Great Moments in Public Spending

Our two largest Arizona public colleges are spending over $18 million in public funds just to get rid of their football coaches.

I use the words "public funds" knowing exactly what I am saying.  The schools dispute this, saying:

...no tuition dollars nor public money will fund the buyouts. Both universities have self-sustaining athletic departments

But this is total cr*p.  Money is fungible.  They can pretend that this money comes from athletic program revenues, just as certain electricity customers pay extra to say that their undifferentiated kilowatts from the grid came from a particular solar plan or windmill, but its not true in either case.  Marginal spending is paid for in the end by the marginal source of funds, and the marginal source of funds for universities is tax money.  That is $18 million that could have been spent for about anything in these public education institutions but was prioritized towards trying to upgrade the football coach.

  • mckyj57

    This is not really correct. The athletic department has donations and ticket revenues that are directly related to the football program. No football, no money.

    Your comment only makes sense if you assume those monies would continue to exist despite any football coach you chose to put on the field. That is an invalid assumption.

  • SamWah

    Seems to me that whoever wrote the contract for either of these guys should be fired.

  • mlhouse

    Sure, but what it also demonstrates is the absolute disconnect between college athletics and the college itself.

    College athletics are one of the most corrupt institutions in the United States, not far behind organized crime.

  • stan

    College athletics -- almost as corrupt as the colleges and universities they play for. No, not really. The schools are exponentially more corrupt.

  • stan

    Simply not true. If you think that the boosters footing the bill for these payments would have made the donations for a new wing of the womyn's studies building, you might want to re-examine your assumptions.

  • me

    Agreed. One of my fondest wishes is that all taxes collected were funneled into one large bucket and that institutions behind collection and budget allocation wouldn't hide behind rules claiming that these fund will only be used for … pick your cause.

  • kidmugsy

    But far, far behind the FBI?

  • mckyj57

    That is another issue entirely, and one that is far bigger than the University of Arizona.

  • Sam P

    If you read the article, you find out that the situation is much worse and the quote is highly misleading. The athletic departments of both of these universities are partially funded by mandatory student athletic fee.

  • slocum

    Except...are these programs that operate at a profit (or at least break-even)? Only a handful actually do, and I don't see either Arizona university in any of the top revenue generating programs.

  • johnson85

    Their football program almost certainly operates at a profit, just by virtue of being in the PAC12 and getting the associated TV revenue and bowl payouts. Men's basketball is the same way.

    Generally, all the other sports are money sucks, although some schools make money on women's basketball and a few break even on baseball and I'm guessing some make money on otherwise money sucking sports by being the premier school for those sports.

  • marco73

    Anyone who has kids in college in the past few years has seen these fees sprout like weeds.
    As an example, our local USF in Tampa has raised it's athletic fee to $15 per credit hour (undergrad), to help collect funds for its proposed on-campus football stadium. So a standard 15 hour load costs $225 per semester.
    Currently, the USF team plays before 20-25,000 person crowds at the NFL stadium Raymond James; a 65,000+ facility, located a 10 minute drive from campus. Well according to the USF poobahs, playing in a state of the art NFL stadium just isn't good enough; they want to spend $500 million (probably end up twice that) building their own stadium.
    Yup, Raymond James is good enough for the 2021 Super Bowl, but not good enough for a middling college team.

  • marque2

    In my day the athletic fees were to pay for the student gym and intercollegiate competition (sports anyone could participate in eg "Ski club", "swim club"). If they use that money for the new football.stadium bad on them, but I definitely took advantage of the student gym, track, and pool at univeritiea where I attended. Also this isn't to be confused with the "athletic pass" which allowed students to purchase a ticket that would allow general admission to any of the athletic department sports events. Maybe you are paying for that. That shouldn't be maditory though.

  • mckyj57

    Every PAC-12 school makes a profit.

    In fact, football and basketball, at a Power-5 school and at most every FBS school too, provides the funding for all the other sports that would lose money on their own. Including the vast majority of womens sports.

  • The_Big_W

    One of the reasons some College Football programs struggle to operate at a profit is because of stupid payouts like these.

  • The_Big_W

    What's ironic with per credit fees like this, is that as a student takes more credits, their opportunity to attend the athletic events "funded" by it actually decrease.

  • b w

    There's adequate conflicting comments here to safely assert that not enough hard financial numbers are presented here to prove or disprove the school's assertion that neither tuition nor taxes funded the buyouts. Warren, your hasty conclusion without doing the math is the sort of thing for which you constantly berate politicians. Not your best work.

  • mckyj57

    Typically intramural sports and fitness centers are the things funded with that fee. Again, in case you were not paying attention, football and basketball are money-making sports at the PAC-12 level. They fund other things, not get funded by them.

  • Eric Hammer

    Maybe. One would need to see the department budget and stores of funds to know. The only real way to say that the money was not coming from a general source would be if the football team did some combination of cutting spending by 18 million off revenue and lowering their cash reserves. It is possible they have that kind of money sitting around, or have that much slack in their budget, but even then, unless the football program routinely hoards that kind of cash or lowers spending on football while keeping cash flow back to the school constant, the university is losing money on the deal.

  • Todd Ramsey

    A successful football team generates more revenue than an unsuccessful team. Therefore the marginal source of funds is football success.
    Probably other university departments receive (some) more revenue from increased football success. Furthermore, universities with successful athletic programs attract more applicants, resulting in a higher quality student body.

  • b w

    "unless the football program routinely hoards that kind of cash or lowers spending on football while keeping cash flow back to the school constant, the university is losing money on the deal."

    Only if the net cash flow back to the school goes negative, Keep in mind the change of coaches is intended to preserve or enhance revenue.

    Like I said, there's insufficient information here to draw any conclusion either way. Don't act like a climate alarmist.

  • Eric Hammer

    Yes, it might preserve cash flow, but it is an 18 million investment to avoid the loss. That 18 million could have gone to many different things instead of payments coaches to quit. I think the burden of proof lies in demonstrating that the funds into and out of the program are nonfungible.

    A bigger question might be why are they paying 18 million to get the guys to quit. Why were they not just fired? Should we trust a public organization that makes those kind of contracts?

  • b w

    I think the burden of proof HERE lies with the OP making the accusations, given his past criticism of conclusions by others based on inadequate information.

    The bigger question is a separate issue - I do wonder about their negotiating skills. On the other hand, I don't know much about the market for college football coaches, the prior track record of the coach involved both before and during the contract in question, or the risk these coaches face of being arbitrarily kicked out. Those are all factors that could make a buyout clause understandable. Why did he demand it and why did they grant it - again, inadequate information in this context. As for public organizations including buyout clauses in general, it's very common practice for city managers and school superintendents, and understandably so, because both serve at the pleasure of elected board/councils known for being political lightning rods, and dismissals for reasons unrelated to performance are quite common.

  • Eric Hammer

    Recall that Coyote did not make the prior claim of the money not coming from tuition or public funds, the university did. Prima facie, that is a spurious claim, as money is fungible, and that 18 million has to come from somewhere. In much the same way that tax incidence works, it is very unlikely that the cost can or will be contained at one point of the supply chain with no effect on the others. I am tempted to say impossible, even.
    By way of example, say the football programs do run a continuous profit, and pay feed money into educational and sports programs, eg. chemistry labs and women's soccer. Now that they are out 18 million, they have fewer dollars to spread to those programs and run a football program. It is possible they might cut spending on football by 18 million; I mean, there has to be some fat to trim, right? If they do, and continue to push money to the rest of the university at the expected rate, fine, it all comes from football. If the program cannot cut 18 million, then some of that money is going to come from lesser profits going back to the university as a whole. Will the university cut women's soccer and close a few chem labs? Maybe, but more likely they will pull money from other sources to keep them going. Those sources might directly be tuition/public funds, or might be loans or endowments or whatever. The trouble is, those loans and endowments are going to be funded at least partially by tuition and public funds.

    Long story short, the university has X sources of income, one of which is football. If the football program loses a lot of money, either the football program alone loses that money (which assumes that it is basically a separate organization entirely from the university) or the university as a whole loses the money, spread out among current or planned expenses. In that case, some of the money necessarily comes from the other X-1 sources of income because that is how opportunity costs and constrained income works.

    So the university is making an outlandish claim that is contrary to how things work overall. They might be correct, but seeing as how it would be highly unusual if it were true, they have a highly unusual standard of proof if they want us to believe that.

    (Another possibility is that donors and boosters of the football team donate the 18 million, but would not have donated otherwise. I leave that out because it does not seem to be the case here, and seems highly unlikely in any case.)

  • b w

    So, essentially, if you're a farmer who has a goose that lays 100 golden eggs a year, and last year, 18 of those golden eggs went to pay the vet because the goose had an infection that, untreated, would impair its egg laying ability, you should complain about how much the goose is costing you. Every day, companies decide to re-invest profits in improving their performance that would otherwise be distributed to shareholders. That doesn't mean they're fleecing their investors.

    Yes, the university made the claim that no tuition or tax funds went toward the buyout, and Coyote would have been correct to demand an accounting proving this. Instead, he made a counterclaim without basis. Coyote made the accusation of bull crap, without doing the math. That's what roughly a third of the posts here criticize politicians and activist groups for doing. Not his best work.

    Notice when he accuses public transit officials of misstating the impact of rail vs. bus, he provides extensive quantitative evidence to back it up. That's what makes this blog such a great read. This post didn't come anywhere close to meeting that standard.

  • Steve-O

    I suspect there's quite a bit of marketing/advertising value accrued to the universities from their televised sports, too.

  • Eric Hammer

    I am not sure the analogy here is apt. Do the two coaches in question provide 100 million a year, or just the programs? If it is the programs that are the goose, one has to ask how much marginal benefit those coaches are providing relative the marginal benefit of two new coaches. As well, how much time it would take to make back that 18 million, especially if the new coaches have a higher salary than the previous.

    The question though has very little to do with net cash flow. The question at hand is whether or not tuition or public money is going towards the payouts, not whether it is a good idea to have the payouts. It totally might be a good investment for the school, but saying the money will not come from tuition or public funds is almost certainly untrue. If the investment is a good idea, it is not clear why they don't just defend it on those grounds instead of making up stories about where the money will or will not come from.

  • b w

    To your first question - the program - the dismissed coach is the infection.

    I agree that the investment should be defended on merit, but if, for instance, over the entire
    history of the program, the school has received more profit from the program than the amount of the buyouts. then the statement that no tuition or tax money was used is defensible. At the very least, calling it bull crap demands some substantiation.

    Is it possible that without the buyouts, the overall historical profit might be higher? That's a
    judgment call, and if you're asserting that, the value of your assertion comes down to how many Division 1 football programs have YOU run profitably? More to the point, MORE profitably than this one is run. Presumably, if the program is profitable, it's because those running it know something about what they are doing. At the very least, such an assertion would require some major statistical analysis of the finances of programs that allowed a bad coach to serve out his contract, versus those who fired him.

    The original post doesn't even get into the question of the merits of the decision. What is the value of a good coach? What is the calculus of a coach's win-loss record versus other factors? How did they determine the tipping points at which Woody Hayes' and Bobby Knight's marginal utility went negative? Volumes could be written on these questions, and in that context, a naked assertion of bull-crap is not up to the level of analysis customary on this blog.

    Mind you, if it were up to me, the program wouldn't exist regardless of the finances, simply
    because it's a distraction from the claimed purpose ot the institution, but as long as it maintans its status as a cash cow, I can't really fault it based on the cost of its management strategy.

    Your complaints also seem petty in the context of the golden parachute that the university president up in Michigan received for letting a child rapist operate for years right under her nose.