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Discussion: The Economics of College Sports

posted on December 21, 2007 at 5:28 PM

Here with us to explore the topic of the economics of college sports more are two members of the Iowa sports scene. Michael Gartner is owner of the Iowa Cubs baseball team, a Triple A professional ball club. Mr. Gartner is also president of the Iowa Board of Regents until the end of the year. Next to him is Tom Witosky, a reporter for "The Des Moines Register" who covers politics and athletics. And as we like to say, both are contact sports.

Yeager: So first reaction, gentlemen, in seeing the piece, college sports spending, is this good for Iowa? I'll start with you, Mr. Gartner. Is all of the spending that we're seeing, is this good for Iowa?

Gartner: Well, sure -- sure it's good for Iowa. It's, among other things, it's great entertainment for thousands and thousands of people throughout the year. Second of all, it's -- you can't have a major university that doesn't have a strong athletic program. And both Iowa in the big 10 and Iowa State in the big 12 have very strong athletic programs. So sure it's good. It would be awful without them.

Yeager: It would be awful lonely in some parts. That's something a lot of people rally on. Tom, I'll ask you the same question.

Witosky: Is it good? I don't know if that's really the question. I mean it is what it is.

Gartner: That is the question. He asks the questions.

Witosky: I understand that. It is an industry that has just grown by leaps and bounds over the last twenty years that I've been covering it. When I first started, Johnny Orr was making -- took a job actually in 1980 at Iowa State for the princely sum of $65,000 a year, which was double what he had been making at the University Of Michigan and had taken the team to the final four twice. So obviously it will has changed. When Hayden Fry was coaching, he was making anywhere from $100- to $200,000. I mean obviously when Kirk Ferentz makes $2.5 million when a first-year coach who has never held a head coaching job and Gene Chizik out at a million dollars, when Division II football coaches average a million dollars, you can't ask questions as to is this business or is this education. And oftentimes if you want to say one, the other side will say it's the other.

Yeager: Business versus education, coaches' salaries. Let's start there first. Mr. Gartner, as you sign off as the regents, they sign off on things that go through the universities. Coaching salaries, when you see Kirk Ferentz being the highest paid State of Iowa employee and a very high employee, does the board have to talk about matters like that or is it just, as Jamie Pollard says, a way of the times?

Gartner: Well, it's a way of the times. There's no question. Compared to television, Kirk Ferentz is the anchorman. He brings in -- he brings in all the people. He puts the people in the seats. And if you don't put the people in the seats, you don't make the bond payments on Kinnick Stadium. So it's a supply and demand. He's worth whatever the market will bear. And there's no problem at all in paying somebody millions of dollars when they have that important visible job. And the entire economics of the University of Iowa athletic program sort of go with the football team, and the football team goes as the coach goes. Coaches cost a lot of money these days. Iowa wants a great coach. Ferentz is a great coach. They pay him a lot of money. I have no problem with that, and the people in Iowa don't have a problem with that. When that was announced, I'll bet we didn't get two phone calls or less at the board of regents.

Yeager: So it's not been something -- the phone is not ringing off the hook --

Gartner: No, no, no.

Yeager: Because they want to see their coach -- they want to see their team win.

Gartner: That's right. And it is not tax dollars. That's not tax dollars. And it's not tuition dollars.

Yeager: So the University says -- the University of Iowa says they are self-sufficient in their athletic department budget this year. First time they've been able to do this that.

Gartner: Well, you can define self-sufficient in a lot of ways. But by college athletic accounting standards, they break even.

Yeager: Tom, you have a different reaction to that?

Witosky: Well, sure. I mean, look, I mean the thing about it is that everybody is going to claim at one level or another that it's self-sufficient. Well, first of all --

Gartner: No, no, Iowa State isn't and UNI certainly --

Witosky: Well, Mike, I'm going to ask you one question. You sell suites at Sec Taylor. Who's got the better offer, the better deal, Iowa or you?

Gartner: First of all, it's Principal Park.

Witosky: Excuse me, Principal Park.

Gartner: You guys at the Tribune ought to remember that.

Witosky: That's probably true but the question is who offers the better deal to a suite holder, the University of Iowa or the Iowa Cubs in terms of the kind of tax deductions that suite holders at the University of Iowa get as opposed to what they can get at your place?

Gartner: Well, I don't understand what you're saying.

Witosky: Well, what I'm saying is this, is that a suite holder at the University of Iowa gets to deduct 80 percent of his expenditure on that suite as a tax deduction. [speaking at once]

Gartner: You're raising the Senator Grassley issue.

Witosky: Sure I am.

Yeager: Which we actually have -- before you gentlemen get into it, let's actually hear from Senator Grassley. He made this exact comment to us just a little bit of time ago where he talks about this tax deductible rule, and this is something that we'll hear from him right now.

Grassley: A tax deduction -- but a tax deduction for a charitable educational purpose is very worthwhile. But how -- but I want to be shown how the educational purpose is fulfilled by an 80-percent corporate tax deduction to some giant Sky Box, you know, in a football arena.

Yeager: Thoughts and reactions?

Gartner: Yeah, well, I mean that's a whole different issue. That's like I buy season tickets to Drake Basketball. I like Drake Basketball a lot, and to get good tickets, you have to give money to the Bulldog Club. I can take that off as a charitable deduction. I can also argue that that really ought to be the price of the ticket and I shouldn't be able to take that off as a charitable deduction, but the law is the law. And that's up to Senator Grassley to determine the law or not determine it. All I'm saying is that the operating budgets of the universities, 98 percent of it is two sources. One is tuition and the other is legislative appropriation, and it's about 50/50. It's almost exactly 50/50. At the University of Iowa, there is no tuition money and there is no -- this year there's no tuition money and there's no legislative appropriation money in their budget. At Iowa State, it's probably close to two million there is, and at UNI, it's closer to 4.5-, 5-, 5.5 million.

Witosky: Who is having a better year this year, by the way?

Gartner: I mean that's not the point. The point is that in the big ten, there's so many sources of revenue, whether it's tickets, whether it's television, or whether it's selling -- or charging for parking, that they can support 24, 25 sports, however many it is, off football and basketball without going into tuition money, and that just happens to be the economics of the Big Ten.

Yeager: And the Big 12 is a little different --

Gartner: It's different for Iowa State.

Yeager: It's different for Iowa State in the way the revenue is shared. They don't have the Big 12 network, at least yet.

Gartner: No, and I don't think they will.

Yeager: And we may see the Big Ten at work set a precedent there but the other conferences won't. That's another issue.

Witosky: Well, look, I mean I think the point is that - is that, as I say, you know, every time somebody wants to call it education, they call it business. Every time I call it business, they want to call it education. There are huge issues here. I mean the fact of the matter is that there's 100 -- this year -- excuse me 2006/2007, $117 million was spent by the three universities on an extracurricular activity. And how many individuals were involved? As athletes, 1,700. Okay? So you have to ask yourself is this an extracurricular activity or is this, as most people will tell you, a marketing tool by the universities to endear themselves to the population. It's quite legitimate. I'm not trying to argue that it isn't, but let's call it what it is. It is allowing -- it is having athletes, students who aren't paid --

Gartner: They do get their scholarships -

Witosky: It can be a huge cost, but is it fair?

Gartner: And those scholarships are underwritten by the athletic department.

Witosky: I understand that but the question is --

Gartner: Not by the legislature or anything. You can say anything you want, but if you're going to talk about the money about it, you have to understand exactly what the money is. And at the University of Iowa, it’s basically a wash. At Iowa State, it's subsidized to a degree, and at UNI it's greatly subsidized. So really if you want to attack sports at one of the three state universities on an economic basis, you've got a better argument against UNI than you do against Iowa and --

Witosky: I'm not so sure that that's true. I mean, if the argument is --

Gartner: You know, when you worked for me, you never argued with me. I don't know why you're doing it here.

Witosky: If the argument -- it makes good television; that what I'm told. If the argument is that no tax money should be used in this --

Gartner: I'm not making that argument. I'm just saying that --

Witosky: Well, no, but that seems to be goal here. I mean that's why --

Gartner: No, I don't think that's the goal at all.

Witosky: That's why the Big Ten network was developed, is the way that I understand it. They took a whole bunch of basketball -- programs - over the year basketball games, so that now they can charge people to watch them on television --

Gartner: But that's not working.

Witosky: Well, it may not but it's another piece of the business. You know that in sports, the way that you make more money is to limit access unless you want to pay for it. That's what construction of stadiums is all about, and it's just making people pay more money. Okay, that's fine.

Gartner: I think they ought to sell print rights.

Witosky: Print rights.

Yeager: Print rights would be a little different. Print rights would be a whole different show.

Witosky: There once was a time you didn't believe in that.

Gartner: So that the newspapers would have to pay the way broadcast does too.

Yeager: It would be a different thing and we'd have more print reporters if we'd go on the Internet, but that's a very good point. Now, you talk at Northern Iowa -- we have a minute left and we could go on for a long time. Northern Iowa football, in the playoffs this year, which is another subject, but they did build a brand-new basketball arena, the McLeod Center, a new multimillion dollar facility for basketball.

Witosky: With private money.

Yeager: Okay, with private money, which is -- men's basketball is the biggest revenue generator in Northern Iowa in the athletic department. They had to do to that to compete. They can't compete in football. What are your thoughts?

Witosky: Well, they’re competitive on the field. And financially it gets -

Gartner: Look, a University -- go ahead.

Witosky: No, I was going to say that at UNI; first of all, the football coach makes $175,000. They went undefeated.

Yeager: And he got a pay raise at the end.

Witosky: And he got a $25,000 pay raise at the end, which is a good thing for the coach, but they don't have enough people that go to the games consistently to break even. Is that a good thing or a bad thing?

Yeager: Fifteen seconds.

Gartner: Your fifteen seconds is this, a college has to -- a major University has to have everything. It has to have a great drama department. It has to have a good band. It has to have a wonderful English department. It has to have a good law school. And athletics are an integral part of that, whether it's intramural athletics, whether it's intercollegiate athletics, whether it's just guys going out and having a good time and women going out and having a good time. That's part of the overall scene.

Yeager: It's been a very good experience to hear all of this as well. Tom Witosky from "The Des Moines Register," Michael Gartner from the Board Of Regents, gentlemen, thank you. Very good discussion. I appreciate it.

 

Tags: colleges Iowa