'If they're winning, everybody's happy': As price of prestige grows, Egg Bowl rivals budgeting differently to keep up
Jul. 22—Editor's Note
Mississippi schools are trying to keep pace in the college athletics arms race. Part III of our Egg Bowl Economics series examines how Mississippi State and Ole Miss approach spending in a race to buy prestige.
Money is the name of the game in the SEC right now.
SEC football is leaving CBS for greener pastures on ESPN, Oklahoma and Texas seemingly wanted to cash in on SEC media rights money and the conference is home to some of the top-earning athletic departments in the country.
But what does that mean for teams outside of the national brand tier of the SEC?
The bottom line
The financials of college athletics can't be boiled down to simply how much each school makes versus how much it spends. Because that's not really the point.
"First of all, using the term profit is a challenge because these are non-profit entities," said Wayne State University assistant professor Scott Hirko. "They're not in it to make money, this is not the Carolina Panthers or the Atlanta Falcons or the Detroit Lions — they make money, that's their job, they're businesses.
"In college, they're not. The purpose is to raise prestige for the institution through sports by providing opportunities for young people to gain an education and represent the school on the playing field."
This is also where public data can get a little murky, which makes it difficult to draw direct comparisons between schools. The data from the Knight-Newhouse College Athletics Database is from the NCAA Financial Reporting System (FRS), and how everything is reported may change from school to school, which the database acknowledges.
"Comparisons between institutions are possible, but some institutions interpret the NCAA financial reporting rules slightly differently despite efforts by the NCAA staff working with the National Association of College and University Business Officers (NACUBO) to standardize the definitions and reporting," it says. "For some institutions, significant changes in spending trends may represent a change in reporting rather than actual spending. NCAA legislation requires that the financial reports be subject to agreed-upon procedures conducted by a 'qualified independent accountant who is not a staff member of the institution.'"
According to the database, Mississippi State reports that it generates more revenue than it spends on athletics annually and has done so in each of the last five years.
Mississippi State also returns money back to the school. It reported anywhere between approximately $2.64 million and $5.37 million in excess transfers (defined as "(p)ositive net revenues generated by athletics and transferred to the institution for non-athletics purposes") every year between 2018 and 2022.
Only nine FBS athletic departments in the Knight-Newhouse database reportedly did so in 2022.
Ole Miss, on the other hand, has reported that its expenses have exceeded its revenue in four of the last five years. While the Rebels were in the "black" in the pandemic-affected 2020-21 year, they returned to the "red" in 2021-22.
Ole Miss isn't alone, as some Power 5 schools find themselves spending more on athletics than they bring in. SEC counterparts Tennessee and South Carolina did the same thing, as did the likes of UCLA, Rutgers, Washington, Maryland and Arizona State.
"The primary purpose for athletic departments to spend the money they spend is to raise prestige. Period. That's it," Hirko said. "I would argue that it works to some extent. The front porch of our universities in this country are football programs. Maybe to some extent basketball, but primarily football."
Another trend in coaching contracts is the obfuscation of who is paying what. For example, the Daily Journal reported Mississippi State basketball coach Chris Jans was set to make $2.4 million in base compensation, with the potential to earn up to $650,000 in performance incentives, when he was first hired in March 2022. Yet, according to public records obtained by the Daily Journal for this story, Jans was paid $750,000 by the school.
"School Pay includes base salary from Jans' publicly available state contract, plus compensation from contract with the Bulldog Club, Inc., a private non-profit organization that declined to release the agreement, which also covers full buyout terms. University provided summary of current contract-year pay," USA Today noted in its database.
This kind of setup muddies the waters of how much a coach is getting paid and by whom. Mississippi State has its Bulldog Club, and Ole Miss has the Ole Miss Athletics Foundation, the self-described "fundraising arm of Ole Miss athletics."
"They don't like having their state employee salaries out there saying such and such a coach is making $9 million a year when all they have to do is report that the institution is paying $1 million," said Karen Weaver, graduate faculty and academic director at the University of Pennsylvania and expert on the intersection of college sports and administration.
"It's up to you to try to figure out where that other money is coming from and all the different pockets. This is becoming more common because they're getting hammered with, 'How do you have the highest paid state employee in the state always be the football coach?'"
But what does it mean for an athletic department to run a deficit?
"(You and I) wouldn't run a checking account in the negative too often because we would be penalized for that," Weaver said. "But because the institution is there to support it, back it up, make sure the program continues, sometimes they will take internal loans, sometimes they will get loans, facility improvements repackaged as campus-wide facility debt, so money can be moved around."
"It depends how each school is counting and accounting for the expenses," she added. "Some of that is a big deal in debt ratio, some of that is a big deal in how facility costs are managed, and every school does that differently. Every state allows schools to do it differently.
The real question: Is it all worth it?
"If they're winning, everybody's happy," Weaver said. "I hate to put it that way, but it sort of serves the institution's goals, right? Because if you have a successful football program, particularly in the SEC conference, that seems to drive so much more good feeling, goodwill, excitement. It may drive more applications, it might drive more alumni giving, certainly the games will be sold out if you're winning, all of those things are viewed as a positive. So, in their mind, it's a good investment."
In a football-hungry Mississippi, that might be all that matters.
