Athletics, Research, and Filthy Lucre: Part One of a Love Story

I have been drafted to be BON's resident Longhorn economics writer.  You can probably gauge your interest in anything I will be writing based on the prior sentence.  Expect enough data to evidence a point, but I'll try to keep it engaging.  That means no game theory or balance sheets.

This is going to be a multi-part series.  I'll take on some general economic memes on the blogosphere, follow up with an overview of the Longhorn economy and its relationship with the athletic program, and then follow with some informed speculation as to what the future holds for UT in its new conference.  Eventually, I plan to take on the thorny topic of student-athlete pay-to-play in the super-conference era.  Feel free to send along suggestions.  If A&M goes its own way, I'll give it a little attention as a parting gift.  Because all A&M ever wanted was to be loved.

It is worth reiterating this disclaimer, there is no room for politics on BON.  Economics and politics are often conflated, but lets keep this fun for those who enjoy exploring economic problems and solutions.  

Texas has Enough Money:

"Enough Money" is an interesting concept in the world of college athletics.  I suspect it has its origins in the noble times when college football was not televised regularly and states still financed a great percentage of the university budget.  Oh, how far we've come.  I'll advance the notion that there are two separate definitions of "enough money".

 The first definition is this, "the athletic program doesn't need much help from the general university budget to make ends meet."  Many universities can hope for no better result than this, particularly universities that are poor performers in revenue sports.  More money would always be good, but as long as a school is not using tuition money to bail out its athletic program it can rest easy.  Universities in this situation (Our Cal friends should take note) may anger students and alumni when those stakeholders find out the athletic program dipped into the red and general university funds were necessary to bail out the athletic program.  

The second definition is the one that applies to the contenders and many pretenders in the BCS arena.  These are schools where the athletic program has enough cash left over at the end of the year to donate back to the school. Texas is a proud member of this group.  But still, the athletic contribution directly to the university only ranges from 1-2% of total athletic revenue (Approximately 6 million over a 5 year period - slide 56), and about 5-10% of gross "profits" (yes it's a "non-profit", but gross revenue less gross expenses is the same thing no matter what kind of business you run).  FN1.  More money into the athletic program will logically result in a high total contribution to the academic side of the university.

As of February, Texas is expected to take 5% out of its budget annually for an undetermined number of years due to the Texas budget deficit.  This includes a 5 million cut to the athletic department.  If UT can regain that lost money from something as (relatively) painless as a conference realignment, it seems like an easy decision.

If Texas Just Joins the Big 10, We'll Rebuild Our House from Benjamins.

I have probably done some things to move this bandwagon forward, and don't misunderstand, I'm not hopping off, but the CIC and Big 10 is not some Fort Knox of academic dollars that will lead us to Berkeley-Michigan status within a weekend.  The CIC really boils down to a few major benefits (summarized nicely here). Among those benefits are agenda setting, collaboration, traveling scholar programs, graduate scholarships and credit recognition across universities.

If you're a Texan, your primary concern is likely agenda setting.  Texans don't like coming in second place at anything  really, and the legislature has created a second rate scheme.  Watching the legislature decide the best way to create a new "tier one" research university is a good source of frustration.  California, the only superior economy in the country (and now is not the time to bring up its budget crisis, because I will snap given Texas own impending situation) has a "master plan".  What does that mean?  They have a plan, and that plan has produced five of the top research universities in the world (Berkeley, UCLA, San Diego, Davis, San Fran), along with Stanford and USC.  It has also created a clearly defined set of undergraduate institutions in the Cal State system, providing quality education at a relatively low cost.  Texas is...riding by the seat of its pants.

The CIC is not just a plan, the CIC borders on a cabal of higher education luminaries schemeing for the enhancement of higher education across the rust belt.  But they DO NOT hand out money.  The cooperative is extraordinarly capable of getting funds out of the federal government and into the hands of members; it is excellent at agenda setting for grant bids, and does a very good job of perception framing conference schools against other conference schools for research dollars.  (To put this in football terms, you know how Mack campaigned strongly for an indoor practice field so no one else would have something UT didn't have, imagine 12 school presidents doing that across their respective states with science facilities/money).  That said, an increase in UT's profile and resources rides on the assumption that the legislature, regents, faculty etc. will take on the Texas attitude of not being content with second best.  If that idea falls flat, then some portion of these prospective gains will not materialize.  Those of us who believe that a conference change would increase UT's academic resources are hedging on Texas politicians being egotistical and subject to comparisons of the Texas flagships to other state flagship institutions on and off the field.  We have examples like Penn State in our favor, but we could be wrong. 

The secondary concern to everyone else, but a primary concern to Academics, is collaboration.  The trend toward "big science" has started congress and executive agencies down a path of significant grant allotments for a specific purpose.  Quite literally, the allotments are too much money for any one institutional department to spend efficiently.  The solution, at least in the CIC's eyes and one that has been successful thus far, is to send multiple universities after a piece of the same massive grant (or in some cases, many departments of a single university after one grant).  As a (hypothetical and exceedingly oversimplified) example, UT bidding on a nano-tech grant may not be able to not absorb the entire amount, so the government agency would be left with some principal left over to distribute to another university with a winning proposal.  The CIC is trending Big 10 institutions toward tying themselves together, so the same grant administrator would examine one proposal from UT, knowing he would have to find three more qualifying proposals to fully distribute the principal, or read one joint proposal cosigned by the applicable depts. at Michigan, U of Chicago and Penn State.  It should be noted that the CIC does collaborate between members and non-members on a case by case basis as necessary to help a member receive grant money.  

The work the CIC does in this area is significant, sometimes very much so, but trying to hang an exact dollar value on it is tenuous at best.  That said, the SEC and ACC have also created similar organizations, so the benefit is perceived by a number of higher education administrators.  For those keeping track, academic cooperation consortia always seem to follow athletic conference lines, which leads us to the next meme.

There is No Intersection Between Conference Affiliation and Academics In the Modern University: FN2

Half of the Big Ten presidents were former provosts within the Big Ten, and many of them have served on [the CIC] board,” Allen said. “From that perspective, I’m confident the presidents have a deep and abiding respect for what’s been precious about this group of universities. I attribute our success to our longevity – we’re the oldest athletic conference – and that these are peer institutions. At the research and graduate level, we look a lot alike and can come to the table ready, willing and able to solve problems and issues than maybe those in a more disparate group can. I’m personally happy to watch the process unfold and see what happens. I trust our presidents will bring us into the conversation as the pacing moves forward.”. - Barbara McFadden Allen, director of the Committee on Institutional Cooperation, speaking about the realignment process.

I thank the Aggies for making me address this meme.  Academics, higher education observers, and higher education administrators disagree with it.  Whether there should, or should not, be a connection is a completely separate issue.  The reality is there, and it's not a terribly hard concept to grasp. Some legitimate points on this front have come from Aggie corners.  Football offers advertising and brand consciousness, and likely at a rate better than pure advertising would convey.  Athletics also offer Alumni a connection to the university that is almost impossible to duplicate, and though the exact relationship of athletic success and alumni donations to academic activities is difficult to pinpoint it is certainly there.  

Above I covered the intersection between athletics competition and academic collaboration, but athletics also offer something else.  Athletics create a quick list of schools perceived to be "peer" institutions by observers, including political observers.  If you're reading this, you probably can name the schools in the Big 12 without difficulty, and you probably know UT's approximate place on the all time football wins column.  Do you know the most similar research institutions from a monetary standpoint?

UT's immediate peers in the research department are Georgia Tech, Purdue, Illinois and Chapel Hill (though it trails all but Purdue).  Raise your hand if you got more than one of those.  I'll be very surprised if more than one member of a state higher education finance committee can guess more than two of those names.  Odds they can name all teams in the Big 12?  Near 100%.  So Bill Powers tells the same committee that UT is less well funded with state money than Illinois, what will that mean to them without a conference affiliation?  To most, it would seem like a random school, but framing it through the lens of competitive rivalry and cooperative peer cannot help but give it more meaning to those controlling the purse strings. 

For those still dubious as to whether football really can influence this kind of outcome, I'll thank our own Bill Powers for providing another recent example of the intersection between sports and academics.  The Texas Top 10% rule, has been a thorn in the side of the UT-Austin since inception (whatever else being in the top 10% proves, it proves students are smart enough to go to UT instead of A&M).  Many, many administrators had tried and failed to get the rule changed.  Enter Bill Powers.  Enter Football.  Enter Perception Framing.  Enter Success. 

The SEC Doesn't Care About Education:

It is very difficult for me to maintain the BON standards of decorum when explaining why I think this argument is insipid.  There are many kinds of educational institutions.  Some are predominantly undergraduate institutions (Baylor is an example) some are predominantly graduate institutions (U of Chicago is a classic example), some are state chartered for the purpose of educating in-state students at the undergraduate level (Cal State system, Some satellites in the UT and A&M orbit), and some, the flagship state research institutions, like A&M and Texas are concerned with more than one mission.

The SEC's lack of higher level graduate funding does not mean that the SEC "doesn't care about education".   It means that the mission of those schools is fundamentally different from the mission of the University of Texas.  They have different metrics of success and they are metrics which only form a piece of UT's criteria for self-evaluation.  If UT merely trains undergraduates for future careers, it has failed, because its mission is to train undergraduates, graduate students, professional students AND create new scientific discoveries that will benefit the state.  If Alabama at Tuscaloosa only trains undergraduates and professional students, it has largely accomplished its predetermined goal and the only goals for which it was resourced.  This nuance gets lost in many discussions, and the the real importance of academics is lost as well.  So let's be an aware enough community to not deride the universities of the Southeastern Conference.  Their missions are simply different than UT's mission, and that's all that need be said.

Also, to their credit, the SEC schools have started their own version of the Big 10's CIC, though the current focus appears to be at the undergraduate level (it's clearly sponsored by ESPN, as opposed to, say, the National Science Foundation).  This is not surprising, given the mission of many SEC schools is at the undergraduate level.

Texas is known in many circles for being a better graduate school than undergraduate.  Forging networks and cooperatives that further the graduate programs as well as the undergraduate programs should be a primary goal, and one that favors the Big 10 or a formation of a new body with the Pac 10 stalwarts and some of our old friends (or at least Colorado).  In some respects, again we see an intersection between sports and academics, because today's undergrad at the game is tomorrow's research assistant in a lab. Even though these undergraduates will be researching their graduate options obsessively, a little more brand awareness doesn't hurt.

FN1

However, it also keeps afloat intramural programs, certain administrative fees, and draws money indirectly to the university through auxiliary services such as parking garages.  I'm not criticizing the program, just stating the financial realities.

FN2

A brief discussion on correlation and causation.

Correlation is typically easy to find and prove.  The problem is, it doesn't tell you anything, aside from the coincidence of two events.  Conversely, theories of causality in political economy manage to combine the fun of the scientific method and regression analysis with....more writing.  What I have pointed to previously is correlation (the Big 10 has the most research money of public universities spread across an athletic conference and after joining the Big 10 Penn State's research budget grew immensely) and a plausible theory partially accounting for causation.  The sample size is frankly too small with too many variables for any legitimate political economist to declare causation, regardless of their theory.