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Should Cal Athletics Be Self-Sustainable?

What is the value of an athletic program to a college or university?  Why would an academic institution, with a core mission consisting of education and research, commit not-inconsiderable resources towards fielding, training and promoting intercollegiate athletic squads that use a disproportionately large amount of both capital and facilities relative to the small membership on such teams?  And, even recognizing that these teams do* provide benefits to the campus at-large, what is the value of such benefits, and does it outweigh the cost of the resources necessary to produce them?

In short, the recent budget crisis within both the University of California and the State as a whole compels the Athletic Department at Berkeley to justify both its existence and its scope.  While I don't foresee the Athletic Department's existence being threatened any time soon, the recent cuts of baseball, men's and women's gymnastics, and women's lacrosse, along with the demotion of Rugby, have made it clear that the department's scope of competition was well beyond its means.

Looking at Athletics' grim budgetary figures, it is not surprising to me that cuts had to come.  The mounting pile of debt was not close to sustainability, and the Chancellor and the Athletic Director were presented with no good options to address the structural shortfall.  Do I agree that Chancellor Birgeneau and AD Barbour selected the "least bad" options?  Not really.  But not only is that the subject of another article, but I do at least recognize that it is far, far easier to criticize these decisions than to have had to make such unpalatable choices myself; I do believe that whatever options Sandy Barbour chose, she was going to get raked over the coals anyway.

In any case, what I would like to discuss today is the scope of the Athletic Department in general terms, and how its finances should impact the general university fund.  Critics of Cal Athletics' historical budgetary largesse have often pointed to the department's classification as an "Auxiliary Enterprise" to support their view that Athletics needs to stop draining funding from the rest of the cash-strapped campus.  Indeed, the definition provided by the University offers some strict guidelines:

An auxiliary enterprise, as defined by the National Association of College and University Business Officers (NACUBO) in the College and University Business Administration manual, is "an entity that exists to furnish a service to students, faculty, or staff, and that charges at a rate directly related, but not necessarily equal, to the cost of the service." Auxiliary enterprises are self-supporting activities which provide non-instructional support in the form of goods and services to students, faculty, and staff upon payment of a specific user charge or fee that is at least equal to the full direct and indirect cost of providing the goods and services.  The general public may also be served incidentally by some of the enterprises.  Although the operation of an auxiliary enterprise is supplemental to the primary educational functions of the University, such enterprises are important to the overall operation of the University.

Classic examples of auxiliary enterprises include parking operations and housing and dining services -- not a core part of the academic mission, but important to the function of the whole.  They do not exist to make money, as a strictly commercial enterprise would, yet they are also supposed to support themselves with the revenue they do take in -- this ensures that they are reasonably well-managed, and not a drain on University resources.  Does this sound like the role of an athletics department to you?

In fact, the document I linked to specifically calls out intercollegiate athletics as one type of Auxiliary Enterprise:

Intercollegiate athletics at Berkeley and Los Angeles, for example, are classified as auxiliary enterprises because of the substantial receipts generated through sales to the general public.  At campuses where athletics involve only student participation, athletic programs are classified as "organized activities" or as part of the department of physical education.

This document would then imply that, because Cal Athletics generates significant revenue, it is required to live within those means, whereas athletic departments at other campuses (say, Riverside) face no such restrictions.  Riverside's athletics budget may be orders of magnitude smaller, but it faces no requirement that it sustain itself, if for no other reason than the practical reality that it stands no chance of being able to.

Does this strike you as a bit odd?  A little inconsistent?  It does to me.  Moreover, when you try to reconcile a requirement that Cal Athletics be self-sustaining with the question I posed at the beginning -- "What is the value of an athletic program to a college or university?" -- we find that such a requirement could only make sense if the overall value of the Athletic Department was $0.  Zilch.  Nothing.  Nada.  Logically, a self-sustaining requirement means that the only price the Berkeley campus is willing to pay for its intercollegiate athletic program is none at all.  Perversely, this implies that the University of California actually values athletics at Riverside *more* than it values athletics at Berkeley, for it is willing to lose money on the former but not on the latter.

Now, I'm not well-informed enough on Berkeley budgetary matters to give an accurate dollar amount stating what Athletics should be worth to the Berkeley campus, but I feel strongly that whatever the dollar amount is, it is significantly north of $0.  Thankfully, the recently concluded Chancellor’s Committee on Intercollegiate Athletics agrees with me.  From their final report:

The Council agrees that a robust IA program is compatible with the values of an elite American research university, that it adds a valuable dimension to students' academic and social experiences, and that its part of Berkeley’s specific traditions and histories is worth preserving.  While we recognize that different teams have different levels of resources, we follow the 1991 Smelser Report in seeing an implication of comprehensive excellence as entailing that all teams are held to the same standard of academic and athletic performance.

Under this ideal, we believe that IA’s contributions to the campus in general consist in the following: Intercollegiate Athletics adds to campus "spirit" and cohesion -- a necessity in a large urban campus environment.  It serves as a unique and irreplaceable point of contact with the University's alumni and friends and facilitates cultivation for philanthropic purposes.  It thereby promotes loyalty and school spirit on the part of selected donors.  (We note that roughly half of the 53 largest individual donors to the campus support IA as a part of their gifts, and that many donors to IA are even more generous in their gifts to academics.)  It provides opportunities for direct participation in high-level athletic competitions (and all the skills and accomplishments that such competition requires) for approximately 800 student athletes, and adds to the college experience of students who are involved in activities connected to IA (the Cal Band, Rally Committee and other spirit groups, student managers, students employed by IA, etc.).  Finally, it serves as the most frequent "window on the University," and is the basis for a significant amount of free advertising, through television and radio coverage of our teams in competition.

I could not agree more.  However, the problem with all of these benefits is that, like abstract qualities such as "friendship" and "loyalty", putting any kind of dollar value to these benefits is both difficult and highly subject to interpretation.  Contrast this with the lengthy and very concrete listing of monetary costs incurred by the Athletic Department, and it's easy to see how opponents could make the argument that Athletics is a large and unnecessary drain on University coffers.

However, let's agree with the Chancellor's Committee that Athletics does provide the campus with numerable benefits of some considerable value.  This would then imply that the self-sufficiency requirement is overkill, and that campus should be willing to subsidize athletics to some degree -- up to the value of the benefits gained from Athletics' operations.  So, how much should the campus be willing to pay?  The Committee itself tosses out a nice round number:

Taking into consideration the benefits of a strong IA program and the limited ability of the so-called Olympic sports to generate revenues, as well as the costs and context of the program, the Council believes that a normalized level of campus support of $5M annually can be justified...This amount is in one sense arbitrary, since it represents not a defined calculation, but a compromise among members with different views, accepted by all.

They also include a caveat to this, which I wholeheartedly agree with:

We believe that campus support should be clearly labeled as "Scholarship Support" for the non-revenue sports (which can treat such scholarships largely as a cost of their own operations). Treating the campus support of scholarships in this way would make clear that central campus funding reflects the core mission of the university, and directly serves the interests of its students.

While Cal Athletics must necessarily have one unified budget, and plenty of resources are shared among teams, a true accounting picture would actually involve 27 22 separate budgets, one for each varsity squad.  The above description as an auxiliary enterprise feels a little odd to apply to Cal Athletics, and the reason is that what's really going on, fiscally speaking, is that the department is comprised of two mostly separate auxiliary enterprises, football and men's basketball, and twenty-five separate "organized activities", most of which have no hope of being fiscally self-sustaining at any time in the foreseeable future (I see rugby as a notable exception).  Labeling Cal's field hockey team an "enterprise" in its own right seems as silly to me as classifying it as a philanthropic subsidiary of Cal's football program, even if that ends up being how the money works out.  If you really want to properly account for the costs of fielding a field hockey team (and I'm by no means picking on field hockey here), you need to accept the team as an expense incurred to enhance campus life, one whose costs are borne in part via other athletic department resources, and in part from general campus funding (whose aid should necessarily be limited to the realm of scholarship support).

I do want to be clear, however, that I'm not saying that Cal's Athletic Department budgetary practices as currently implemented are acceptable, or that it's OK for the department to lose as much money as they feel necessary, because they bring back intangibles to campus.  Current deficits, especially in this economic climate, are unsustainable, and belt-tightening, beyond the wholesale loss of several sports, is going to have to happen across the board.  To the extent that the goal of self-sustainability encourages Athletics to manage its resources efficiently, I can support it.  Nevertheless, it's important to understand that Cal Athletics, as a collective, provides enhancement and value to the Berkeley campus, that such benefits come at a definite cost, and that it is entirely proper for the campus at-large to partially subsidize these costs in light of the benefits it receives in return.

To turn back to the subject of the department's scope, I might ask: is $5M an appropriate amount for the campus to subsidize its intercollegiate athletic program?  Too much?  Not enough?  What about the number of teams?  Is 27 too many?  Is 22 still too many, or perhaps not enough?  While the presence of an athletic department can be shown to enhance campus life, and the success of that athletic department can certainly provide further benefit, at some point, each additional team adds fixed additional costs while increasing the marginal benefit of athletics as a whole by smaller and smaller amounts.  There is a point where the marginal benefit of adding another team is just not worth the cost of fielding it.  Where that point is located is a subject of potentially endless debate; it may be impossible to determine with any precision.

I was originally going to post this yesterday morning, but the emotional cost of having four athletic programs simultaneously meet their end, with a fifth relegated to uncertain status, gave me pause.  My post was a clinical evaluation on the scope of the athletic department, and it felt a little callous to come right out with this so soon after the cuts.  Even now, I'm not sure.  I do think it's important to understand the pressure the Athletic Department was (and still is) under, and to know that the regrettable decisions made were a sign of the department facing up to a financial reality it had long tried to ignore: the Athletic Department serves the University, not the other way around, and some of its services (fielding a baseball team, for example) were no longer desired at the going rate.

However, one can understand all this, and still feel terribly disappointed.  For many of us proud alumni, Berkeley has always been a pillar of excellence, standing as a worldwide leader in practically every field it entered.  I know these cuts come to just baseball, gymnastics and lacrosse, and not to physics or economics or engineering, but it still seems an admission of failure, of a chink in the armor.  However much these cuts were necessitated by the worldwide recession, however much they make sense from a fiscal perspective, it still feels like the brilliance of Berkeley, that shining light of California, has dimmed just a little bit.

(Editor's note: this article was written several weeks before the cuts were announced, and has been somewhat edited since then to reflect recent events.)