to participate in a valued activity. Non-athlete students obtain free access to sports entertainment, and their experiences while attending the University may be enhanced by the social bonding with fellow students and the ≥school spirit≤ that sports teams putatively engender. They also benefit if the economic value of their degree is positively affected by the ≥visibility≤ sports teams give the University. Alumni similarly benefit when individuals in the external community regard their degrees more favorably. They also can benefit from the social networking made possible by events organized in conjunction with their universityπs athletic competitions. Citizens of Rhode Island who do not attend games may still enjoy the ≥public good≤ consumption benefits allowed by the presence of a Division I sports program in their state (this is often referred to as the ≥water cooler≤ effect), and some of them may obtain higher incomes as a result of sports-induced spending by ≥outsiders,≤ that is, by non-Rhode Islanders participating in or attending sports competitions at the University.

We noted at the outset that before the beneficial effects of operating an NCAA sports program can be compared meaningfully to the net cost to the University of ≥producing≤ those effects, their ≥value≤ must somehow be transformed into a monetary equivalent. Unfortunately, we did not discover a practical method of converting many plausible value dimensions into a quantitative estimate. In areas where we illustrated our general argument with quantitative suppositions, they were generally little more than guesswork. But, presumably, rough estimates are preferable to no estimates.

Value to the University as a Going Concern. The University can itself benefit if operation of the NCAA sports program induces more generous giving by alumni and benefactors, if it leads to an increase in the number or quality of applicants admitted, or if it increases the willingness of legislators to increase the state appropriation. In an attempt to ground our thinking about these possibilities in actual evidence, we asked one of our members, Tim Tyrrell, to undertake a thorough review of the academic literature concerning the beneficial or harmful effects that universities experience in consequence of operating an NCAA sports program. Professor Tyrrellπs report to the Subcommittee is attached as Appendix C.

As that report makes clear, there has been extensive research conducted on the relationship between athletic success and alumni giving. The findings are of a mixed character and, selectively picked over, can be used to support either a pro- or anti-athletics standpoint. We are persuaded that the extant literature provides support for the notion that there is generally an upsurge of good will toward a university in the wake of unanticipated athletics success (as reflected, in our own case, by the afterglow of the menπs basketball 1998 "Elite Eight" season) and that such success results in enhanced donations to athletic booster clubs and athletics departments (as reflected in that fact that the payoff the Elite Eight season was construction of the Ryan Center, which is our minds is without doubt primarily an athletics facility and only secondarily a general entertainment facility). We are similarly persuaded the existing literature establishes that continuous high success in a visible arena (as for example, Duke Universityπs success in the ACC and NCAA men's basketball tournament and the University of Miamiπs in football bowl games) tends to result in additional alumni donations for non-athletic uses. However, we are not persuaded that published research shows that operating an unremarkable NCAA sports programã≥unremarkable≤ at least with respect to its "highly visible" componentãstimulates a level of financial support for non-athletics activities exceeding what it would otherwise be in the absence of such a program. Hence we are unable to conclude that the University's NCAA sports program has resulted in increased giving to the University for non-athletic purposes and thereby to an increase in scholarships, chair endowments, and other forms of student and faculty support.

Another issue receiving considerable attention from researcher is the contention that athletic success can positively affect a university's attainments in the higher education marketplace. For example, it has been argued frequently that athletic success can have a favorable effect on enrollment (without raising quality), student retention, and graduation rates. It has also been argued that by increasing the applicant pool, athletic success can be an instrument in upgrading the quality of a university's student body. Unfortunately, with one exception, we were unable to find a research literature on the effects of college sports on these possibilities relevant to schools that are not members of "big time" football conferences. That exception is a study offering the conclusion that operating a Division I-AA football program, other things such as acceptance criteria unchanged, has a positive enrollment impact of 547 students (see Appendix C). However, we believe it is important to the results found that the universities whose enrollment numbers were examined in this study are all located in areas with a much stronger ≥football culture≤ than New England and the Northeast, the areas of relevance here given the geographical roots of the Universityπs student body. Hence, we doubt this finding is applicable to the case of the University. Still, it might be noted, assuming an average tuition plus fees for URI undergraduate students of $7,500, that the enrollment or loss of 547 students would alter the Universityπs tuition revenue by $4 million. Of course, the expenditure side of the Universityπs budget would also be affected, so the net impact might be substantially less.[3]

Given the existing sports literature, our understanding of the budget process in this State, and the performance of our most visible teams in recent years, we are disinclined to argue that the University, as a business institution, is at present receiving much of a returnãvia additional donations, higher enrollments, a more capable student body, and a more generous State appropriationãfrom its annual investment in an NCAA sports program. However, we remind the reader of the caveat we made at the beginning of this report. We emphasized that we are not aware of a single academic study engaging in a systematic manner the possible consequences that would ensue from the discontinuance of a flagship state universityπs entire NCAA sports program. Hence our declared ≥disinclination≤ should not be interpreted as indicating that we Subcommittee members believe the University would suffer no significant loss if its Division I-AA sports program were dismantled. Although there is no conclusive evidence either way, we are of one mind in worrying about the Universityπs ability to maintain its current niche in the higher education marketplace if it implemented a ≥go it alone≤ dismantlement of its NCAA program. We perceive that operating a visibleãand, preferably, successfulãNCAA sports program is widely regarded as central to a major state universityπs mission. Accordingly, the act of discontinuing an NCAA sports program on a ≥go-it-alone≤ basis would be interpreted by many as a sign of a university in severe financial distress. If such an interpretation took root, we would be surprised if it were not objectified via negative repercussions in the marketplace (for example, a decline in the number of applications). And we would not be surprised, either, to find that giving to the University would also be negatively affected.

Participation value to student-athletes. When students pay their tuition (including mandatory fees) to the University, they are thereby purchasing access to a ≥college experience.≤ The primary component of this ≥experience≤ is the opportunity to pursue a desired academic degree. However, the opportunity to participate, as individual inclination dictates, in an array of non-degree pursuits is also part of that experience. Nearly every university therefore provides its students with a variety of participation opportunities to which they have access, assuming they possess the necessary traits (for example, in the case of NCAA sports, athletic talent). Student government, intellectual clubs, intramural sports, social clubs, musical ensembles, and theatrical productions are generally among the opportunities provided. So are highly competitive team sports. The hidden presumption here, given that the provisioning of such opportunities can be costly (as we have shown is certainly true regarding many of the Universityπs NCAA teams), is that the implicit contract between students and the University requires that a portion of their tuition (including mandatory fees) be earmarked for the support of these participation activities. This reality led us to conclude that the aggregate value of NCAA team sports participation opportunities in the minds of those who become team members is properly part of the ≥value≤ the student body receives in return for their payment to the Universityãand thereby something we should include in assessing the NCAA sports program's overall ≥value≤ to benefited parties.

Those who participate in intercollegiate athletics can benefit from their participation in two quite distinct ways: first, by receiving enjoyment and/or a sense of accomplishment and, second, by experiencing an increase in lifetime earnings. With respect to the second possibility, research (see Appendix C) shows that male athletes earn more after college than male non-athletes, but whether the difference is caused by the latter groupπs participation in athletics or not remains unknown. We will therefore ignore the possibility that participation in NCAA sports can raise a participantsπ lifetime earning profile and focus only on the value to student-athletes of the participation opportunities with which they are being provided via NCAA sports.

We have already noted our failure to discover satisfactory methods to quantify the non-monetary ≥values≤ emanating from the NCAA sports program. Here we have the first case in point. We were unable to work out a reliable method of determining the value of participation opportunities to the 513 athletes participating on AY 2002-03 NCAA sports teams. We can only propose that it is a non-trivial amount. To illustrate, it is a fact that members of the Universityπs club hockey team are currently required to remit $1,000 ≥up front≤ if they want to join the team. If we use this as a guide and assume that NCAA sports participation opportunities are similarly worth $1,000, on average, to participating students, the collective value to NCAA sports participants would total approximately $500,000. Of course, the true cost to hockey club athletes is greater than $1,000, as they are required to involve themselves in additional fund raising activities. It is likely, furthermore, that many members of the hockey team would have been willing to pay more than $1,000 (all we know from their payment is that they were willing to pay at least $1,000; we have no knowledge of the maximum amount they would have been willing to payãwhich presumably would be the true indicator of the value of the opportunity to them). Taking these factors into account, it is not unreasonable to suppose that $2,500 more accurately captures the value to student-athletes of an opportunity to participate in their sport of choice at the competitiveness level prevailing in the A10 Conference (many moderately talented musicians, for example, pay an amount in this range for a year's worth of lessons). This latter presumption would suggest that student athletes' participation opportunities have a value to them, collectively, of approximately $1.3 million.[4]

We believe it is worth reemphasizing that there is no substantive difference between the financing of an activity by means of a designated student fee (as occurs in regard to NCAA sports) and financing it out of student tuition or the University's appropriation from the State budget. Either way, the funding is an authoritative allocation out of one commingled fund (Ledger 2 inflows). Thus, it is of no analytical significance that NCAA sports are financed via student fees and the University bands and ensembles are not. Each reflects the reality that the University Ledger 2 budget provides financial support for a broad array of student participation activities. What makes athletics different is the level of support required to operate a competitive NCAA sports program, not the mere fact of that support.

Again, we have no way of knowing precisely what value the opportunity to participate in an NCAA sport has in the minds of the student-athletes who are members of the individual teams. Yet one point is clear. There is most likely a sizeable gap between the value of participation opportunities to the participants themselves and the average per athlete net cost to the University of providing those opportunitiesãapproximately $8,000 using the cash inflow-outflow standpoint and approximately $20,000 using the opportunity cost standpoint. However, as can be seen from Table 9, there are enormous variations in the per athlete cost associated with individual sports, and for a few sports one might find that the value of the participation opportunities is close to the cost of making them available, even from the opportunity cost standpoint. Of course, if participation were itself the primary rationale for operating a sports program, then club sports is a far more effective vehicle, from a financial standpoint, than NCAA sports (see Appendix A).

Entertainment value to non-athlete students.[5] For those not participating in the "production" of intercollegiate sports competitions as coaches, players, managers, administrators, and so forth, such competitions can be seen as entertainment events benefiting those who choose to use their time to be "entertained" via their spectator role. We know that when a student is willing to pay, say, $10 to purchase a movie ticket, the value of that entertainment experience to them is expected to equal or exceed $10. However, since studentsãup to a cap number relevant in some sports, such as men's basketballãare admitted to athletics competitions for free, it is difficult to ascertain just what the spectator opportunities afforded by the University's intercollegiate athletics program are worth to themãthat is, what they would have been willing and able to pay to purchase tickets to entertainment events they choose to attend when actually admitted free of charge.

It seems to us that a reasonable way to estimate the aggregate entertainment value of athletic competitions to students is to multiply the cost of a ticket to a particular competition for an adult non-student by the number of students who choose to attend. We recognize that be following this procedure we are undoubtedly overestimating the number of students who perceive the value of the activity at least to equal the non-student ticket price (since students who value the activity at less than the regular ticket price but at more than zeroãthe actual ticket priceãwill also attend). Our estimate of the implicit entertainment value in AY 2002-03 of the ≥highly visible≤ components of the University's NCAA sports program, based on this procedure, is presented in Table 10. Student attendance at competitions staged by the other NCAA sports is unavailable, but if AY2001-02 data is any indication, this omission makes little difference to the totals shown in Table 10. One can see that no matter what standpoint is adopted, the value of the entertainment afforded to students was only a very small fraction of the net cost in AY 2002-03 of providing them with that entertainment (see Table 5).

Table 10

Entertainment Value to Students of Intercollegiate

Athletics, AY 2002-03

Sport Nr. attending Implicit ticket price Amount

Menπs BB 17,516 $ 17.00 $ 297,772

Menπs FB 3,495 10.00 34,950

Womenπs BB 1,091 8.00 8,728

Total $ 341,450

"Psychic enhancement" value to non-athlete students. We previously referred to the student purchasing a "college experience" in return for her tuition plus mandatory fees. That experience is arguably enhanced if the student enjoys a social bond with other students and also if a feeling of "school spirit" permeates daily life. NCAA sports are widely construed as helping to foster these positive "psychic" dimensions of a university student's experience, and the sociology of sports literature has firmly established that a university's high profile sportsãwhich usually means football, men's basketball, and sometimes also women's basketballãoften do indeed engender precisely these effectsã

and this is true even for many students who have no intrinsic interest in the sports themselves. It is also well established that winning significantly amplifies the positive psychic states induced by a sports program. Unfortunately, we know of no way to gauge how closely bonded our student are to each other and to the University or how much school spirit they possess. Assuming we did, we similarly know of no way to gauge how to distinguish the contribution of NCAA sports program to their psychic state versus the contribution of other facets of university life. We will state that we do not dismiss out of hand the possibility that some, possibly many, of this University's students do indeed obtain psychic benefit of the type mentioned because the University operates an NCAA sports program. We are more confident in perceiving that winning produces these beneficial psychic effects and point to the "buzz" and institutional pride evident as the men's basketball team made its way to the "Elite Eight" seven years ago. But, again, we have no way even of guessing what the aggregate "value" of that unique experience for our students might have been.

Degree-enhancement value to non-athlete students. Proponents of intercollegiate athletics have forwarded a very different argument in their effort to demonstrate that even non-fan students benefit from their university's NCAA sports program. It emerges out of a presumption that operation of an intercollegiate athletics program, particularly as a member of a "big time" conference (for example, the A-10), puts an institution "on the map" and may even raise the "worthiness" of that institution in the minds of individuals outside the institution, including potential future applicants to the University. This is only another way of saying that the prestige or status of an institution is elevated somewhat in the minds of some members of the general public as a result of athletics, particularly if there is highly publicized success in a "big time" arena (as, say, in the NCAA basketball tournament). There is evidence supporting some aspects of this interpretation. However, it appears to be Div I ≠A football success alone that engenders a gradual, albeit modest, improvement of student quality (see Appendix C).

Interestingly, even if, objectively, there is no improvement in student quality, athletics success can still work to the benefit of non-participant, non-fan students. If a purchased good or service yields a flow of return over a number of years, it is generally referred to as an "investment." From the point of view of the purchaser of a university education, a college degree is an investment potentially yielding two type of returns spread over their lifetime: (1) an enhanced ability to deal with and experience life events and opportunities and (2) an elevated lifetime earnings profile in comparison to what it would have been in the absence of such education. Regarding the latter, research indicates that in recent decades the average earnings "return" to the ≥investment≤ in a college degree is in the range of 15 to 20%. An average rate of return, however, may conceal substantial variation in individual rates. What is of concern here is the possibility that a successful athletics program helps to elevate that investment rate of return above what it would otherwise be.

In principle, such an "elevation" can occur due both to a real and an illusory effect. With respect to the former, elevation of the University's perceived status can cause prospective students to rank it more favorably versus its competitors. According to the conventional stylized story, athletic success produces an increase in an institution's applicant pool, allowing the institution, in turn, to be more selective in admitting students. Given the importance of fellow students to what a student learns while in attendance, raising the quality of the student body raises the overall quality of the education received by those attending the University even if there is no change in faculty, buildings, and so forth. Given that economic research shows a weak positive relationship between the quality of the degree granting institution and the lifetime earning profile of its graduates, one would conclude by this chain of causalities that students who derive no entertainment value whatsoever from NCAA sports will nonetheless be among the real beneficiaries if the University maintains a successful NCAA sports program.[6]

The previous line of reasoning subsumes that the prestige of the degree a graduate possesses is often considered along with other qualifications by those rationing access to specific lucrative career opportunities (for example, acceptance into top business schools). By the logic of the preceding paragraph, the actual quality of University graduate will be altered in a positive manner as a result of a successful intercollegiate athletics program. It should be remembered, however, that institutional quality evaluations are often informal and based on fuzzy conceptions of the educational experience actually provided by the degree granting institution. For the positive earning effect to occur, it is enough for the perceiver (employers, graduate school admission committees, etc.) merely to think more positively about the quality of particular institution due to the publicity generated by its athletics prowess.

If this interpretation is correct, it suggests non-athlete students who graduate from the University may, on average, capture more income over their lifetime because the University conducted a visible intercollegiate athletics program, and particularly so if it was a successful and hence a highly visible athletics program. We have already indicated that we are "disinclined" to infer that operation of the University's NCAA sports program has induced an increase in the average quality of the student body above what it would otherwise be. However, we point to an important corollary of the foregoing line or reasoning. If the University effected a highly publicized "go it alone" discontinuation or de-emphasis of NCAA sports, it would have the indirect consequence of diminishing the "degree prestige value" for its current and future students.

If it were possible to calculate the empirical relationship between the NCAA sports program and the prestige value of a degree from the University that would be lost if the program were discontinued, assuming there is one, we would want to credit the "benefit" accruing to student currently enrolled. Unfortunately, there is no systematic body of knowledge that we could draw upon to attempt an estimate of this relationship. Researchers have attempted to isolate the impact of a successful intercollegiate athletics program on applications and student body quality (see Appendix C), but we are unable to discern a clear inference that we could make. We nonetheless want to record our awareness of the possibility that non-athlete students may be benefitingãthrough the avoidance of a lossãfrom a continuation of the University's NCAA sports program even if they are complete uninterested in sports and derive no entertainment or psychic value from it. It is worth noting, we believe, that if the 10,000 plus undergraduates currently enrolled at the University were to experience an income loss in the future of as little as $300 per year, assuming a discount rate of, say, 6%, the present value of those future losses would exceed the present value of their implicit four year burden of sacrificing approximately $1,000 per year of other University funded activities, that is, the implicit burden of bearing a one ten-thousandth share of the $10. 7 net cost to the University, from the opportunity cost standpoint, of operating its NCAA sports program. In other words, the avoidance of a very small negative impact on annual earning would justify, from the studentπs point of view, a continuation of the present level of University support for the NCAA sports program. [7]

Value to alumni. For the present purpose, we conceptualize an alumnus to be a graduate of the University in isolation from their possible dual role as a fan or sports enthusiast. The "status elevation effect" outlined in the previous section can also work to the benefit of alumni, albeit presumably to a lesser degree. Again, we are unable to estimate the actual magnitude of this benefit, if there actually is one, and simply note its possibility.

Value to fans. For our purposes it is useful to subdivide fans into three types: (1) fans of University teams, (2) fans of teams against whom the University competes, and (3) general sports fans. We conceptualize a URI fan as someone who pays attention to the outcomes of competitions entered into by a particular URI sports team (and possibly many of them) and experiences emotional satisfaction when that team (or possibly a number of them) is victorious. Parents, family and friends of participating athletes are included among fans under this definition.[8] An analogous definition would apply to fans of teams against whom University teams compete. A general sports fan is one who has no particular ≥emotional investment" in the outcomes of University or its opponents' competitions but who frequently uses their leisure time to view sports competitions on television or to listen to them on the radio.

As previously noted, sports competitions can be considered as entertainment events. That a particular competition is valued by those in attendance is attested to by their willingness to purchase a ticket to witness it. The same can be said about those who exhibit a willingness to use their leisure time viewing a specific competition on television or listening to it on the radio. Table 11 (below) shows that $808,268 was collected in AY 2002-03 from fans attending NCAA competitions staged by the University. It must be understood that the actual value derived by those attending the competitions was undoubtedly more than this amount. As previously mentioned, those purchasing a ticket thereby indicate that they receive value from attending the competition at least equal to the amount paid. Many presumably receive more than that value (economists refer to the differential as "consumer's surplus"). Also, admission to many University-staged NCAA sports competitions is free to all comers. Those who attend (certainly parents)

Table 11

Ticket revenue, by sport, AY 2002-03

Sport Paid admission Net Revenue Football 9,138 $ 85,711

Menπs BB 48,033 699,123

Womenπs BB 3,684 15,245

Menπs Soccer 1,288 3,630

Womenπs Soccer 993 2,355

Volleyball 480 1,344

Gymnastics n.a. 860

Total $ 808,268

presumably place a positive value on the experience and would pay admission if asked to do so.[9] In short, the true entertainment value fans derive from the University's NCAA sports program is undoubtedly somewhat greater than indicated by AY 2002-03 ticket sales. But even if this is taken into account, it is evident that the entertainment value obtained by those who attend the Universityπs NCAA sports team competitionsã

including both fans and studentsãis but a small fraction of the NCAA sports program's total cost.

Television revenue constitutes a second source of revenue occasioned by fan interest in the "high profile" portion of the NCAA sports program. Many of the University's football and men and women's basketball games are televised by Cox Communication. While no money is received from Cox in return for the right to televise games, their contract with the University stipulates they provide a number of "in kind" services that allow the University to showcase itself to both the general public and the sports fan. Unfortunately, we were unable to estimate the economic value of those services, but it is unquestionably a moderate amount. It is important to recognize that Cox is here simply serving as a conduit transferring value from fans (whose viewing allows Cox to obtain advertising revenue) to the University, so this amount also should be treated as derived from the entertainment value of NCAA sports competitions. The same applies to disbursements to the University from the A-10 and NCAA, a total of $519,572 in AY 2002-03, which mainly derive from the sale of TV rights to A-10 and NCAA basketball championships.

We hold that booster donations are another reflection of the entertainment value engendered by the NCAA sports program. We have already introduced the term consumer surplus. This refers to the "surplus" of value remaining when the amount an individual actually has to pay to obtain a good or service is subtracted from the actual value obtained by enjoying its use value. Sports economists have noted that professional sports teams have developed a number of instruments, such as individual seat licenses, enabling them to capture some of the consumer surplus. University sports programs have done so, too. For example, linking one's seat assignment for men's basketball games to how much one donates to the Athletics Department unrestricted fund is clearly such a device. Economic research (see Appendix C) shows that athletics giving goes up and down with athletics winning (research results are inconsistent regarding athletics winning and non-athletics related giving to a university). Since the value derived from athletics entertainment is related to the quality of the teams providing that entertainment, the variability of athletics giving can be attributed to the increase or decrease of consumer surplus resulting from "better" or "worse" team quality. As shown on our spreadsheets (see Appendix A), the Department of Athletics raised approximately $1.3 million in donations during AY 2002-03. We interpret this amount mostly to be captured "consumer surplus" arising out of the entertainment value for fans of the University's NCAA sports program.

The sources of revenue discussed to this pointãticket sales, television revenue, and booster donationãwere all included as revenue in our procedure for calculating the net cost of the NCAA sports program and of the individual NCAA teams. That is, in attempting to determine whether the NCAA sports program generates "values" equivalent to the net cost to the University of operating that program, we have already "netted out" the entertainment value of the individual sports to non-student fans. However, there is a form of entertainment value flowing to the non-student population that has not been captured in calculating the NCAA sports program's net cost, a value dimension that sports economists argue is frequently ignored in assessing the worth of sports teams to a population group. The phenomenon of interest is often referred to, non-technically, as the "water cooler effect."[10]

The opportunity to think and talk about one of the University's "high profile" sports teams is "everywhere" as an element of the local environment. Its competitions are covered in detail in the newspaper. Its activities serve as topics of interest on sports talk shows and on Internet chat rooms and discussion forums. Its successes and failures are frequent water cooler discussion topics (hence the popular term). What is relevant here is that "psychic involvement" with the team's activities and accomplishments is available to allãeven those who attend no games and have a weak "spectator attachment" to the teamãif they choose to avail themselves of opportunities to participate psychically. Moreover, one person's "consumption" of the team's exploits and travails in no way reduces another person's opportunity to also "consume" them. If the topic is "in the air" for one it is available for psychic engagement by all.

As has been the case with many other of the values that are theoretically engendered by the University's NCAA sports teams, we have discovered no method of estimating how much value the "water cooler effect" has for Rhode Islanders and other individuals alert to the endeavors of the "visible" University NCAA sports teams (football and men's and women's basketball). It is worth noting, however, that researchers have made attempts to develop empirical estimates of this effect. For example, it was reported in a 2001 paper published in the Federal Reserve Bank of Kansas City Economic Review that despite the presence of two other professional sports franchises and the "horrid reputation" of the team, Pittsburg residents were at that time willing to "cough up" as much as an average of $2.30 a year each to keep the National Hockey League Penguins in Pittsburgh (this was above and beyond the amount they were likely to spend purchasing tickets to Penguin games or to subscribe to cable services presenting telecasts of the games). To illustrate the significance of this finding, if Rhode Islanders, on average, derive a similar "water cooler" value from the mere presence of University NCAA sports teams, they are presently enjoying in excess of $2,000,000 of value that is currently not being captured by the University. If so, economic theory suggests it would be appropriate for the State to subsidize the University's sports operation by that amount.[11]

Value of local economic activity generated. The University's NCAA sports program is often asserted to impact economic activity within the State in a positive way. When visiting teams come to the University to participate in a competition, they often stay overnight at a local hotel or motel and purchase meals and other incidentals from local businesses. The same is true when the parents and families of student-athletes come to the campus to watch their student-athletes compete, when contracted individuals come to officiate competitions, when league and NCAA officials come for on-site visits, and so on. In-state spending of these types is a direct result of the University operating its NCAA sports program. It is known that these injections from outside have a multiplied impact on the State economy. Accordingly, the total positive economic impact of the University's NCAA sports program can be understood as equal to the amount of "new" spending the program injects into the State's economy multiplied by an appropriate local spending multiplier. The term ≥new spending≤ refers to spending within the State that otherwise would not have taken place. For example, when someone from New York attends a sports competition, their spending is shifted from New York to Rhode Island. This is what we mean by new spending. On the other hand, when someone from Smithfield, Rhode Island, decides to stay in a local motel and purchases meals in local restaurants, that is not new spending. This is because in this case, one type of in-state spending is substituted for spending that otherwise would have occurred somewhere else in the state. We would similarly not include the salaries of coaches, trainers, athletics administrators, office staff, and so on, since presumably the University would simply shift the amounts currently designated for those individuals to the support of other activities, resulting in no change in the amount injected into the State economy.

Once again we lack the data required to develop a precise estimate of the economic contribution of the NCAA sports program to the Stateπs economy. For example, we have no firm data regarding the number of out-of-state visitors who attended NCAA sports competitions in AY 2002-03, just the number who purchased tickets. For parent and family visitors, we have no way of knowing whether they might not have visited just as often even if there was no sports competition to provide the immediate rationale. To obtain a rough indication of the local economic stimulus provided by the NCAA sports program, we made a wild guess about the number of visitors who came to the area only to attend sports competitions. Approximately 75% of NCAA team members are from outside the State. Suppose that the families of two-thirds of those 381 athletes, or 254, do not live within easy driving distance of the campus. If this were true, the families of those 254 athletes would require local overnight lodging of one or two days in order to attend a NCAA team competition. Suppose we conservatively estimate that an average of two family members per ≥distant≤ student-athlete each visit twice per year solely for the purpose of witnessing competitions in which their family member is a participant. 254 x 2 persons x 2 visits each x an average of 2 nights of lodging per visit = 2,032 nights of lodging. Tim Tyrrell, a Subcommittee member, has conducted research pertaining to the economic contribution of tourism to southern Rhode Island local economies. He estimates an average of $100 of local spending per day per visitor. If our chain of suppositions is even close to the reality, then some $203,000 of addition spending occurs within the State economy due to these visits by the parents of out-of-state student athletes. Specialists in the field of regional economic development have determined that a spending multiplier of 1.36 is appropriate for regional contexts of the type with which we are concerned here. This suggests that the spending of parents generates a total increase in the Stateπs economic activity of approximately $276,000.

There is also spending undertaken to lodge and feed athletes, student managers, trainers, coaches, and other persons associated with visiting teams during their overnight stay in the area. We estimate this would result in an additional 2500 to 3000 nights of lodging, but each probably giving rise to less spending per day than in the case of visiting parents. Suppose that amount is conservatively estimated to be $75 per day. There are also visits by alumni attending the homecoming game, basketball broadcasting teams, referees, visiting A-10 officials, and so forth. Suppose these visits give rise to another 1000 nights of lodging and that these visitors spend the standard $100 per day in local establishments. Combining these separate types of overnight visitors, it is not unreasonable to infer that the Universityπs NCAA sports program induces a total of 3000 ≥visit days≤ to the local area by those spending ≥normally,≤ that is, at a rate of $100 per day per person, including lodging, and another 3000 ≥visit days≤ by those associated with visiting team who inject a lesser amount of $75 per day into the local economy. Together, these visits represent direct ≥new≤ spending injected into the State economy in the neighborhood of $525,000. Its multiplied annual impact would total approximately $700,000. Actually, since we have been very conservative in our assumptions and ignored completely the spending of persons making day trips to the area to witness a competition, the multiplied annual impact could easily be twice the amount generated via our suppositions. Most likely it exceeds $1 million. Of course, we do not know what the true amount is.

It will be remembered that under the cash inflow-outflow interpretation, the approximately $3 million of tuition remitted by non-scholarship athletes is treated as sports-engendered revenue and subtracted from total cost in arriving at an estimate of the NCAA sports programπs net cost. It should not be overlooked that a significant portion of this tuition, probably more than 75%, comes from out-of-state students and hence is actually ≥new≤ spending injected into the State economy from outside. Assuming that $2.25 million of the tuition paid by non-scholarship athletes is from out-of-state athletes, and again using a spending multiplier of 1.36, the multiplied impact on the State economy would be approximately $3.04 million. The difference between these amounts, approximately $800,000, was not included as revenue in obtaining our previous net cost estimate. Hence it is appropriate to include it here as a value generated by the NCAA sports program. This suggest that the impact of that program on the Stateπs economyãthat is, the programπs value as a generator of income within the stateãis actually around $1.8 million, or approximately $800,000 more than ≥guesstimated≤ in the previous paragraph.

A summing up in regard to values generated. It was our goal to identify the value of the benefits that students, alumni, fans, citizens of the State, and the University itself obtain because the University operates an NCAA sports program. We must now acknowledge that despite good intentions and many hours of focused work, we have failed to achieve our goal. We have reviewed in conceptual terms most of the benefits that in principle may derive from the NCAA sports program. But we have not been able to obtain an empirical estimate of the true monetary value of those benefits. Instead, we have mostly guessed about their significance and provided numerical illustrations of their possible magnitudes. Table 12 (below) provides a summary of those speculations and illustrations. We believe that because many of the numbers in that table are illustrative rather than definitive, it would be meaningless to add them together to provide an overall total. We recognize that our failure to provide a definitive estimate of the NCAA sports programπs value will allow NCAA sports zealots to substitute their own more optimistic assessment of that value and similarly allow critics to substitute a more disparaging assessment than our.

Table 12

Summary of Possible Indirect Values Generated

by the Universityπs NCAA Sports Program

Possible benefit, by recipient Amount of value received

The University itself

State appropriation effect Unknown, probably negligible

Increased enrollment effect Unknown, probably negligible

Increased giving Unknown, probably negligible

Students

Participation opportunities $800,000 to $1.3 million (guesstimate)

Entertainment Approximately $341,000

Psychic enhancement of

college experience Unknown, probably negligible

Enhancement of degree value Unknown, probably negligible

Alumni (non-fan role)

Enhancement of degree value Unknown, probably negligible

Fans

≥Water cooler≤ stimulation $2,000,000 (wild guesstimate)

State residents (non-fan role)

Contribution to State economy $1.8 million (guesstimate)

We can say that if our illustrative examples are anywhere near the mark, it appears that the NCAA sports program produces annual benefits with a value more or less equivalent to our estimate of the programπs net cost using the cash-inflow standpoint. It is equally the case, however, that if those illustrative ≥estimates≤ are ≥in the ball park,≤ the programπs positive value is far short of our estimate of the net cost using the opportunity cost standpoint. We again emphasize that Table 12 contains only our speculation about the total value magnitudes currently being ≥captured≤ by various groups. That is, the amounts shown are not to be regarded as ≥facts.≤

We have now acknowledged that we failed to achieve our goal. We worry; however, that the amounts detailed via our speculations will be used inappropriately by critics as ≥proof≤ that the NCAA sports program represents a misguided used of University monies. Hence, even though some may interpret our doing so as a sign of apologetic intent, we believe it is incumbent upon us to reiterate our concern about the possible negative market repercussions of a go-it-alone discontinuation of the entire NCAA sports program. Apology is not our motive, however. Rather, we wish only to call attention to the fact that there is no straightforward way to settle the issue of the NCAA programπs value to those who are affected by its existence. If our speculations concerning the possible consequences of a go-it-alone discontinuation of the program are taken into account, our analysis can, equally inappropriately, be interpreted as providing ≥proof≥ that continued institutional funding of the NCAA program is wholly rational. We have already noted that NCAA sports are widely understood to be part of the mission of a flagship state university. Sports are simply viewed as a constituent element of the holistic going concern we know as a university, and sports ≥visibility≤ and ≥success≤ are elements of the processes through which perceptions about the ≥value≤ of the education received are formed. This being so, the discontinuation of the NCAA program might negatively alter the Universityπs reputation in the minds of those external to the University, and we suspect it would. If this occurs, we would expect that it would be manifested as reduced ≥demand≤ by potential applicants for admission into the University. It would likely also diminish the perceived value of a degree from the University in the minds of many of our societyπs occupational gatekeepers. As we have already noted, if a devaluation of their degrees causes an annual reduction of as little as $300 annually in the lifetime earnings profile of the Universityπs undergraduate students, the avoidance of this negative eventuality almost certainly has a present value to them exceeding the entire net cost of the NCAA sports program even from the opportunity cost standpoint. In this case, from their point of view, it would be irrational for the University to reduce its level of support for the NCAA program.

We emphasized in the second section of this report (see page 2) that because no comparable University has ever discontinued its entire NCAA athletics program, there exists no body of research findings that could be used to gain an understanding of the secondary consequences that might ensue from such an action. We emphasized that our estimates of net cost were all based on an assumption that the Universityπs market niche would be unaffected by a discontinuation of the NCAA sports program. We emphasized that this was unlikely to be true if the University discontinued NCAA sports. Indeed, we noted that possibility that an action intended to ≥free up≤ scarce monetary resources for other usesãnamely, discontinuing the NCAA sports programãmight in fact lead to a decline in the monetary resources available to the University and hence could even result in a reduction in the monies available for other purpose. We of course have no special knowledge that would allow us to know in advance what would actually occur. Still, we urged the reader to be cautious about assuming that the NCAA sports programπs ≥net cost≤ to the University is indicative of the net amount the University would gain by discontinuing that program.

We similarly have no knowledge of the actual impact that a discontinuation of NCAA sports would have on the future earnings of the Universityπs undergraduate student. Our point is that just as we cannot say with any degree of certainty whether the NCAA sports program generates positive values exceeding its net cost, we also cannot say with any certainty whether the students who attend the University would be helped or harmed by its eliminationãeven if the programπs net cost could be recovered in full and reallocated to other uses. We have not explored the question of whether the funds presently used to operate the NCAA sports programs or any of its component teams would yield higher benefits (≥values≤) if they were put to other uses. Nonetheless, we believe that the reality that we are fundamentally uncertain about the consequences that would be engendered places a special burden on those who advocate a discontinuation of the NCAA sports program to be very clear about the ≥value≤ to our students of the alternative uses to which any ≥recovered≤ monies might be reallocated.

There is a related matter we feel we should address. It may have been noticed that we have not associated value magnitudes with the operation of specific sportsãindeed, given the crude nature of our ≥estimation procedure,≤ we believe it would be irresponsible for us to do so. This being the case, we cannot offer any definitive insights as to the decline in the total value of the NCAA sports program that might occur if a specific sport were to be discontinued. We feel it is appropriate, however, to point out that ≥water cooler≤ benefits, if they in fact are being generated by the NCAA sports program, derive mainly from the high profileãthat is, the highest net costãsports. We would add that a significant portion of the programπs positive impact on the State economy would also disappear if the most expensive sports alone were to be discontinued. Of course, those benefits derive mainly to individuals who are external to the University, so perhaps it would be appropriate to develop means of increasing their contribution to the cost of operating the NCAA sports program.

Recapitulation and Final Thoughts

It is important to recognize that the University since its founding has been enmeshed in a larger system of higher education to which NCAA sports have long been central. During the 1920s college football became a prominent spectator sportãthat is, an entertainment event of growing social significance. During the 1930s and 40s, college basketball also became a prominent entertainment event. With the spread of television into the culture during the 1950s, it became commonplace to televise these entertainment events. By the 1970s at the latest, ≥big time≤ college sports had become highly commercialized due to the economic value of their entertainment potential. During the 1980s and 90s, institutions that were highly successful at generating revenue from these entertainment events aggressively drove up the cost of operating an NCAA sports program for all NCAA members schools. That escalation of costs has precipitated soul searching across the nation at institutions, such as our own, where it has been difficult to convert entertainment potential into a meaningful entertainment revenue (only $3.3 million in our own case). The appointment of our Subcommittee can be seen as a manifestation of that development. Accordingly, we had no difficulty in discerning the fundamental question that constituted the subtext of our official mandate: ≥Can it be shown that the very significant amount of institutional support needed to continue the Universityπs costly NCAA sports program is somehow åworth itπ?≤

Before we could attempt an answer to this question, it was necessary that we develop an accurate understanding of the NCAA sports programπs true cost to the University. Departing from conventional practice, we decided it was inappropriate to conceive student Athletic and Title IX Fees as revenue resulting from the operation of the Universityπs NCAA sports program. Accordingly, we did not so conceive them. We grappled with the issue of what truly constitutes a relevant cost or revenue, and chose to develop alternative estimates based on alternative conceptions of what should be included. We eventually determined that the NCAA sports program actually operates at a net cost to the University of approximately $5 million per year, excluding capital costs, if a cash inflow-outflow interpretation of costs and revenues is used. Alternatively, we determined the program operates at a net cost of almost $11 million if an opportunity cost interpretation is used. (Our compromise ≥weak≤ opportunity cost standpoint produces an estimate of net cost between these two amounts.) We additionally estimated the net cost to the University, from each of these alternative standpoints, of each NCAA team and on a per-athlete basis. Our data show clearly (but not surprisingly) that the ≥highest profile≤ NCAA sports are operated at a substantial net cost to the institution. Indeed, for men and womenπs basketball, a participation opportunity entails a cost to the institution of $70,000 or $80,000 per year. While the specific amounts of ≥institutional support≤ required per sport will vary from year to year, we are not optimistic, given present trends and the University membership in a ≥big time≤ athletic conference, that the net cost of participation opportunities can be reduced significantly during the foreseeable future.

In order to answer ≥is it worth it?≤ it is necessary to juxtapose the costs of an activity against the beneficial consequences engendered by that activity. Thus we sought to discover whether a meaningful stream of benefits is generated by the operation of the NCAA sports program. We believe we have pinpointed a number of ways that the NCAA sports program can generate beneficial effects. However, we quickly came to recognize, as we have acknowledged, that we do not knowãand indeed we believe one cannot knowãwith any certainty what the monetary value of those benefits might be. We nonetheless offered some illustrative examples of what they might be. It appear to be the case that most of the positive values generated by the NCAA sports program is captured by parties who are external to the University, but we also perceive that the Universityπs students have a significant interest in avoiding losses that the programπs discontinuation might engender. Indeed, we showed that it is plausible to argue that the avoidance of even a very small reduction in their future earning provides enough ≥value≤ to those presently attending the University to justify the additional cost they must bear in order to underwrite the net cost of the NCAA athletics program. These are but small accomplishments, however. We were not successful in developing the empirical data (estimates) we needed in order to resolve the fundamental question with which we grappled. And we doubt, short of a major research undertaking, that anyone else could have done so either.

So, of necessity much of our ≥analysis≤ has been wholly speculative or based on extremely crude ≥back of the envelope≤ calculations. However, we do not believe that our endeavor has been fruitless. We believe we have developed a far more accurate understanding of the net cost to the University of its NCAA sports program than has heretofore been available. It is true that we have not been able to put into evidence sufficient factual information to conclude that the extensive institutional support the University must provide in order to maintain the ≥competitive status≤ of the individual NCAA sports teams is money well spent. But it is equally true that neither have we been able to put into evidence sufficient factual information to conclude that it is money poorly spent. In short, in no way do our value calculation allow for either those who support or those who oppose the NCAA sports endeavor to declare, ≥aha, we have you now!≤ As for ourselves, being fully aware of the limitations of our analysis, we are hesitant to conclude that the extensive institutional support made available to the NCAA sports program is unwarranted from the vantage point of thoseãprimarily students and taxpayersãwho actually bear the burden of providing that support. We suspect, however, that this is a debate that will never be settled on factual grounds.

Appendix A

Appendix B

Appendix C

The Other Effects of College Athletics

T. J. Tyrrell

June 9, 2003

Introduction

This is a summary of the published research on the effects of college athletics on individuals, the university and the local community other than those on university expenditures. It has been written to complement a separate cost analysis of College Athletics at the University of Rhode Island by Higgins and Mead. No primary data has been collected. This is simply an attempt to draw general conclusions about the ≥other effects≤ of ≥college sports≤ or ≥university athletics.≤

The table below lists thirteen categories of effects on three types of recipients mentioned in the literature. These categories and types were chosen as a simple way to organize the literature, not on the basis of any comprehensive analysis of college sports. The effect categories are not mutually exclusive and recipients may fall into all three types. Never the less, the table suggests an approach for describing the findings.

The first nine categories of effects of college sports (the first nine rows in the table) are arranged according to stages in the college experience ≠ beginning with the effect of college sports on applications and enrollment, middling with the effects on retention and graduation and ending with the effects on post-graduation income and alumnae donations. The last four entries in the table (those below the heavy line) follow a less obvious pattern since they may or may not involve current or former students (effects of college sports on corporate sponsorship, ticket sales, visitor expenditures and community cohesion).

College sports as a cause is defined somewhat differently for its effect on each recipient type. The effects on individual students are generally those caused by personally watching or participating in college sports. The effects on the university are generally those resulting from the advertising effect of the success of various sports teams. The effects on the local community are those depending simply on the existence of college sports and/or related activities. Of course, these generalizations do not describe all research hypotheses. All effects reported here were statistically significant unless described otherwise.

References included in the table below are only those that could be accessed. Other references are listed in a more-complete bibliography available from the author. References in the table give the last name of the first author and the year of the publication. The entry ≥XX≤ indicates that the effect category has been mentioned in some of the literature and is believed to warrant further examination, but specific research results could not be found. A ≥$$≤ means the same thing, but also that the effect of interest has monetary value.

Literature on the Other Effects of College Sports

Effect	Individual Students	University	Local Community
Applications	XX	Zimbalist(1999)
Enrollment	XX	Chang(2002),Goff(2000)
Student Quality (SAT)	Shulman(2001)	McCormick(1987),Mixon(1995a,2003b),Tucker (1993), Zimbalist(1999)
Student Socialization/ Integration/Development	Schroeder(1998), Jackovic (1999)	XX
Retention Rate		Mixon (2003a)
Graduation Rate	Long(1991), Shulman (2001) Amato (1996, 2001)	Mixon(2003a), Tucker(1992)
Post-Graduation Income	Long(1991), Shulman(2001)
Alumnae Donations General Gifts Athletic Gifts	Shulman(2001)	Baade (1996a), Brooker(1981),Daughtrey (2000), Grimes(1994),McCormick(1990b)
	Shulman(2001)	Coughlin(1984),Daughtrey (2000)
Ticket Sales		DeSchriver (2002)
Corporate Sponsorship		$$
Visitor Expenditures		$$	Chang(2002), Tyrrell(1999)
Community Cohesion		XX	XX

Effects on Individual Students

Most of the research on the effects of college sports on individual students describes the differences between athletes and non-athletes rather than between students before and after they begin participating in athletics. It is always possible that participation in athletics is not a cause for the effect measured in the research study, but itself the effect of a more fundamental behavioral or genetic cause. No research literature was found on the effects of college sports on individual applications and enrollments.

Shulman and Bowen (2001) provide the only results in several categories of effects. These authors analyzed data on 90,000 students who entered thirty selective colleges and universities at three points in time: the fall semesters of 1951, 1976 and 1989. Major results are reported for athletes who participate in high profile sports (football and menπs basketball), low profile sports (all other sports) and students at large. Athletes were defined as all students who receive one or more athletic awards (≥letters≤) while in college.

Results from their study of the entering 1989 cohort provide the only evidence on individual SAT scores: high profile male athletes at Division IA public universities (917) scored significantly lower than those of male students at large (1154). The pattern was the same for Division IA private universities where the average scores were all about 100 points higher. The SAT scores of 1989 female athletes at Division IA public universities (997) were also below female students at large (1091). Again, the pattern was the same for Division IA private universities where the scores were all about 150 points higher.

The evidence is mixed on whether athletics enhances academic integration but seems to support its role on student development. Schroeder (1998) found that in contrast to previous results at the Division I level, basketball participation at the University of Oregon (NCAA Division III) played a ≥partial role in the integration process for men, but not for women.≤ Jackovic (1999) found ≥student development outcomes≤ among male revenue athletes at a NCAA Division I university to be significantly higher than those for non-athletes for six of the nine outcomes measured.

There is also mixed evidence for a higher graduation rate among athletes. Long and Caudill (1991) studied whether or not 9787 freshmen (4394 males and 5393 females) entering 487 American universities in 1971 earned a BA by 1980. Their model accounted for ten variables such as race, high school grades and whether or not parents had college degrees to isolate the influence of ≥athlete≤ ≠ defined as ≥one who earned a varsity letter in a college sport.≤ They summarized the positive results from their model, which did not include a variable for financial aid, by stating that ≥athletic participation may enhance the development of discipline, confidence, motivation, a competitive spirit, or other subjective traits that encourage success.≤

Shulman and Bowen (2001) also documented a higher graduation rate for Division IA public 1989 cohort male high profile athletes (85%) and low profile athletes (84%) than for male students at large (80%). On the other hand, Amato et al (1996) found that college football success measured by number of postseason appearances has a significant (at the 5% level) negative influence on graduation rates of football players at the Division I-A level (-0.12). They found no significant influence at the Division I-AA level. In a follow-up study Amato et al (2001) found that after the implementation of Proposition 48, there was no longer a negative relationship for Division I-A players.

There is good evidence for higher post-graduation income for male athletes. However, this does not seem to extend to female athletes. Using a model for 9787 freshmen entering 487 American universities in 1971 Long and Caudill (1991) found that ≥Males who participated in intercollegiate athletics are estimated to receive 4 percent higher annual incomes than similar non-athletes.≤ A positive income premium was also estimated for females, but it was statistically insignificant. Shulman and Bowen (2001) found 1995 own earned income for their Division IA 1989 cohorts of male high profile athletes ($50,000) and low profile athletes ($36,437) to both be higher than for male students at large ($34,730). On the other hand, female athletes from the same cohort had a lower1995 own earned income ($25,410) than female students at large ($31,511).

Evidence suggests male athletes in high profile sports donate less to the university, and male athletes in low profile sports donate more to the university than students at large. Shulman and Bowen (2001) examined the differences between athletes and non-athletes with regard to donations to the university. While no data was available for Division IA pubic schools, they found that general giving rates of high profile male athletes at Division IA private (18%) were lower than students at large (47%). General giving rates of high profile male athletes at Division III coed and liberal arts colleges (54%) were also lower than students at large (60%.) Ivy league percentages for high profile athletes and students at large were the same (47%). Female athlete giving rates were also always below those of students at large. On the other hand, low profile male athlete giving rates were always above those of students at large.

Effects on the University

Only Zimbalist (1999) studied the effects on applications at the University level. He ≥gathered data for 86 division IA colleges from 1980 through 1995 and performed a variety of econometric tests. The tests revealed that äthere was some tendency for athletic success to increase applicationsä≤

Goff (2000) examined the enrollments of Wichita State University and the University of Texas-Arlington that dropped their football programs and Georgia State that added football at the Division I-AA level. From a regression analysis of annual enrollment at each of the schools he found that football programs had an average enrollment impact of 547 students. Chang and Canode (2002) study assumed that athletes are exactly the enrollment impact of an athletics program in calculating the economic impact of a new football program at the University of South Alabama.

A number of studies have investigated the effects of athletics on average university SAT scores. Results suggest that SAT scores of entering freshman are higher where athletic programs exist and may increase slightly with the success of football and basketball programs.

McCormick and Tinsley (1990) tested ten different models of SAT scores of freshmen entering college between 1981 and 1984 including a dummy variable for athletic conference membership. Results suggest SAT scores are higher by 26 to 43 points. They found only modest support for the effect of winning team percentages on SAT scores. Tucker and Amato (1993) found that a highly ranked football team boosts average SAT scores over time, but that a highly ranked basketball team had no impact on either the level of or changes in average SAT scores. Zimbalist (1999) used data for 86 Division IA colleges from 1980 through 1995 and found ≥no significant relationship between various measures of athletic success (winning percentage in football and basketball, appearance in postseason tournaments or bowls, ranking in AP polls, number of all-American players at the school, among others) and average school SAT scores.≤ Mixon (1995) estimated a model for SAT scores for freshmen entering 217 pubic and private colleges and universities in 1994. He found university SAT scores to average 1.58 points higher for each NCAA Basketball tournament entered. In a later study Mixon and Trevino (2003a) modeled median SAT scores for incoming freshmen 2001-2002 at Americaπs Best Colleges using a variety of institutional variables. They found SAT scores to vary almost directly with the football teamπs winning percentage points. (The coefficient was 0.94 on the wining percentage points in one model and 0.81 in a second model.)

In a separate study of the same data set, Mixon and Trevino (2003b) found freshmen retention rates to also vary positively with on the football teamπs winning percentage (The coefficient was 0.096 in one model and 0.065 in a second model.)

The evidence on university graduation rates is mixed. Mixon and Trevino (2003a) found graduation rates 2001-2002 at Americaπs Best Colleges to be positively related to the football teamπs winning percentage points ( a coefficient of 0.249 in one model and 0.215 in a second model.) On the other hand, an earlier study by Tucker (1992) found that a highly ranked football team on campus decreases the graduation rate, and that a highly ranked basketball team on campus has no impact on the graduation rate.

Evidence suggests that while there are only slight positive impacts of high profile college athletic winning percentages on alumni giving, there are significant positive impacts from bowl games, championships and television exposure. Brooker et al (1981) examined the relationship between athletic success and alumni contributions for 58 major universities using 10 years of athletic data and nine years of donation data (1960s-1970-s). In the private school analysis, at least one of the dependent variables (size of average gift of alumni, per capita gifts or percentage of alumni donating) was associated with one or more evidences of athletic success (winning percentages of football and basketball, bowl participation, top 20 ranking). Analysis of state universities showed inconsistent results but there were positive results for basketball success in middle-sized public universities.

Grimes et al (1994) examined alumni contributions to the academic endowment of Michigan State University office of institutional research from 1962-1991. Post-season play was not found to be a significant determinant of donations to academics while television appearances are positively related to contributions. Their results also suggest that sanctions imposed by the NCAA for rules violation may reduce (but only slightly) contributions to academics.

Baade et al (1996a) examined university donations at 48 private, doctoral granting universities; 94 public, doctoral granting universities and 167 liberal arts colleges. They found that ≥While winning records do not translate into higher gifts at the university level, bowl game appearances do result in significantly higher gift totals.≤ Daughtrey et al (2000) analyzed the impact of non-Division IA NCAA football championships on donations to the university and found that DIII universities had a significant increase in university donations and that DI-AA enjoyed an increase in the number of donors to the university.

Donations directly to the athletic booster clubs and athletic departments are enhanced by success. Coughlin et al (1984) estimated a model of athletic department contributions for 1980-81 for all schools in Big Eight, Pacific 10, Southwest, Big Ten, Atlantic Coast, Southeastern Conferences and seven independent schools. They found football bowl games and menπs basketball percentage wins to have significant positive effects on donations to athletic departments. Daughtrey et al (2000) found that there was a positive impact of football championships on donations to DII and DIII athletic departments and an increase in the number of donors to all athletic departments.

McCormick et al (1990b) studied the relationship between academic giving and athletic using data for individual Clemson University alumni from 1979 to 1983 (sample size = 245). They found ≤a positive, significant relationship between academic philanthropy and gift giving to support athletics; athletics fundraising does not appear to crowd out gifts to academics.≤ ≥A 10 percent increase per alumnus in donations to the athletic booster club is associated with a 5.0 percent increase in donations to the alumni fund.≤

DeSchriver et al (2002) analyzed the relationship between spectator attendance at NCAA Division II football contests and selected determinants by estimating multiple economic demand models. From attendance at 618 football contests they found that both current and previous year winning percentages are positively related to attendance.

Effects on the Local Community

Only one published study (Chang, 2002) describes the community impact of college sports. They estimated 1999 football visitor expenditures on the local community to average $70.11 per person. There is a vast literature on the economic impacts of sporting and recreational events. A study by Tyrrell (1999) is unpublished but refers to economic impacts related specifically to use of college sports facilities at URI. It was estimated that each spectator would spend $75 per day during the event (including lodging). This meant that a family of four (one of whom plays) would spend approximately $300 per day, including daily expenditures of approximately $100 in lodging, $100 for food and $100 for merchandise and other.

Unstudied Effects

According to the literature reviewed several additional categories of effects of college athletics are important but no research has been found. These categories include: Applications and Enrollment decisions by individual students; Student Socialization, Corporate Sponsorship and Visitor Expenditure effects on the university; and Cohesion effects on the university and non-university communities.

References

Amato,-L; Gandar,-J.-M; Tucker,-I.-B; Zuber,-R.-A. (Apr 1996). Bowls versus playoffs: the impact on football player graduation rates in the National Collegiate Athletic Association. Economics-of-education-review, 15(2), 187-195.

Amato,-L.-H; Gandar,-J.-M; Zuber,-R.-A. (May 2001). The impact of Proposition 48 on the relationship between football success and football player graduation rates. Journal-of-sports-economics, 2(2), 101-112.

Baade, Robert A; Sundberg, Jeffrey O. (December, 1996) Fourth Down and Gold to Go? Assessing the Link between Athletics and Alumni Giving Social Science Quarterly, vol. 77, no. 4, pp.789-803. URI H1 S65

Brooker, G. & Klastorin, T.D. (1981) To the Victors Belong the Spoils? College Athletics and Alumni Giving. Social Science Quarterly (62), pp. 744-750

Chang, Semoon and Sheila Canode (2002). Economic Impact of a Future College Football Program. Journal of Sport Management, Vol 16, 239-246.

Coughlin, Cletus C.; Erekson,O.Homer (July, 1984). An Examination of Contributions to Support Intercollegiate Athletics. Southern Economic Journal, vol. 51, no. 1, July 1984, pp. 180-95. URI HC107 A13 A67

Daughtrey,-C; Stotlar,-D. (Dec 2000). Donations: are they affected by a football championship? Sport-marketing-quarterly, 9(4), 185-193.

DeSchriver, Timothy D, and Paul E. Jensen (2002) Determinants of Spectator Attendance at NCAA Division II Football Contests. Journal of Sport Management, Vol. 16, pp. 311-330.

Goff,-B. (Apr 2000). Effects of university athletics on the university: a review and extension of empirical assessment. Journal-of-sport-management, 14(2), 85-104.

Grimes, Paul W; Chressanthis, George A. Alumni. (January, 1994) Contributions to Academics: The Role of Intercollegiate Sports and NCAA Sanctions. American Journal of Economics and Sociology, vol. 53, no. 1, pp. 27-40. URI H1 A48

Jackovic,-T. J. (1999). A comparison of student development outcomes among male revenue athletes, non-revenue athletes, and club sport athletes at an NCAA Division I university: a case study.

Long,-James E; Caudill,-S.-B. (Aug 1991). The impact of participation in intercollegiate athletics on income and graduation. Review-of-economics-and-statistics, 73(3), 525-531.

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McCormick,-R.-E; Tinsley,-M. (1987). Athletics versus academics - evidence from SAT scores. Journal-of-political-economy, 95(5), 1103-1116.

Mixon, Franklin G, Jr. (December, 1995)Athletics versus Academics? Rejoining the Evidence from SAT Scores. Education Economics, vol. 3, no. 3, pp. 277-83

Mixon, Franklin G. Jr. and Len J. TreviÒo (in Press 2003a) From Kickoff to Commencement: The Positive Role of Intercollegiate Athletics in Higher Education, ä

Mixon, Franklin G. Jr. and Len J. TreviÒo (in Press 2003b) Touchdowns and Test Scores: Exploring the Relationship between Athletics and Academics,

Schroeder,-P.J. (1998). The relationship between academic integration and basketball participation at one NCAA Division III institution. Eugene, OR: Microform Publications, University of Oregon.(2 microfiche (116 fr.) : negative ; 11 x 15 cm).

Shulman, James L. and Bowen, William G. The Game of Life.   Princeton: Princeton Univ. Press, 2001, 426p. URI Library: GV351 S48 2001

Tucker, Irving B. (Dec 1992). The impact of big-time athletes on graduation rates. Atlantic economic journal, 20(4), 65-72.

Tucker, Irvin B, III; Amato, Louis. (June, 1993)Does Big-Time Success in Football or Basketball Affect SAT Scores? Economics of Education Review, vol. 12, no. 2, June 1993, pp. 177-81.

Tyrrell, Timothy (April, 1999). Economic Impact of the Region I Youth Soccer Championship Tournament on the State of Rhode Island, Department of Environmental and Natural Resource Economics, University of Rhode Island, Kingston, RI 02881.

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[1] The other members of the Subcommittee want it known that they appreciate greatly the sustained effort that Ms. Bergen put forth in providing data and explaining the details of Department of Athletics and Recreational Services budgetary information. Without her guidance it would have been far more difficult for the other members of the Subcom-mittee to grasp the intricacies of the Athletics budget.

[2] The A-10 recently complied a confidential report summarizing financial data for each of its member schools. There are undoubtedly legitimate concerns that could be raised regarding the comparability of the data provided by members schools due to different accounting definitions and practices. We interpret the sum of student fees, university budget, and state supportãrevenue categories included in the reportãto indicate the true amount of institutional support. Because the report was confidential, we cannot herein identify amounts with specific institutions. We can say that the Universityπs reported 83.2% institutional support level (by our interpretation) was only slightly higher than the levels reported by the other public institutions in the conference. The level of support at A-10 private institutions ranged from 42.5% at an institution that has been very successful in marketing its basketball program to 93.8% at another institution that has not been very successful at doing so. Schools operating a Div I or Div I-AA football program all reported a total athletic department budget exceeding the Universityπs.

[3] A recent preliminary report issued by a consultant to the NCAA investigating many of the issues reviewed in Appendix C includes data showing that for every dollar ≥invested≤ in enhancing the quality of a Division I sports program, roughly one dollar of additional athletics revenue is generated (see Robert E. Litan, Jonathan M. Orszag, and Peter R. Orszag, ≥The Empirical Effects of Collegiate Athletics: An Interim Report,≤ Sebago Associates, Commissioned by the NCAA, August 2003, p. 4). Hence, spending more to win more will not reduce, on average, the net cost of operating an NCAA sports program. However, as indicated in Appendix C, there is some evidence that winning can benefit a university via increased giving and increased applications. Of course, a common ≥arms race≤ in pursuit of winning cannot be mutually successful. That is, it cannot be a mutually successful strategy to improve the institutionπs financial circumstances via athletics success.

[4] It might be argued that the value of a participation opportunity is ≥countable≤ only for students paying tuition. Since only an equivalent of 328, or 65%, of the athletes participating on the Universityπs NCAA sports teams pay full tuition, by this argument the appropriate valuation of NCAA team participation opportunities is 65% of the illustrative amount of $1.3 million, or $850,000.

[5] We are assuming that sports are beneficial to the University community. See Murray Sperber, Beer and Circus: How Big-Time College Sports is Crippling Undergraduate Education (New York: Henry Holt and Company, 2000), for an incisive challenge to this presumption. Sperber contends that a highly visible intercollegiate sports program is central to a of a system that provides students in research universities with entertainment events and a party atmosphere (≥beer and circus≤) but simultaneously cheats them of the opportunity to obtain a substantive education.

[6] Since research has firmly established that athletes in high profile, showcase sports are typically admitted to both public and private universities with academic qualifications far below those of other students, the presence of the athletes themselves may lower the academic quality of a student body. On the other hand, at our own university, the operation of the non-showcase NCAA sports quite likely raises the overall quality of the student body. For example, if we exclude athletes on the football and men's basketball teams (our "high profile" sports), about 40% percent of the remaining 390 or so NCAA team members were on the Dean's List at least once during the past two semesters.

[7] Below we suggest that, analytically, the State is properly assigned the task of bearing part of that burden, perhaps as much as $2 million, via its annual appropriation. This only strengthens the point being made.

[8] One might consider it preferable to treat the value of an NCAA sports participation opportunity as deriving from both the satisfaction from participation obtained by the student-athlete and the satisfaction obtained by parents and family (who normally pay a substantial portion of tuition). To keep our argument as straightforward as possible, we treat parents and family, in their spectator role, as fans.

[9] The decision not to require that attendees purchase a ticked likely reflects either (1) a belief by Department of Athletics administrators that the revenue that would be collected if an admission charge were instituted would be insufficient to yield a meaningful surplus after the deduction of the actual and administrative costs of procuring ticket sellers and ticket takers or (2) a desire for more spectators that would be forthcoming if a ticket had to be purchased.

[10] The issues of concern here is generally analyzed in the technical sports literature as either a "public good" problem or a "third part effect"

[11] In AY 2002-03, the State's appropriation to the University equaled $82 million, or 43% of the unrestricted (Ledger 2) budget. If we thought of the state appropriation as therefore "covering" 43% of the NCAA sports programπs $10.7 million net cost (using the opportunity cost standpoint), then the state implicitly provided $4.6 of the funding of that net cost. What we are saying here is that a good portion of that amountãclose to one-half if our example is near to the realityãcan be understood as compensation to the University for the "water cooler" value enjoyed by the State's citizens.