Twice in the last four months, members of Congress have broached the subject of revoking the tax-exempt status of the NCAA and its member institutions. It’s a move that, while not near a reality yet, could cost the Bulldogs Athletic Association millions of dollars and change the entire landscape of college athletics.
“It’s big news because of the impact it could have on us,” said Evans, Georgia’s athletic director said. “I think it’s something that we need to be aware of especially since this is the second time it’s being brought up.”
University president Michael Adams is a member of the NCAA’s finance committee, but he declined to comment for this story. University spokesman Tom Jackson acknowledged the issue will be a high-priority topic at the next NCAA meeting.
The issue first came up in October in the House of Representatives Ways and Means Committee, but Rep. Bill Thomas, the chairman of the committee and force behind the potential legislation, retired this month. NCAA and college athletic officials hoped the subject would go with him.
Instead, Sen. Charles Grassley, former chairman of the Finance Committee, has taken up the cause.
After Alabama announced its eight-year, $32 million contract with Nick Saban, Grassley issued a statement that read, “When I see big salaries for sports coaches and money for stadium sky boxes while tuition skyrockets, I wonder whether the university trustees are doing their jobs. They need to justify these expenses as part of the public obligation that comes with tax-exempt status and make sure the colleges are meeting their priorities.”
In a letter to NCAA president Myles Brand that first broached this subject, Thomas asked questions that seemingly would be hard for NCAA officials to answer.
“From the standpoint of a Federal taxpayer, what benefits does the NCAA provide taxpayers in exchange for its tax exemption?” Thomas wrote. “Why should the Federal government subsidize the athletic activities of education institutions when that subsidy is being used to help pay for escalating coaches’ salaries, costly chartered travel, and state-of-the-art athletic facilities?”
Evans understands the questions. While graduation rates throughout college athletics have remained stagnant at disappointing levels, college athletics spending has gone way up. At Georgia, football coach Jim Donnan had a total compensation package of $375,950 in 1997. Less than a decade later, Mark Richt is making $2 million annually.
The Bulldogs also just devoted $30 million to a new practice facility for its men’s and women’s basketball teams and gymnastics team. None of that money comes from taxes, but it is available because Georgia doesn’t have to pay taxes.
“People sitting on these committees, they look at these salaries going up and the facilites we’re putting up and think, ‘How does that contribute to the overall educational mission?’” Evans said. “Maybe if we cut back on some of that spending, it doesn’t draw as much attention, but I don’t know if that’s going to happen any time soon.”
Brand issued a 25-page response to Thomas’ letter, and now people like Evans are waiting anxiously to see where the issue goes from here.
If the status is revoked, what would it mean for Georgia? It’s too early to say, said Frank Crumley, the school’s senior associate athletic director in charge of the finances.
The scale of the potential change is hard to predict, Crumley said, but at the traditional corporate tax rate of 35 percent, the Bulldogs would have had to give up $8.4 million of the $23.9 million they made in 2005.
Also, it’s likely that donations made for football ticket priority would no longer be tax deductible for the team’s fan base, which could affect giving.
“It would have a significant impact on institutions as a whole,” Evans said. “It’s far reaching. You don’t know to what extent it will go.”
Richt’s salary is among the nation’s best, but the Saban deal makes Evans wonder how quickly the scale will now change.
“Does it set a bar that we got to a lot faster than I thought we would?” Evans said. “Yes, it does.”
Assistant coaches’ salaries are rising at a similarly brisk pace, and several comparable programs outpace Georgia in that area. Jimbo Fisher recently agreed to a deal worth $425,000 annually to be Florida State’s offensive coordinator, and he reportedly could have gotten more than $600,000 to stay at LSU.
Georgia’s highest-paid assistant is defensive coordinator Willie Martinez, who makes $260,000 a year.
None of the Bulldog football coaches, including Richt, should expect a raise anytime soon, Evans said. (Newly named offensive coordinator Mike Bobo is the exception to that. He will soon be bumped to more than $200,000.)
“We want to maintain a competitive level,” Evans said, “but we’re still going to do what’s appropriate, and I think it’s important to remember what we’re a part of.”
If he and the rest of the administrators in college athletics don’t, the government may soon remind them.