Is Rutgers' Big Ten move a boon or bust for taxes, tuition?
By Star-Ledger Guest ColumnistThe Star-Ledger
on November 25, 2012 at 9:56 AM
Rutgers University President Robert Barchi answers questions during at a press conference announcing Rutgers announces a move to the Big Ten on Tuesday, November, 20, 2012, ending a two-decade relationship with the Big East. The decision to defect from the Big East, of which Rutgers has been a member for football since 1991 and for all sports since 1995, comes on the heels of the University of Maryland’s governing board unanimously voting to leave the Atlantic Coast Conference and join the Big Ten. (Patti Sapone/The Star-Ledger)Rutgers joins Big Ten Conference gallery (17 photos)
By Jared Pincin
Rutgers University athletics has a new home in the Big Ten. Rutgers President Robert Barchi said the Big Ten is "exactly the right conference for Rutgers," while the athletic director, Tim Pernetti, called it "historic." While Rutgers fans question whether the move is good for football and other sports, New Jersey taxpayers should ask whether the move will save them money, and students should ask whether tuition will be affected.
Like most of the recent conference-jumping in college sports, Rutgers joining the Big Ten was about making money. Operating a big-time athletics department is expensive and, since 2006, Rutgers has spent $321 million in pursuit of athletic success. From 2006 to 2011, Rutgers increased its athletic funding by 43.9 percent — far outpacing inflation (11.6 percent) or hikes in undergraduate tuition and fees (28 percent) over the same period.
The increase in athletic spending has been accompanied by an increase in direct financial assistance from the university. According to revenue and expense reports filed with the NCAA and compiled by USA Today Sports, Rutgers athletics has received $99.3 million in direct university subsidies since 2006, totaling 31 percent of the athletic department’s budget. Student fees added another $44.5 million.
In 2011, Rutgers’ athletics received a 47.3 percent subsidy, the largest among universities competing at Rutgers’ level, despite increases in revenue from ticket sales (143 percent), athletic contributions (57.4 percent), rights and licensing (9.1 percent), and other sources (12.9 percent) since 2006.
While moving to the Big Ten is costly — Rutgers will pay the Big East a $10 million exit fee — the move should finally help Rutgers football and other sports pay for themselves. Last year, Rutgers received only $6.5 million from the Big East’s TV and bowl appearances. Meanwhile, the Big Ten split $284 million among its members in the 2011-12 fiscal year; that’s nearly $25 million per school (though Nebraska doesn’t get a full share because it is a new conference member).
Sports Illustrated reports that, by 2017, Big Ten schools could each receive $40 million a year.
However, even with the promise of increased revenue, New Jersey taxpayers and Rutgers students shouldn’t celebrate yet. The new money may not eliminate subsidies to Rutgers athletics, for two reasons.
First, excluding Northwestern, a private school that doesn’t have to share its finances with the NCAA, every Big Ten school except Nebraska, Ohio State, Penn State and Purdue receives money from either student fees or direct university support to cover some athletic expenses. Second, Rutgers athletics is likely to increase its athletic budget to be "competitive" in its new conference. While Rutgers has the fourth-largest reported athletic budget in the Big East, its $60 million athletic budget would be second-lowest in the Big Ten. Rutgers may increase its athletic budget even more than the projected increase in Big Ten revenue — a phenomenon known in economics as the "flypaper effect," where an increase in new revenue increases spending by an even greater amount.
Rutgers’ move to the Big Ten can be a financial win for New Jersey taxpayers and Rutgers students alike, if the new revenue reduces the subsidy Rutgers athletics receives from the university. However, without reform in the athletic department, it also may deepen the financial dependence. With this new revenue, Pernetti and Rutgers athletics should quicken their stated desire to reduce the athletic subsidy. Taxpayers and students should hold them accountable.
Jared A. Pincin is an assistant professor of economics at The King’s College in New York City, where he teaches economic policy. He lives in Neptune City.