One Wrong Answer to Some Very Important Questions: Understanding Why Cash Payments to College Athletes Is a Bad Idea

The 2014 American college football season will kick off this weekend. The top division of the NCAA is dealing with a number of issues that affect its competitive structure, such as the continuing realignment of conferences, and a playoff system that will substantially diminish the importance of the traditional bowl system. Of far greater import, the problem of concussions and other serious injuries continues to plague college football.

In the midst of all of these challenges, perhaps the most talked-about matter is the question of whether colleges should pay wages or salaries to the young athletes who participate in “revenue sports”—that is, football and men’s basketball—and what will happen to the sport in the aftermath of the O’Bannon decision, in which a judge dealt a blow to the NCAA’s existing rules regarding player compensation.

But paying players in cash would address none of the problems that people have identified with college athletics, and it would make some of those problems worse. The key is to make sure that universities and the NCAA fix the problems that exist, and in doing so, we cannot simply throw up our hands and give up on the notion that athletes can be real students. In other words, focusing on paying cash to players has become an all-purpose answer that diverts the discussion away from real solutions.

Academics and Big-Time College Sports

In my most recent column here on Justia’s Verdict, and in another Verdict column in December of 2013, I discussed the peculiar persistence of the mistaken belief that “college athletes are unpaid,” and similar assertions. I noted that the standard arrangement at every top-division football and basketball program is for players to receive full-ride scholarships, including room and board along with tuition waivers. I also noted that, contrary to popular belief, the majority of those players graduate from college. Even those who do not graduate are compensated in ways that most students and their parents can only dream about.

Even so, there is certainly a perception that the one thing that student-athletes most definitely are not is students. Scandalous accounts of athletes receiving special treatment hit the sports pages in a steady trickle. Earlier this month, even Notre Dame—a football program with one of the highest graduation rates and reputed to be squeaky-clean, even as it competes at the highest levels of the sport—suspended four of its players for receiving unauthorized assistance with their academic work.

Rather than viewing Notre Dame’s action as an indication that the system works—that is, that the inevitable deviations from the student-athlete ideal are punished, and that these punishments will act as a deterrent to future cheating—the cynical conventional wisdom is that this is merely window dressing. The idea seems to be that the system is too far gone, too flooded with money to be redeemed. Giving into such cynicism, however, would be a mistake.

Simply Give Up? We Have Not Even Tried

In my earlier Verdict columns on this subject, I offered two theories about why the public seems to be willing to give up on the student-athlete ideal. First, there is more than a whiff of anti-intellectualism, with self-styled realists treating higher education as less important than cold, hard cash. Second, I noted that there is persistent confusion about the difference between revenues and profits, with universities being accused of greed, even though the money that they receive for college sports could and should be a completely legitimate method of supporting university budgets.

As noted above, one common objection to my first argument, that free tuition is a valuable form of payment, is that the athletes are not really being educated. Even scholarly articles include casual assertions that the educational aspect of college sports is a “pretense,” stated as if that conclusion need not even be questioned.

But if that really were true, or even if it is only true for some significant subset of the student athletes, why would we immediately say that the right answer is to give up and simply treat the players like laborers? What is it about college athletics that causes people to drop the idea of reforming the system and simply turn it into another professional sport?

To be fair, a reasonable person could be tempted to look at the accumulated anecdotes about academic corruption, all viewed in the light of increasing pressures to win at all costs, and imagine that there is no point in fighting against the inevitable. But in most cases other than in college sports, people would look at a damaged system and seek ways to make it better. Similarly, we should be asking whether there are ways to give the athletes the education that they deserve.

The reason that so many people are willing to give up entirely, I suspect, is a matter of elitist condescension. In far too many discussions about college sports, people will frequently state as a matter of certainty not only that college athletes are not receiving a good education, but that they cannot be educated. The athletes are physically large, and many are from poor areas where few people attend college. The athletes thus are thought to be inherently stupid. (It would be naïve, moreover, to ignore the role that attitudes about race play in people’s willingness to write off college athletes as beyond reach.)

The football players at Northwestern University would beg to differ. The entire basis of their successful claim that they deserve protection under the National Labor Relations Act was that the university was paying them (in the form of tuition, room and board) but that they were not being permitted to spend enough time on their studies to achieve their academic goals. Their stated purpose in bringing the suit was not to allow them to receive cash for playing games, but to give them the space in which to be better college students.

There are, to be sure, many athletes who would not be admitted into the colleges where they play sports, were it not for their athletic prowess. That, however, is true of a lot of non-athletes as well, including alumni children, musicians, and so on. The objective should be to give every student a reasonable path to receiving a real education from his college or university.

In other words, paying cash to players is not an answer to the objection that athletes are being cheated out of their education. It is an easy way out, for people who claim to have the best interests of the young men in mind, but who are more concerned about keeping the games on track than they are about educating a group of people for whom college could be a life-changing experience.

Forcing Nonprofits to Act Like Nonprofits

In my Verdict column two weeks ago, I argued that the reason that people are willing to believe the worst about college sports is that they misunderstand the difference between revenues and profits. That is, because universities as a group collect billions of dollars in revenues, popular opinion has it that these institutions are in the business of making money, just like for-profit companies.

As I argued in that column, however, the presence of large cash flows tells us nothing about the ultimate destination of that money. If a university runs a big-time sports program, and it has extra revenues after paying the expenses of running the program, then that money can support the nonprofit purposes of the university. If it does not have money left over, then there is not even an argument that the university is “profiting” from the hard work of the supposedly unpaid athletes.

To convince themselves that the big money in college sports is supporting bad things, many fans have started to point at university presidents and college coaches as villains. This is an understandable move, in a sense, given that these same fans look at professional sports and see the billionaires who own franchises as blowhards and bullies. Where professional football has villains like Dallas’s Jerry Jones or Washington’s Daniel Snyder, non-owners must play the role of villain in the morality play of college sports.

Even if college presidents and coaches abuse their power, however, it is difficult to see how cash payments for players would improve matters. Moreover, if we believe that the coaches are overpaid, as measured by the laws governing nonprofit organizations, then the proper policy response is to enforce those laws properly.

Similarly, some people have argued that universities should be subject to the “unrelated business income tax” (UBIT), which applies to the activities of nonprofit organizations that run for-profit businesses on the side. But even if that were somehow true, how is that even relevant to the question of whether the athletes should be paid? The discussion has spun so far out of control that the same answer, cash for players, is the default response to every question.

The Two Meanings of Competitiveness

In short, the responses to both of my suggestions regarding college sports are simply non sequiturs. Rather than saying that we should be sure that student-athletes are treated like students as well as athletes, or saying that universities must use their revenues for tax-exempt purposes, critics are calling for the system to move even further in the wrong direction.

But, one might wonder, are not universities colluding, allowing them to avoid paying what the market would bear for college-level athletic talent? Of course they are. But even though there is not a general exemption from antitrust laws for nonprofit organizations, there are sensible specific exceptions, such as the Ninth Circuit’s holding that fundraising by nonprofits is not covered by the Sherman Act.

More generally, there are plenty of reasons that we would treat nonprofits differently from profit-making businesses. In the context of the problems discussed above, the most promising answers would all require universities to act in concert, allowing them to overcome group action problems.

For example, if we wanted college football programs to agree not to have their athletes practice for more than twenty hours per week, it would be fully reasonable to allow the universities to confer and collaborate in ways that would be completely unacceptable for profit-seeking businesses. If we want to require universities to limit their spending on athletic facilities, or to provide better health and disability insurance for their student-athletes (which is surely needed, as soon as possible), then the most obvious approach is to allow universities to “collude” in order to prevent any particular college football program from gaining special advantage.

It is important that there be consequences for inaction and bad behavior. If universities wish to run big-time athletics programs, the entire university’s nonprofit status could be made contingent on the actions of the football and basketball programs. Even short of that extreme, there are certainly ways for universities to be given the opportunity to educate students and to use extra revenues for nonprofit purposes, and to craft sanctions for violations of those rules.

Ultimately, “competitiveness” in college sports is maintained by holding everyone to the same standards. That is not the same as competitiveness in an economic sense, where it is essential to allow people to undercut each other to gain a bargaining advantage. Alabama fans should not care if the Crimson Tide is prevented from taking any particular action that could gain an advantage, so long as they know that Auburn, Florida, and everyone else plays by the same rules. The “arms race” in college sports is the result of too much competition, not too little.

In the end, one is left wondering why the myriad questions surrounding college sports are increasingly answered by saying, “Give the players cash.” That supposed solution brings with it many other problems, too numerous to discuss in this column, but even setting that aside, we should finally recognize that the problems of college sports are best addressed not by setting universities loose in a new Wild West, but by enforcing the rules that already exist, and by crafting better ways to level the playing field.

If we can begin to move in the right direction, the athletes could really be students, and the “fundraising events” on Saturdays can truly support universities’ educational missions. Giving up, and treating the athletes as beyond hope, is unacceptable.