A study sponsored by the Knight Commission on Intercollegiate Athletics has found what CEO Amy Perko described to Sportico as “significant” inequities in the NCAA revenue distribution formula for the Division I men’s basketball tournament—imbalances that ultimately disproportionately reward schools with FBS football programs, which are already among college sports’ biggest money makers.
March Madness revenue distribution sends nearly $600 million to the 351 Division I schools annually while also supporting NCAA operations and 90 national championships for 24 sports across all three membership divisions–more than 1,000 combined colleges and universities. Division I schools that also compete in top-tier football additionally receive payouts of around $460 million annually from the College Football Playoff’s FBS championship.
The NCAA distributes some of its revenues equally to Division I schools and their conferences, but most is divvied up based on a number of measures and incentives, including March Madness tournament success, the number of NCAA sports an institution offers and the number of athletics scholarships provided in those sports. For example, schools receive $36,570 for each sport it sponsors above the 14-sport minimum that Division I institutions are required to have.
To qualify as an NCAA sport, the organization’s own rules dictate that it must operate that sport’s postseason championship. FBS football has an exemption from that mandate, even though the CFP operates independently of college sports’ governing body. In contrast, a number of college institutions sponsor men’s rowing teams, but the NCAA itself does not sponsor a championship for the sport. Therefore, no men’s rowing teams or scholarships count toward a school’s share of the March Madness payouts. The exemption for FBS football, given almost three decades ago, created a system that today rewards its sponsoring schools.
Where the FBS football impact hits hardest is in the size of a school’s Grants-in-Aid payout, which is based on the number of athletic scholarships offered. To reward schools for providing such opportunities, the value assigned to each scholarship increases the more grants a school provides.
The Knight Commission study, conducted by national professional services firm CliftonLarsonAllen, calculates the FBS impact to be between $56 and $61 million. FBS football allows 85 scholarships, making the maximum 150-scholarship benefit far more attainable for departments with such a program. The NCAA limits most other sports to fewer than 15 scholarships per team, so schools without FBS football—and even some FCS football schools, which can only offer 63 football scholarships—have a much harder time meeting the threshold to receive the maximum payout per scholarship, therefore taking home fewer dollars per non-football scholarship they do offer.
As it stands, the NCAA receives no revenue from FBS football but continues to absorb the costs of supporting the sport administratively (handling player eligibility, health and safety, insurance, litigation and legal settlements) while including the sport in its distributions. Factoring in their CFP dividends, top-tier football schools are essentially able to double dip in the payout pools.
When FBS football was given its exemption and worked into the NCAA’s revenue distribution formula (which was created in 1991), there was no centralized national championship system. The same calculation system is used today, even though it predates the CFP and even its predecessor Bowl Championship Series by decades. (There have been some revisions to phase in academic incentives in recent years, but the bulk of the formula remains unchanged.)
“The evolution—the start of a consolidated postseason championship to the launch of the CFP and the conference media deals, 80% or more [of which] are based on FBS football—completely changed the landscape of college sports. Yet, you’ve got a revenue distribution model that was created before that and has never been revisited in the context of everything that has happened in football,” Perko said. “There needs to be greater accountability in the revenue distribution system today because it just doesn’t make sense the way it is.”
The Knight Commission proposes that FBS football should no longer receive its current exemption. Perko emphasizes that schools with those programs would still receive significant distributions from the NCAA even without including FBS football in the formula—and could perhaps be incentivized to continue to support a large number of smaller programs.
“If you don’t count FBS football as an NCAA sport or those scholarships in the revenue distribution formula, here’s what happens: The non-FBS schools are going to get more money, a handful of FBS schools that sponsor a lot of sports will get as much money or frankly more. You only have a handful of FBS schools that sponsor more than 25 sports, but those are the ones that would do very well in this system we’ve recommended,” Perko said. “The FBS schools that sponsor only the minimum number of sports would receive less money through the new distribution, but again, all of those schools are getting credit for football through the CFP distribution which continues to increase.”
CliftonLarsonAllen’s report estimates that eliminating FBS football for revenue distribution purposes could release $61 million to $66 million for reallocation to other institutions—money that could provide even greater value back to schools that support a large number of sports or potentially increase the return value of each scholarship given out even below the threshold of 150. Additional dollars to support non-football programs are an especially intriguing consideration as institutions across the country have to consider how to continue to support non-revenue generating sports amid COVID-19’s economic repercussions.