PAC-12 bosses make millions off unpaid athletes

Steve Berkowitz has the story in USA Today, here. $3.5M for Larry Scott – not bad for running what the IRS still considers to be a non-profit organization:

The conference reported just over $374 million in total revenue for a fiscal year ending June 30, 2014 — a figure that includes income from the wholly conference-owned Pac-12 Networks; the conference’s marketing and media arm, Pac-12 Enterprises; and Pac-12 Broadband Network. (Under IRS rules, a non-profit must report its revenue and expense data based on its fiscal year; but it must report compensation data based on the calendar year completed during its fiscal year).

While the Pac-12’s payouts to its schools have grown substantially during the past two years, the expenses associated with its television and marketing ventures mean that in 2013-14, Pac-12 schools continued to get smaller shares of conference revenues — about $21.2 million per school — than did schools in the Big Ten, which distributed about $27.6 million per school receiving a full share.

75% of this year’s donations to UO went to athletics. Endowment earnings are below benchmarks

8/19/2013 update: “Around the O” reports UO raised $200M this FY in donations. It’s difficult to tell from the press release, and as explained below UO Foundation CEO Paul Weinhold has refused to release breakdowns, but it appears that about 57% of the donations to the Foundation went to the jocks. If you count the $140M or so Knight spent on the football sweat shop – and it’s hard to ignore – the jocks got about 75%.

It’s well past time for UO to start taking a percentage of the athletics donations for the academic side. But there’s still no substantive response from President Gottfredson to the May 8 Senate motion on this, just a letter saying maybe he’ll appoint a working group. It’s been 9 years since the original athletics task force recommendation.

The story also reports that chronically unlucky Chief Investment Officer Jay Namyet was able to earn only 13.8% on the endowment. Disastrous. The S&P 500 returned 18.6% over the same period, the Dow was up 16.3%, and the NASDAQ 17%. His underperformance is, conservatively, $11M in just one year. For perspective, the faculty union and the administration are currently about $5M apart on salaries.

The UO Foundation’s full annual report is typically released at the end of September. This early press release appears to be an attempt to divert attention from the latest athletic excesses. Good luck with that.

6/2/2013 update: The UO Foundation has been dominated by sports boosters for far too long. See past posts on the Foundation, including their (successful) effort to get an exemption from UO’s public records law, here. Tax deductible donations without transparency is not a recipe for trust, and not a good model for an independent UO Board of Trustees. Speaking of which, I still can’t get a
commitment from UO that SB270 as currently written will require the Board to follow that law – even to the feeble extent that UO currently obeys it.

6/2/2013: No sign of it on their website, but rumor has it the UO Foundation trustees are meeting today. The new board chair is Steven Holwerda:

From an online bio:

First choice for a new career: I started out in athletic administration, and if I had to pick a second career it would be to go back to working for the University of Oregon’s athletic department. Go Ducks.

How convenient. A former Duck athletic department and NCAA employee, whose dream is to work for the Duck athletic department, will now oversee the UO Foundation, which by law is supposed to support the university’s academic mission. Oregon law requires that

The Foundation will accept only gifts that: the University has approved, including all restrictive terms and conditions, has determined to be consistent with the core educational values of the University, and are compatible with the missions of the University and of its individual programs (Oregon Administrative Rules, Chapter 580, Div. 42 and Div. 46);

And those OAR’s prohibit accepting gifts that involve

(c) Creating a commitment for the institution or the state to continue support of a program funded through gifts, grants or contracts, in the event such funds are discontinued;

I suppose a creative lawyer could slip the Jaqua Center and the Knight Arena through. But in practice the foundation is now mostly a money laundering operation for the Duck Athletic Fund. That’s a very rewarding business, for some. Erika Funk filed 2 requests for extensions with the IRS, but finally had to make some salary info public on May 15, in their IRS 990. These numbers are now almost a year old:

Here are the donations they received for UO for current operations, from 2000 up to last year. The numbers are from the Council for Aid to Education:

In his investiture speech President Gottfredson announced a new $1B capital giving campaign. The previous campaign ended in 2006, and raised $850M in donations and pledges. How much of that was for athletics, and how much for academics? The UO Foundation won’t report UO’s breakdown for capital gifts and endowments – something most foundations, including the OSU Foundation, tell the CAE as a matter of course:

I did find this snippet from last summer:

Overall, giving in fiscal 2012 totaled $51,737,551 in support of academics, mainly for current purposes and endowments. Athletics programs received $55,950,231, which included significant support for expansion of the Len Casanova Center. 

What steps will President Gottfredson take to make sure the UO Athletic department doesn’t siphon off potential academic donations for the Ducks? The Athletic department runs its own independent fundraising program, which currently competes with the UO’s development office without check, and with great success – for the jocks:

UO Professor Dennis Howard – holder of a Philip H. Knight Chair in Sports Marketing at UO and former Business School Dean – has written the definitive paper on how the Ducks have done this in the past, comparing data on donations to UO sports and to UO academics, from 1994 to 2002. His conclusion?

Both alumni and non-alumni show an increasing preference toward directing their gifts to the intercollegiate athletics department-at the expense of the donations to academic programs. Sperber’s (2000) assertion that giving to athletics undermines academic giving is strongly supported.

and

For every $100 of new revenue raised from major donors by the University of Oregon, over 80% is being directed to the athletic department. Even with the large increases in numbers of total donors since 1994, academic giving struggles to remain stable while donations to athletics experience huge growth. In three out of the past five years (1998, 2000, 2001), the total dollars donated to academics by non-alumni has fallen despite annual increases in the number of non-alumni donors. Total dollars donated to academics by alumni fell in only one year (2000), again despite an increase in the total number of donors. This suggests new donors are not making academic gifts, and current donors are shifting dollars from academic giving to donations directed to the athletic program. Additionally, as discussed above, proportional giving by alumni is predominantly directed to the athletic program. If these trends continue, total academic giving will fall for both alumni and non-alumni despite continued increases in the total numbers of both types of donors.

To add to the insanity, under the secret Frohnmayer/Kilkenny agreement President Gottfredson’s office has to pay the AD $350K, so that they can then use his Autzen presidential skybox to schmooze with their boosters and get still more donations for the Ducks. I’m not making that up.

One obvious solution is for UO to tax donations to athletics, sending say half to the academic side. Another would be allow donations to the athletic side count for determining season ticket priority. Athletic Director laughed at both these proposals when we brought them up in the IAC. He even refused to consider a ticket surcharge – even just a dollar – to be earmarked for academic scholarships.

Currently the transfers run the other way. President Gottfredson has until July 8th to respond to the Senate resolution calling for

  1. an end to two of the more egregious annual subsidies for athletics – the $2M Jaqua Center operations costs, and the $467K we pay for Knight Arena land, and 
  2. a modest payment from the AD towards need and merit scholarships for regular UO students: just 2% of the AD’s spending on sports.

Meanwhile, up in Corvallis, OSU’s foundation is in the midst of their own capital campaign: See their list of contributions here. Their athletic budget is only about half UO’s, their subsidies are out in the open, and they manage to bring in plenty of giving for academic programs.

Here’s another Duck/Beaver comparison: Research and Athletics spending:

Diane Dietz has the story and data on UO here. I got the OSU data from their very complete Research Office data page, here. Both are “Federal Flow Through” totals, which are the easiest to find directly comparable data. They include spending on outreach and instruction, but it’s mostly research money and the trends look similar no matter how you cut it. That’s the table on the left. The table on the right shows athletic department spending, from USAToday. (Official UO and OSU numbers for 2012.)

Ken Pendleton calls for strategic athletics reduction talks

8/19/2013: In an Op-Ed in the RG:

The debates surrounding the opening of the Hatfield-Dowlin Complex are not much different than the ones that have been waged since the University of Oregon Athletic Department decided to ramp up operations after the unexpected trip to the Rose Bowl in 1995. 

The sad part is that we don’t seem to be any closer to finding common ground, even though there should be a great deal of it. …

Rather than focusing on any single athletic department’s practices, the NCAA should be pressured to bring together concerned faculty and athletic personnel to explore ways to curtail such spending. These might include administrative rules that much more strictly regulate expenditures — regulations of the type that are already used, for example, in recruiting — or a provision that stipulates that a significant percentage of any donations to an athletic department must go to the general fund. … 

Ken Pendleton is a project designer and senior researcher at the Sports Conflict Institute in Eugene. He has a Ph.D. in philosophy from the University of Oregon.

I disagree for two reasons. First, the Knight Commission and COIA have fought for years for systematic reforms, to no effect. Second, only a small proportion of universities play this game to the extent UO now does. UO did fine pursuing its academic mission, with a comparatively modest athletic budget, for years.

In the past 10 year UO’s operating expenditures on sports have tripled, and capital expenditures for arenas and so on have exploded. But this was done in the dark by President Frohnmayer, who was pursuing his own agenda. UO can pull back on its own without waiting for collective action, and doing so would be to the benefit of UO academics, regardless of what other universities do.

State legislators call for investigation of former AG’s ties to athletic scandal

It’s not Oregon’s Frohnmayer and Kilkenny, it’s Pennsylvania’s Corbett and Sandusky. But the expensive fallout from Frohnmayer’s secret jock deals are on Gottfredson’s plate, according to the notes from his meeting with the heads:

Q: Has UO considered taxing the athletics program?
A: Evaluating relationship with athletic program

10/3/2012

Pres Gottfredson to watch Arkansas game?

If so he’ll do it from the “Presidential Skybox”, which costs UO’s academic side $375,000 a year. We pay the jocks because Dave Frohnmayer put his signature to this secret deal two weeks before he stepped down as UO President:



This was after Kilkenny had contributed some serious money to Frohnmayer’s Fanconi Foundation. A sad story in many ways. It took a petition to Attorney General Kroger to make UO give up the documentation on this, the complete file is here. After it came out, UO spokesperson Phil Weiler told KEZI reporter Kate Renner the $375,000 came from donations to the UO Foundation. It turns out that wasn’t true – it all comes directly from UO’s academic budget:

Weiler refused to correct his statement. I’ll go out on a limb and guess our current AD Rob Mullens is going claim those ungrateful students should be glad athletics gets their money, because the boosters in the box with the Pres are big donors to the academic side. That’s a nice story – but it’s not what the data show.  A few years back Stefan Verbano of the ODE had a great interview with former UO Business School Dean and current Warsaw Sports Marketing Prof Dennis Howard on the link between athletic contributions and the real University of Oregon:

“It’s called a donation or a contribution … when, in fact, as we have discovered in our research … it’s a transaction,” Howard said. “It has nothing to do with giving back to the University or a philanthropic motive. It is purely and simply a commercial transaction in which the individual in paying for tangible benefits: better seat location, access to the Autzen Club amenities. All of those things are driving those transactions.”

Howard’s paper, which uses data from UO donors, is brutal:

“Both alumni and non-alumni show an increasing preference toward directing their gifts to the intercollegiate athletics department-at the expense of the donations to academic programs. Sperber’s (2000) assertion that giving to athletics undermines academic giving is strongly supported.”

And here’s an update of the UO data on giving to the academic and athletic sides, showing that most of the growth in giving to UO over the past 11 years has indeed been to the athletic side – and this excludes most if not all of the Knight donations, which have all been to athletics since the WRC fiasco.

And last fall the UO Foundation’s annual report revealed a $1.4 million cut in the amount it provides for academic scholarships, and a $2 million increase in their own administrative expenses. 9/1/2012.

Duck giving reduces giving to UO academics

Presumably this includes the $5 million Robin Jaqua gift, which Rob Mullens swiped for the Jock Box back in January. Story today from Inside Oregon:

Overall, giving in fiscal 2012 totaled $51,737,551 in support of academics, mainly for current purposes and endowments. Athletics programs received $55,950,231, which included significant support for expansion of the Len Casanova Center. The university received 43,295 gifts and pledges from individuals, companies and foundations.

This is a continuation of a long trend in the increasing crowd-out of academic giving by sports, first documented at UO in 2004, by UO business school professor Dennis Howard:

Both alumni and non-alumni show an increasing preference toward directing their gifts to the intercollegiate athletics department-at the expense of the donations to academic programs. Sperber’s (2000) assertion that giving to athletics undermines academic giving is strongly supported.

This has if anything worsened over time at UO. (Link to data source here.) 8/23/2012.

UO needs a new Provost

Read Interim Provost Jim Bean’s 2010 op-ed in the Oregonian, defending the decision to spend $1.83 million a year of regular students’s tuition money on the athlete only Jacqua Center for Student Athletes – or as the NY Times calls it, the Jock Box. Then read about how Duck AD Rob Mullens was allowed to use all the earnings from a $5 million donation to UO to replace the tiny bit the athletic department was paying – nothing toward the academic side’s costs.

Then read today’s Register Guard story on the crunch in classroom space for regular UO students. I’m no economist, but the $1.83 million per year the students are paying the athletic department would have financed a $35,599,612.29 classroom building, with 30 year tax exempt bonds at 3.125%.

UO needs a new provost. 8/12/2012.

Update: In the comments, The Dog analyzes Chris Ramey’s statement in the article:

However, over the past two decades, spending on academic buildings and sports facilities — not counting housing and other student-focused buildings — has been roughly equal, according to Ramey’s analysis, although it doesn’t include the football operations center that’s under construction. 

I don’t see how Ramey’s math works here either – and even if it does, is it really OK that 50% of all new construction over the past 20 years has been for the jocks? Amazing. UO needs to tax contributions to the Ducks.

Because the lesson from Penn State is

that coaches need private hot tubs with waterproof video displays. Diane Dietz of the RG on UO’s newest football palace.

FWIW, AD Rob Mullens never completed the report to OUS on how he’d cover the operating expenses. My suggestion – cut baseball. $76,274,142 in expenses for crap like this, but ask Mullens what the Ducks can afford to give UO back for academic scholarships, and his answer is $0. From the report to the NCAA:

The full report is available on the Ducks financial info page here – created after a few public records requests and petitions to the AG.

Update: The RG is reporting that the Ducks falsely claimed that there were never any private hot tub plans – sorry, it’s right there in the blueprints. That’s transparency for you.

But Duck spokesperson Craig Pintens is now saying that there will be no private hot tub – damn NCAA lawyers.

But now Duck spokesperson Dave Williford reports that the hot-tub and adjoining steam room are still in the plans, but will be open to all the football coaches, in a special shared “wet room”. 7/17/2012.

athletics success hurts academic side

2/14/2011: Stefan Verbano of the ODE quotes former UO Business School Dean and current marketing Prof Dennis Howard – strange, he doesn’t look like a revolutionary threat to the established order – on the link between athletic contributions and the real University of Oregon:

“It’s called a donation or a contribution … when, in fact, as we have discovered in our research … it’s a transaction,” Howard said. “It has nothing to do with giving back to the University or a philanthropic motive. It is purely and simply a commercial transaction in which the individual in paying for tangible benefits: better seat location, access to the Autzen Club amenities. All of those things are driving those transactions.”

A quirk in federal tax law makes 80% of those “donations” tax-deductible – meaning the federal and state government pays about 40% of them.

President Lariviere can do 2 simple things to fix this: require that AD Rob Mullens give academic donations full credit when he doles out perks, and/or tax the donations and give the revenue to the academic side. Both have been done at other schools, with good results.

Jim Earl talks truth, Lariviere is not helpless

1/30/2011: In a NY Times story on the UConn donor who pulled his sports donations when the AD didn’t ask him who to hire as coach. Professor Earl from English Lit, on Oregon.

“The world thinks of us as a sports franchise,” he added. “They don’t care what we do on the other side of campus. The team is owned by an institution that is flat broke, and a football game isn’t helping that at all.”

If you want to get boosters out of the picture, eliminate tax breaks for contributions to intercollegiate athletics.

“Maybe then they’d think of giving the university money that might have gone to a better cause,” Earl said. “Universities are starving. They are in terrible condition, while athletics departments are booming with millionaires giving millions of dollars.”

True enough, look at our classrooms:

 Enrollment is up 6000 students since I came here, we have one new classroom building (from the Lillis donations).

President Lariviere replies to the Times:

Lariviere defended the university’s relationship with Knight, pointing to the library that Knight and his wife, Penny, have renovated, the numerous academic chairs they have endowed and an estimated $230 million they have invested in the university, most of it for sports facilities. (emphasis added).

“They want what is in the best interests of the university,” Lariviere said. “People confuse entertainment and education. I really wish the American public would pay as much attention to Shakespeare and classic Indian literature, but they do not. They want football. Football is entertainment, and they want it.” 

Phil Knight has not given a dime to the academic side since the WRC fiasco in 2000. At the time President Frohnmayer told Knight that was stirred up by a bunch of pinko professors. (Which was partly true, Frohnmayer’s fear of the students didn’t help.) Knight’s athletics only donations since then have cost taxpayers $150 million or so, from the deductions.

IRS rules requires UO to certify that the donations to the athletic side help our academic mission. Otherwise, no deductions. Lariviere needs to deal with Knight’s love of UO’s jocks and his palpable hatred of UO’s professors. Tough job. But he’s hardly as unarmed as he is pretending.

Read this UO Foundation document:

POLICY: The Foundation will accept gifts for the benefit of the University, provided that such gifts are (i) acknowledged by the University to be consistent with the mission of the University and (ii) do not obligate the University or the Foundation to violate any applicable law or regulation. 

Just give us a third of the eggs.

1/4/2011: From Charles Clotfelter – an economist – in the Washington Post:

With the exception of the 80 percent rule for gifts that enable a donor to buy tickets, all these donations are subject to the same tax subsidy we reserve for charitable and educational institutions like hospitals, food pantries, arts organizations and universities. When a taxpayer at the 35 percent tax rate makes a donation of $10,000, he ends up shouldering only $6,500 of the cost, since his tax bill is trimmed by $3,500. That savings to the taxpayer amounts to reduced tax collections by the Treasury. Considering that the top college athletic programs collected a total of more than a billion dollars in 2008, the revenue hit from making these gifts tax deductible is not inconsequential.

But why wait for the Feds to get their act together? President Lariviere could institute this policy on his own, at UO, by requiring that the athletic department pay 35% of all donations towards support of the teaching and research mission of UO. He already has this power, as explained in this UO Foundation document:

POLICY:
The Foundation will accept gifts for the benefit of the University, provided that such
gifts are (i) acknowledged by the University to be consistent with the mission of the
University and (ii) do not obligate the University or the Foundation to violate any
applicable law or regulation.

We don’t want to pluck the duck, just give us a third of the eggs.