This newsletter is about bailouts

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The big news on Thursday was the NCAA’s announcement that they’ll be sending out a much smaller check to member institutions than they normally do. I filed a story on what I think this means for different kinds of schools for Banner Society, which I think will publish at some point on Friday. If you’re interested in that, either listen to this episode of Podcast Ain’t Played Nobody, or check out Banner Society today.

I’d like to explore something a little different here. I’d like to talk about bailouts.

It looks like higher education already got at least one bailout

For my purposes, when I talk about bailouts, I’m talking about some other entity providing an infusion of cash to help shore up a shortfall. Sometimes, that bailout comes from the federal government. It would appear that many US universities are getting some measure of a bailout, although not as much as they were apparently asking for.

Congress is poised to give colleges and students whose semesters were upended by the coronavirus pandemic more than $14 billion in emergency relief, according to the text of a spending deal struck on Tuesday night by the White House and the U.S. Senate.…However, the stimulus funding would fall well short of the $50 billion in federal assistance that nearly a dozen higher-education associations said was needed to keep colleges and students afloat. “While this legislation is an improvement from where the Senate started, the amount of money it provides to students and higher-education institutions remains woefully inadequate,” Ted Mitchell, president of the American Council on Education, said in a written statement on Wednesday.The stimulus package would allocate more than $6.2 billion each to higher-education institutions and emergency student aid, with nearly $1 billion going to minority-serving institutions such as historically black colleges and universities and tribal colleges. It also would give the Education Department the authority to distribute an extra $300 million to colleges hit hardest by the coronavirus crisis.

I understand that just about any kind of federal spending will invite some measure of criticism, but on principle, I understand why schools would ask for federal assistance, and why the government would want to give it.

We’ve mentioned this a few times on Extra Points before, but many schools were facing difficult financial circumstances even before Covid-19 blew a smoldering hole in everyone’s balance sheets. With enrollment dwindling, international student recruiting becoming more competitive and challenging, and state support dwindling, all sorts of institutions that lack Stanford-sized endowments were contemplating a difficult future.

If we, as a country, feel that it is important for different populations to have different higher education options….big schools, small schools, liberal arts colleges, research behemoths, HBCUs and religiously-oriented private schools, then providing some assistance to help keep some of those institutions open and solvent makes sense to me. Whether this proposed legislation is sufficient, or whether it tries to remedy any of the root causes for those precarious balance sheets, is beyond my paygrade or the purview of this newsletter. If there are takes out there, I’d love to read them.

If universities, at large, are likely to struggle over the next few months or years, then it’s not hard to imagine many athletic departments struggling as well, especially if there isn’t football.

This quote, from Texas A&M athletic director Ross Bjork, stuck out to me. Here, via CBS:

It hit Texas A&M athletic director Ross Bjork this week when the 2020 Tokyo Olympics were postponed. That event was set to take place roughly a month before the start of the college football season (July 24 to Aug. 9). Olympic officials finally concluded it was not wise for 11,000 athletes from all over the world to congregate for two-plus weeks.

"With that news right there, then that starts creeping into the football season and training camps and scheduling," Bjork said. "… I don't know how you operate [if the season is canceled]. Where would the bailout come from? Because we would all have to have one if we were going to maintain any sort of normalcy."

When I read this quote, I didn’t think Bjork was asking for a bailout from the federal government, especially since he asks ‘where would that bailout come from’. I read this quote as an admission that current spending levels could not be sustained without football revenue, and if anybody expected the department to go on without drastic changes (i.e cuts), revenue would need to come from somewhere.

In a way, I think you could potentially describe the NCAA payout as a bit of a bailout. The NCAA is taking out a loan so they can give money to members while they wait for the dust to settle around their insurance claim. Other leagues may draw from reserves to help shore up balance sheets. Depending on how that money is distributed or acquired, maybe you could call that a bailout too.

Judging from my Twitter feed over the last few days, I think there’s a visceral negative reaction towards the concept of a college athletics buyout coming from the government.

And to be sure, if any school should be the one arguing for assistance to balance their budget, it shouldn’t be Texas A&M, a school that brought in well over $200 million revenue last year. If the Aggies are worried about their cash flow in their near future, as it stares down a recession, low oil prices, and potentially slowed giving…maybe don’t give Jimbo Fisher a gazillion dollars? I doubt there’d be as much anger if the AD at say, Arkansas State, gave a similar quote.

I also understand why many members, or the general public, would be disinclined to believe any athletic official who pled poverty now, only because so many have been doing it for so long in an attempt to get out of giving benefits to athletes, only to look stupid in court. The “this new expense will ruin college sports!” argument is hardly unique.

I don’t have a great idea as to exactly how great the financial needs will be for FBS athletic departments. So much of that depends on how the federal government tries to stave off a recession (or worse), how quickly our country can get a handle on the Covid-19 outbreaks, what state-level unemployment looks like, and a slew of other variables. If I could predict exactly what that would all look like in September, I wouldn’t be writing about college football for a living, I’ll tell you what.

So I’m not advocating for a federal bailout, or any particular policy measure yet, other than for schools to take their own financial modeling very seriously, and really think about what they would need to do in a fall without football.

As a thought experiment, should things become so dire that a request for federal aid became a scenario worth whiteboarding, I wonder how that might impact negotiations over NIL legislation, or other potential reforms. Would NCAA membership trade a one-time cash infusion across D1 in exchange for a more liberalized NIL marketplace? For cost controls on coach and administrator salaries? For the end of these “athletic foundation” shell companies that are basically just built to help athletic departments get around FOIA? What, about the current status quo, would the current power structure be willing to give up?

For what matter, what would the universities at large be willing to give up for greater financial support?

Honestly, I don’t know. Hopefully, we don’t have to know, because the economy never gets that dire and our political energies can be more properly focused on the people that need help right this very second.

There’s no need to get out the pitchforks and torches now, in my humble opinion. No need to scream about bailouts on Twitter dot com. Lord knows there’s enough to yell about there already.

But they’re interesting questions to think about.

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