Art Carden  

What Could UAB Get for What it Spends on Sports?

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The silence of the lambs... Alvin Rabushka's Triumph...

There is currently controversy in Alabama about whether the University of Alabama-Birmingham (UAB) should drop its football program. Suffice it to say UAB hasn't had the success enjoyed by traditional powerhouses like Alabama and Auburn. Via Twitter, my colleague Darin White shared this article, which notes the following:

Like many lower-resourced Division I schools, UAB has drained money on football. From 2006 to 2013, UAB athletics received $85.4 million in direct institutional support and $28.4 million from student fees. Subsidies accounted for 64 percent of UAB's athletic revenue in fiscal year 2013, though the university's support declined by $1.4 million that year in a rare instance when subsidies decreased.

Note that this is money spent on athletics, not just football. To keep things easy, let's suppose UAB had decided to dump sports in 2006 and instead stuffed that $113.8 million in a mattress. What could they get for it now?

According to US News, UAB's 2014-15 tuition and fees are $9,280 for in-state students. The money UAB spent on athletics subsidies between 2006 and 2013 had it been stuffed in a mattress instead would have provided full-tuition, in-state scholarships for about 12,263 students in 2014-15. UAB has 11,502 undergraduates.

Suppose instead UAB had decided to subsidize basic scientific research by endowing academic chaired professorships. According to UAB financial affairs, the minimum to endow an academic chair is $1.5 million. Again assuming UAB had just stuffed $113.8 million in a mattress instead of subsidizing sports, they would be able to endow about 76 academic chairs (or at $500,000 each, 228 endowed professorships).

Obviously, there are a lot of other things UAB needs to consider before deciding whether to cut football. Maybe Division I sports create school spirit, attract students and faculty members, build valuable brand equity, and provide other benefits. The numbers above suggest UAB is subsidizing sports to the tune of $14-$16 million a year or so with institutional support and student fees. Sports are fun, but I'm not sure Division I sports are worth ten chaired professorships or 1,500 full-tuition scholarships worth of subsidies every year.

Note: I make a few of these points in tweets, but with slightly different numbers since I'm using different sources and doing a bit more reading.

Update, 11:02 AM: I just sent the following to my Principles and MBA students. What about Samford?

You might have learned of recent controversy about whether UAB should drop football. My latest post at EconLog takes this up by asking "what does UAB give up in order to subsidize sports"?

http://econlog.econlib.org/archives/2014/11/what_could_uab.html

What about Samford? According to this site, Samford spent $16,748,946 on sports in 2013. That would have been enough to provide about 631.5 full-tuition scholarships for 2014-15.
Is this a wise investment? How would we know?


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CATEGORIES: sports economics




COMMENTS (6 to date)
Brett Champion writes:

There's also the option of moving down a level. UAB could drop its football program to the FCS level, where the arms race isn't so expensive. Or it could drop all of its sports to Division II or III, where things are really cheap.

Alabama currently has five FBS teams, all of them public universities. Maybe the Alabama legislature needs to step in and say that two is enough and force UAB, South Alabama, and Troy down to the FCS level.

R Richard Schweitzer writes:

Equally interesting would be an examination of how the original decisions and appropriations were determined by whom, their motivations, their expectations and their personal gratifications.

Art Carden writes:

@Brett: interesting idea, but I would be shocked if it were politically feasible.

Birmingham-Southern dropped from DI to DIII a few years ago so they could add football. I think it would make sense for a lot of schools to drop down a division or two.

Michael Moran writes:

Sports is like advertising, building a brand for a school. Look at Ohio. 30 years ago Ohio State was a joke from an academic prospective, Miami was the public school of choice. Now Ohio State is harder to get into than Miami and my guess attracts a more qualified student body. What does 100 endowed chairs get you, a bunch of self important college professors who will do nothing for the school long term. A good football program is an investment in the future.

Robert writes:

What I don't understand is why so many top colleges seem to think they need to sell the same product. Isn't there room for differentiation? Why not go big in some other area explicitly at the expense of athletics. Lose some customers and simultaneously make the university more appealing to others.

J.C. Bradbury writes:

Sports serve as a focal point for continued contact with alumni. This is important for a non-profit institution for direct donations and to enhance political clout for state allocations. It is also useful for marketing the institution for future students and signaling degree-credibility for alumni. Being seen on the ESPN ticker tells prospective employers that your school is real.

Example, I teach at Kennesaw State University. Most people outside of Georgia don't know it is a huge school. In fact, next year it will have over 30,000 students and be the second largest university in the state. The school is adding football, and one of the main reasons is to boost knowledge of the school and maintain contact with alumni.

Of course, this doesn't mean it is worth it to have a football team (not sure you can really test if ROI >0) but it is a big reason why university's choose to cross-subsidize football and basketball. As to why student fees support cross-country? That's harder to explain, but also they are not without explanation.

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