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The Collegiate Spending Spree: A Market Gone Mad, Not Athletes Gone Rogue

Let's cut through the noise, shall we? Every time the conversation around college athletics veers into financial territory, someone invariably points a finger at the athletes. They’re "out of control," demanding too much, shattering the purity of amateurism, or so the narrative goes. President Donald Trump, for instance, recently opined on ESPN’s Pat McAfee show about quarterbacks pulling in “$12 million, $13 to $14 million,” warning of an impending chaos. It’s a compelling soundbite, sure, but it completely misreads the ledger. My analysis suggests this isn't about athletes; it’s about a deeply distorted market that compels otherwise rational actors to behave like high-stakes gamblers, and the data backs it up.

The Illusion of Rationality in College Athletics

The raw numbers paint a stark picture of an industry that operates under a unique kind of logic. In 2024, the 136 major schools in the Football Bowl Subdivision (FBS) raked in about $11.7 billion in revenue. That’s a massive pie, fueled by media rights (like the College Football Playoff’s $1.3 billion annual deal with ESPN), ticket sales, and donor gifts. You'd think with that kind of cash, there'd be some financial stability. Instead, these athletic departments often spend every dime, and sometimes more, in a relentless arms race. We're talking waterfalls in locker rooms, golf simulators, and showerheads that cost more than my first car—specifically, $700. I’ve reviewed countless financial statements, and the capital expenditure lines here are truly astounding.

But the real money pit isn't the fixtures; it’s the human capital, or rather, a select few pieces of it. Nine head football coaches started this season pulling in over $10 million annually, with another 46 making at least $4 million. Coaches' pay is the second-largest athletic expense, right behind facilities. And here’s where the market distortion really shines: many of these coaches get paid handsomely even when they fail. Take Brian Kelly at LSU. He signed a 10-year, $95 million guaranteed contract in 2021. After a 5-3 start this season (not exactly a disaster, but clearly not living up to the massive investment), he was dismissed. That triggered an almost $54 million buyout clause. Think about that for a moment: $54 million for not coaching. The Knight Commission on Intercollegiate Athletics, a group whose work I generally respect for its data-driven approach, reports that public universities are on pace to pay over $1 billion in severance to fired coaches since the College Football Playoff system launched in 2015. To be precise, that's over a billion dollars in a decade for a handful of individuals who didn't meet expectations.

This isn't irrational behavior from the administrators' perspective, and that's the core of the problem. As Kevin Blue, a former UC Davis athletic director, puts it, they’re acting "rationally" within a "zero-sum game." College athletic departments are legally educational nonprofits, yet they operate in a cutthroat, profit-driven environment. They must spend to win, and they must spend to force competitors to fall behind. There are no traditional owners, no shareholders demanding ROI on a $54 million coaching buyout. Instead, powerful alumni donors, with their often idiosyncratic desires, effectively call the shots. When an extra $10 million rolls in, the incentive isn't to save it or reallocate it to, say, actual academic programs; it's to outspend the competition. This is a classic example of an agency problem, where decision-makers (administrators) aren't perfectly aligned with the broader institutional goals (education), but rather with the competitive demands of a specific, high-visibility department.

The Fiscal Black Hole and the Path Forward

The consequences of this runaway spending are predictably dire, particularly for schools outside the top tier. While the University of Texas at Austin can boast nearly $332 million in athletic revenues in 2024, self-funding its operations and absorbing a potential $60 million buyout for Coach Steve Sarkisian with ease—thanks to $137 million in oil-rich donor gifts—smaller institutions are scrambling. Appalachian State University’s football budget, a mere $16.2 million, still grew by 66% over five years, with overall athletics debt climbing 20%. Middle Tennessee State University, grappling with a 102% increase in athletics debt over five years due to over $100 million in facility upgrades, had to cut back on something as basic as football uniforms. This is the financial equivalent of a high-stakes poker game where only a few players have bottomless pockets, and everyone else is forced to bet their house just to stay at the table.

Now, let's address the notion of athlete compensation. The recent shifts, driven by court decisions and legal settlements, have rightly granted athletes economic rights over their names, images, and likenesses (NIL). This has led to "collectives" effectively creating payrolls, with some coaches estimating roster costs around $40 million a year. LSU quarterback Garrett Nussmeier reportedly makes $4 million in NIL deals this season. And suddenly, the focus is back on the athletes, with NCAA lobbyists pressing Congress for antitrust protection to cap player pay. Even a July executive order from Trump, titled “Saving College Sports,” identified "waves of recent litigation" that "eliminated limits on athlete compensation" as a "mortal threat."

Here's my methodological critique: blaming athlete compensation for the financial woes is like blaming a leaky faucet when the entire plumbing system is corroded. Nussmeier didn’t create the market for high-stakes college football; he’s merely a participant, finally getting a slice of a pie that’s been growing exponentially for decades. The "mortal threat," as the data clearly indicates, isn't a student-athlete making $4 million. It's a system that compels a university president to authorize a $130 million, 10-year contract for a coach, knowing full well the institution might be on the hook for tens of millions more if things don't pan out.

There’s a clear consensus among those actually managing these budgets. A poll by Elon University and the Knight Commission found 79% of school officials fear relying on institutional money and student fees to fund sports in the future. Nearly seven in 10 favor national legislation to limit athletic spending. This isn’t a plea for more freedom; it’s a cry for a regulatory framework to rein in the self-destructive competitive cycle. Proposals from the Knight Commission—requiring half of shared athletic revenues to go to athlete education/health or university academics—or the Drake Group’s ingenious cap—matching coach/staff compensation with athlete financial benefits—offer viable paths. Congress, the only body with the requisite leverage, needs to condition antitrust protection for schools (which they desperately want to control the talent market) on these broader spending caps. Otherwise, we’re just treating symptoms while the underlying disease metastasizes.

The Fiscal Illusion's Endgame

The problem isn't the players finally getting paid; it's the administrators, operating in a market with no real owners or accountability, acting "rationally" within an irrational framework. Until Congress forces these institutions to align their athletic spending with their supposed educational mission, we're just rearranging deck chairs on a very expensive, very fast-sinking ship.