The Dollars and Cents of Iowa Football: Part III

Over the last couple weeks, we’ve taken a deeper dive (though we can always go deeper) into the finances of Iowa athletics and football in particular. We touched on the value of Coach Doyle and trouble with saying any Iowa coach is overpaid. Now Kirk Ferentz has a new contract and I admit I am questioning my own logic on the term “overpaid.” I’ll let you decide.

But those are all things in the real world. They have happened and we can analyze them until we are blue in the face. I’d like to ask you now to follow me out of the real world and into a world of make believe. A world of unicorns and rainbows and college players getting paid for their services.

Everyone and their mother (hi Mom!) seems to have an opinion on whether or not we should be paying college athletes in addition to the tuition, room, board, etc. they already receive. Here’s mine.

Go ahead, pay them. But make it equal among all colleges within a division (FBS for example). If you want to say that college athletes spend time on their sport that would otherwise be spent on getting a side job, I can buy into that. So go ahead, throw em a bone and give them a stipend. But regulate it to the point where the stipend is the same across all schools within a specified level of competition.

Use revenues generated by the athletic department (read: football) to cover a stipend for all student athletes, male and female, across all sports. According to the NCAA, there are 176,000 student athletes spread across 346 division 1 schools for an average of 509 athletes per school. If you pay each athlete as if they were working 20 hours a week at $10 an hour (or $800 a month) you are talking about $4.9 million in stipends paid out per year per school. For power 5 conference members like Iowa, that’s not a problem. A few cuts here and there (looking at you Kirk) and $5 million is a drop in the bucket.

The problem is for group of 5 schools and beyond. While the NCAA lists 346 division 1 schools, only 229 even generate $4.9 million in revenue a year. So you’d have to differentiate between the power 5 schools and everyone else with athletes at the lower level getting a smaller stipend. I think most people are fine with that.

The stipend is there for a little “walking around money” that athletes don’t have the time to make with a part time job like most college kids can. They’re getting free meals, a free place to stay and, to an extent, free clothes. The stipend is just a little extra off the top.

When most people talk about paying players, they refer to some sort of revenue sharing between the athletic department and the athletes that help generate that revenue. Typically, the thought would be to just hand over a cut of the ticket sales, TV revenues, etc. as part of a “salary” of sorts. To me, if you are going that route, just call the athletes what they would be: employees. Don’t make them go to class. Don’t make them sit in tutoring sessions. Just call them employees and treat them as minor league athletes for whatever sport they’re in.

I’m not a fan. To me, if you’re going down that road, I’d like to see the revenue sharing be set aside. How many of these kids would know how to responsibly save and spend the dollars they would potentially receive in such a set up? How many NFL players know after another decade of experience?

To me, the best solution is to take a portion of the revenues from each sport and establish an endowed fund (again, for each sport so football is separate from rowing, wrestling, etc.). Each player would then be entitled to a payout after graduation. Let each school decide how much they want to pull from the revenues to pay out to student-athletes and use that as a recruiting pitch.

Photo by David Purdy/Getty Images

Of course, you will have some people not terribly happy about where their tax dollars are going in some instances. I assume those issues would work themselves out after the PR battle is fought by schools (like, for example, UNI and ISU) who are forced to dip into the general fund to pay for athletics on occasion. You’d think in such a free market setup, the schools with the best financials would be able to offer the greatest payment set aside for athletes, much like the best companies can offer the most competitive salaries.

The key, to me, is that the dollars be set aside each year and invested in an endowed pool that would generate payout each year. Let’s take an example from Iowa. We know that in the last year data is available from the Regents (fiscal year 2015), Iowa football generated $22.3 million in revenue. So what if 1% of that, or $223,000 was set aside at the end of the year and invested at some relatively conservative rate, let’s call it 7% (we can debate over a beverage of your choice where anyone is getting 7%), and every year a piece of that is paid out to former athletes. If we assume the payout is something conservative, like 4%, to allow for inflation and a management fee, we end up with an annual payout of just over $8,900. Doesn’t seem like much, does it?

But what if that $223,000 socked away was done every year? And what if the amount being saved went up every year (perhaps because the revenues for Iowa athletics are going up every year?) Well, after a few years you have a hell of a lot more than $223,000 sitting in a pool and instead of $8900 paid out, you have a hell of a lot more to give to players. Best case? You have a donor throw some dollars at things to get it started off on the right foot. If, for argument’s sake, some generous Hawkeye tossed $10 million into the fund at the outset, in year one you’d have $408,920 to give back to the players that year. That’s a massive difference. And the beauty of an endowed pool is it is designed to provide inter-generational equity. The pot is supposed to grow every year while still being able to pay out money each year, even when things go south.

Photo by Matthew Holst/Getty Images

In addition to the revenue set aside by the schools, any income generated by the use of an athlete’s likeness should be set aside in an individual account for post-grad use. Sell a sweet #16 Iowa jersey? A cut of that should be set aside for CJB when he graduates. Pumping posters with Desmond King plastered on the front? He should have a cut of that set aside for him. Want to bring back the NCAA football games? Go ahead and throw the real names on there and set aside a piece of the sales for each kid to get when they are no longer amateurs. If Nike wants to start putting pics of Heisman candidates all over their website, go ahead but set aside some dollar bills for when those kids are no longer amateurs.

Furthermore, the NCAA, along with each conference, should set aside a portion of their revenues into an endowment to provide ongoing medical coverage for athletes after they leave school. Playing football takes a toll on the body and we are learning more and more about CTE every day (obviously, this isn’t all about football, but in mid-September that’s where my focus is). The NCAA and member schools have a responsibility to provide adequate medical coverage for the athletes even after they are done generating money for the system.

Listen, there are some obvious flaws in my system. There are obvious flaws in the current system. Any solution is going to have problems. I don’t think it’s possible to ever get rid of bag men. Regardless of how much you pay a player, there is always going to be someone willing to pay more, even if the rules don’t allow it. Even if big shoe companies are allowed to pay players for their likeness, they will still have an incentive to push them toward their partner schools. But there has to be a better solution than the way things are currently set up. Players deserve to have adequate medical coverage after they leave school. They deserve to get a cut of the profits generated on their backs and from their likeness. They deserve to have enough money while in school to do more than just go to class and play a sport.

Finding the right balance between providing additional benefits to student-athletes and keeping them from becoming simply athletes is a tall task. College athletes should remain amateurs and attend class like any other student. But they also deserve to be compensated for the money they help bring to the NCAA, major conferences and their schools.