Tuesday, December 30, 2014

Jim Harbaugh’s contract with Michigan escalates coaches’ salaries scale, college football arms race

By Adam Kilgore

December 30, 2014

Tuesday in Ann Arbor, Michigan will introduce the richest college football coach in history, a title Jim Harbaugh will not hold for long. The exorbitant salaries universities pay football coaches have resulted in an arms race without end, at a cost to the structure of the sport that remains to be seen.

Michigan reportedly offered Harbaugh $48 million over six years, which would make him the highest-paid coach in college football history. Other reports have since refuted the precise figures. Either way, Harbaugh’s megabucks deal will continue the escalation of coaches’ salaries, a cycle with no stopping in sight that, depending on your point of view, is either a reflection of wanton spending in college sports or the logical byproduct of a rational market.

“It’s simple, really,” said agent Neil Cornrich, who represents Bob Stoops, Kirk Ferentz and other high-profile coaches. “As long as the revenues from college football continue to grow, all the numbers will follow.”

It’s true – big-time programs like Michigan can pay coaches inflated salaries because the money is there, and they choose to pay the salaries because they want to keep the money there.

The entirety of deposed Michigan coach Brady Hoke’s salary and buyout – $14.4 million over his four-year tenure – came from Michigan athletic department coffers and not taxpayers, State Budget Office spokesman Kurt Weiss said. The public university is expected pay Harbaugh solely through revenue and donations the athletic department generated, with no money from the state included.

“Our records show [Michigan’s athletic department] would likely have enough money,” Weiss said.

The Wolverines can sustain their own excesses. So what’s the issue? While Michigan’s athletic department may be able to afford it, many of the schools it competes with cannot. Only 20 Football Bowl Subdivision athletic departments finished in the black in 2013, according to an NCAA study released in April. Meanwhile, according to USA Today’s database, the average FBS coach’s salary has doubled since 2006.

As coaching salaries rise, those schools that operate at a lower economic threshold than Michigan will face a choice: Step aside or dip into state funds or money otherwise earmarked for academics. The gulf between the haves and have-nots will widen, with many of the haves using taxpayer dollars. And then some of have-nots will choose to give up rather than try to keep up, spent into oblivion.

“It’s really the 24 programs with the largest athletics budgets that are really the ones driving the spending increase,” said Amy Perko, the executive director of the Knight Commission. “Schools at the lower tier of spending, those programs rely on student fees for a significant portion of their athletics budget. They are facing decision day fairly soon on how much they can increase student fees” to pay a football coach’s salary.

The growing chasm will only deepen if and when players receive compensation. The Knight Commission’s data shows that coaching salary makes up one third of athletic department spending, Perko said. The costs would only increase if football players received pay, too.

“The more that costs go up, whether it is with coaching salaries or players compensation, it will lead to some schools thinking hard about the value of a football program,” said Michael McCann, the director of the University of New Hampshire’s Sports and Law Institute. “We could see some schools reconsider the value of a football program. That said, every time there are rumors of a football program being cut, there are widespread complaints from alums. That will always be a check to some extent on movement to cut programs.”

That ripple effect is one reason why critics view escalating coaches’ salaries as a striking problem: When Power School U decides it will pay a coach $8 million per season, it may trickle down to how much an average student at Lower Tier Tech pays for tuition. But the appeal of a football program can be so strong that alumni donations threaten to fall if the smaller school makes noise about dropping the sport.

But larger schools have both the incentive and the means to offer higher and higher salaries. Remember: The money is there. New television rights fees have enriched power-conference schools like never before. As long as the NCAA prohibits players from seeing any of the massive profits, no one figure is more responsible for raking in revenue than the head coach.

“Am I surprised they [the salaries] are going up? Not when revenues are going up,” Cornrich said. “If revenues go down, the salaries will go down. These are businesses that are operated by universities, but they’re very dependent on the unique job skills of certain coaches. There are tons of people who want to do it. There are very few who can do it. You need one of those tremendously prolific people – people like Bob Stoops and Kirk Ferentz – who enhances a school’s brand and creates so much value.”

It would be easy to counter that any coach could keep a tradition-rich program like Michigan profitable, and that more athletic revenue should be spent on academic pursuits. But if Hoke’s rocky tenure didn’t lead to indifference, Michigan wouldn’t have felt compelled to find a new coach. This fall, a campus convenience store ran a promotion that handed out two tickets to Michigan’s home game against Minnesota with the purchase of two Cokes.

The dizzying salaries coaches receive are only natural byproducts. This summer, Vanderbilt law professors Randall S. Thomas and R. Lawrence Van Horn performed a study of college football coaches’ salaries, comparing their ability to add value to an organization to that of CEOs. They disregarded any social stigma pertaining to skyrocketing pay for a coach at an institution devoted to higher education. The professors discovered the market had rewarded them properly.

“We find no evidence that the structure of college football coach contracts is misaligned, or that they are overpaid,” Thomas and Van Horn wrote.

College coaches, though, operate in a specialized sphere. “College sports is not a typical business,” Perko said. “College sports is connected to a university. The majority of the universities in FBS are state run. All these programs benefit from the tax status provided to them because of their connection to the universities.”

Still, salaries will continue to rise before they go back down. Many critics have proposed a cap on coaches’ salaries, but that idea would be struck down through a lawsuit, McCann said. As Harbaugh’s salary shows, colleges will continue to use all the financial might they can muster to lure a coach able to produce wins and revenue.

Coaches cannot be begrudged for negotiating contracts that are fair under the system in place. If the NCAA is not going to let the players share in the profits, then head coaches are next in as the ones who produce the revenue.

But the salary figures the system produces provides yet more evidence of the absurdity of linking a massively profitable sports enterprise to an institution of higher education. The money is there and it’s being made by the football team, and it’s not like any schools are going to be diverting that money to the anthropology department anytime soon.

“It would be bold for someone to do it,” said McCann, the professor, breaking into a laugh. “It would also be really risky.”

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