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Review: ‘Billion-Dollar Ball’ Explores the Economics of College Football’s Top Programs
At Texas, Michigan, Auburn, Alabama, Georgia, Florida, Penn State, Notre Dame, Louisiana State University and Arkansas, revenues have increased to $762 million from $229 million from 1999 to 2012. That is a whopping 233 percent increase. Mr. Gaul observes that during this period “profit margins had ballooned to hedge-fund levels,” generated by television broadcast rights, luxury suites, seat donations and corporate advertising. Mr. Gaul reports that the big universities “have netted 90 percent of all the new money that has flowed into college football the last decade or two.”
That has not stopped “have-nots” like Florida Atlantic University and others from engaging in what Mr. Gaul characterizes as magical thinking: “Why not us?” When college presidents see the wealth that the winning programs create, Mr. Gaul says, they develop “football envy.” He asks, “How else do you explain why so many otherwise smart men and women with ‘Ph.D.’ appended to the end of their names would risk economic ruin in hopes of winning the football jackpot?”
And get this: Virtually all that big money is tax free. Because Congress regards football as part and parcel of the educational apparatus, it lets colleges collect untaxed surcharges on so-called seat donations, which bring in an estimated $500 million collectively from football alone each year for the powerhouse programs. Legislators from football obsessed states have also propped up this revenue ploy by permitting fans to deduct 80 percent of the cost of their seat donations from their taxes as a charitable contribution.
How can college football be looked upon as a charity if you, the fan, receive a tangible asset in return for your donation? Good question. Historically, the tax laws have prohibited this sort of quid pro quo arrangement. Mr. Gaul observes: “Calling college football a charity effectively turns the very idea of charity upside down, confusing its power and purpose.” But Mr. Gaul concedes there is no political advantage to challenging the tax breaks college football receives, which include television broadcast rights, bowl game payments and corporate sponsorships.