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—Mississippi's total operating revenue; its total operating expenses were exactly the same
SI's model used financial information filed with the Department of Education by four Division I athletic departments that varied in size, balance sheets and emphasis on certain sports: Louisville, Mississippi, Oregon and San Jose State. (The filings were the most recent available, from the 2009--10 academic year.) When examining athletic department financials, it is best to forget many of the basics of accounting and even the simple rules that apply when balancing a household budget. Athletic departments operate in a strange world where, at times, money gained or lost isn't entered as such, where the hypothetical can be recorded as fact, where, as Ross puts it, "the books are cooked."
How cooked? A few years ago the software program used by schools to file financial data with the Department of Education didn't allow a university to record a deficit. (The program has since been fixed.) An official at one university said his athletic department occasionally moves revenue from one sport to another. Look closely at athletic department financial filings, and you are likely to find the statistically improbable, such as Mississippi's spending the exact amount ($45,737,904) it earned in 2009--10. NCAA officials mention that fewer than 7% of Division I athletic programs made money between '04 and '10. That may be the case, but it's hard to tell from the numbers alone. As a result, SI was extremely conservative with its estimates.
—Deficit run by San Jose State's football team
The methodology SI used relies on a philosophy that runs contrary to the culture of D-I: Smaller is better.
The vast majority of athletic departments do not generate enough profit to pay athletes. A program like Oregon's, which netted $44,538,251 in 2009--10 thanks largely to Nike founder and chairman Phil Knight's generosity—he has reportedly donated $300 million over the years—could start writing checks tomorrow. And Louisville might be able to as well, having cleared $2,229,652. But Ole Miss claims to have spent every dollar it took in, and San Jose State reported a $452,648 deficit.
The fact is the majority of schools would need to cut expenses significantly to pay athletes even a nominal amount. SI considered alternatives to cost-cutting, including the so-called Olympic model, in which athletes would be allowed to sign endorsement deals, as well as a commonly referred to scenario in which they would be free to take money from agents. These plans come with complications (page 58). SI also attempted to draft a model that compensated only football players, using the concept of hazard pay to try to circumvent Title IX laws, which mandate equal opportunity for women athletes. Two lawyers who specialize in Title IX cases doubted that maneuver would stand up in court, leaving SI to devise a model that distributed money equally over all sports.
The first option was to adopt a Tea Party approach and slash spending across the board, beginning with football. Over the last four decades the number of football scholarships has been trimmed from 120 to 105 to 95 to 85. This has had no major impact on the product and, if anything, has improved competitive balance. Even at 85, FBS coaches have more scholarship athletes than they need. Moreover, at the FCS level (formerly Division I-AA) teams get by with 63 scholarships.
In addition to 85 scholarship players, rosters balloon with walk-ons. Mississippi had 126 students participate in football in 2009--10, Louisville 119, San Jose State 106 and Oregon 105. There is little justification for rosters that large, particularly given the expenses (equipment, training) that come with each player. Also, the more football participants a school has, the more female athletes it must accommodate to comply with Title IX.