JANUARY 2008 :: COVER STORY : ECONOMICS

By Jon Weinbach
The Wall Street Journal

At $109,382,222 for the current year, Ohio State's athletic budget is the largest in the nation and the biggest in the history of college sports. It allows the school to field 36 varsity teams in everything from baseball and soccer to riflery and synchronized swimming. The school spends about $110,000 on each of its 980 athletes, three times what the university spends per undergraduate on education.

The budget for this academic year allots $65,000 in private-jet time, or roughly 11 hours, to men's basketball coach Thad Matta for recruiting trips over 200 miles-and a further 15 hours of jet time for the coach's personal travel. A just-completed $19.5 million renovation of the football team's practice facility, funded with a large donation from Limited Brands CEO Leslie Wexner, added a players-only entrance, a lounge that has six flat-panel TVs, three videogame systems and a juice bar. "There's always a race to get up there after practice," says Jake Ballard, a tight end onthe football team, which is again playing for a national championship.

The men's and women's ice-hockey teams train on a $75,000 hockey treadmill that features a lubricated, ice-like surface that tilts at sharp angles and goes as fast as 16 miles per hour. Men's hockey coach John Markell solicited a donor to buy the equipment, which he says has become a key part of players' workouts. It's a machine most college teams-and even many NHL clubs-haven't purchased. "We don't have the space or resources for that," says a spokesman for the Anaheim Ducks, last season's Stanley Cup champions.

In Columbus, the OSU athletic department is a gold-plated island in a region getting roiled by harsh economic forces. The lavish program is the most vivid example of how college sports have turned into a humongous business and created a parallel universe of high-living in the world of academia. OSU's athletic budget, which has grown 46% in five years, has expanded despite a prolonged downturn in the Ohio economy and several rounds of public-funding cuts to higher education. The state's median household income fell 9.3% between 2000 and 2005, one of the worst declines for any state during that span.

Ohio has the nation's highest rates for foreclosures and delinquent mortgages. The state is home to two of the five poorest cities in America, and has been ravaged by the struggling U.S. auto industry and the forces of globalization. From 2000 to 2006, the state lost about 200,000 manufacturing jobs and added just 40,000 new ones. Companies such as Mr. Coffee, Rubbermaid and Hoover closed plants and moved abroad.

From 2002 to 2005, the Ohio Legislature decreased annual support for the state's universities. In response, OSU instituted its highest annual tuition increases in nearly 40 years, boosting rates nearly 60% from 2002 to 2006.

Ohio State was one of just 19 schools to turn a profit on athletics in 2006, according to data collected by the NCAA. OSU says its athletic department is self-sufficient-it uses sports revenues to pay for its teams and operations. It doesn't draw from the same budget that's used to fund academic departments. How much the athletic department spends is determined by how much it brings in, not by how much the university decides to give it. A 2005 economic-impact study, commissioned by OSU, estimated that the school's sports program pumps over $100 million a year into the local economy, with more than a third coming from fans' spending on hotels, food, parking and shopping.

The alma mater of Jesse Owens, Jack Nicklaus and John Havlicek, Ohio State has a long history of passionately supporting its athletes. OSU's teams are the premier sports attraction in Columbus, Ohio's state capital and biggest city, and the school has the largest enrollment in the country, with more than 52,000 students. TV broadcasts of OSU games routinely attract 60% of all local viewers, and in Columbus, the OSU football coach's Sunday-morning chat show gets better ratings than "Meet the Press."

Supporting the program is seen as a civic virtue. Over the past five years, giving to the Buckeye Club has increased an average of 12%. The booster club's membership of nearly 3,700 is up 32% from 2003.

Big Spenders

The enormous financial rewards for successful athletic programs have fueled an arms race among schools to build larger, more lavish venues that can ring up millions from luxury suites and sponsors. Over the past five years, schools in the NCAA's top six conferences raised more than $3.9 billion for new sports facilities, according to the Chronicle of Higher Education.

At Oklahoma State, oil and hedge-fund mogul T. Boone Pickens gave $30 million to renovate the football stadium, and put his name on it. He has also committed $165 million more to build an "athletics village" on campus. Nike founder Phil Knight recently donated $100 million to Oregon's athletic department, which plans to use the money as a safety net to cover potential operating losses. The department still plans to ask for public funds to build a $200 million basketball arena.

Other big spenders include the University of Texas-Austin, which has the nation's second largest sports budget at $107.6 million, although it fields 16 fewer teams than Ohio State. Last year, the Longhorns' athletic department spent $152,585 on nutritional supplements like Gatorade and PowerBars.

The football and men's basketball programs are the only OSU sports that turn a profit-and their revenues support teams that many other universities have cut for lack of funding. "We never want to get into the business of taking opportunities away from students," says Gene Smith, OSU's athletic director.

Ohio State's varsity synchronized swimming team competes in a two-year-old, $20 million facility, nicknamed the "Taj Mahal," that features seven bodies of water and two whirlpools for athletes to relax in during competitions. A multimillion-dollar renovation of the school's "Scarlet" golf course, completed last year and overseen by Mr. Nicklaus, added a short-game practice area and enlarged the course to over 7,400 yards.

OSU's pistol team maintains a supply of about 30 firearms for the team's 11 members, and all shooters receive an array of free Nike gear, including polo shirts, a jacket and shoes. "We're a good-looking team," says James Sweeney, OSU's pistol coach. This year, for the first time, OSU's rifle and pistol teams received scholarship money to recruit top competitors.

No Worries

Other schools take a more Darwinian approach to smaller sports. Last year, Rutgers cited budget shortfalls for its decision to cancel six sports, including swimming, men's tennis and fencing. But the athletic department still gave assistant football coaches a sizable raise, completed a $12.5 million renovation of football's training center, and is in the midst of a stadium renovation that will add nearly 10,000 seats.

At Ohio State, "nonrevenue" sports such as men's lacrosse and women's track don't have to worry about earning their funding. Excluding football and basketball, OSU's other 34 teams generate about $1.5 million in revenue. Last year, expenses for the women's hockey team totaled a little over $1.2 million while the sport brought in just $1,642, all of it from arena concessions. Many sports don't contribute any revenue at all. "I'm sure my scholarship is possible because of the football team," says Lindsay Quintiliani, a goalie on the field hockey team.

Last season, Ohio State's football program generated about $57 million in revenue. The sum included a $4.75 million payment from the NCAA for advancing to the national championship game and $31.65 million in ticket sales from home games at 105,000-seat Ohio Stadium. Team expenses, which include nearly $2 million for meals and travel, as well as debt payments to cover stadium renovations, subtracted about $21 million. Still, football supplied nearly $36 million in profit to the athletic department's coffers. The University of Florida, which beat OSU for the national championship last year, made about $34 million on football last year. OSU is back in the national-title game again this year against Louisiana State.

OSU's men's basketball team, which moved into a new, 19,500-seat arena in 1998, advanced to last year's national championship game and turned a record $9 million profit.

A significant chunk of the athletic department's budget is spent in ways that benefit the school's general fund. This year, the athletic department will spend $12 million on scholarships or "grant in aid" to pay for athletes' tuitions. A few years ago, the department contributed $5 million to help fund renovations to the campus's main library. OSU's sports program is also among the few that pays for all maintenance, security and operating costs at its facilities. (The utility bill at the football stadium last year: $731,309.) In addition, the athletic department transfers about $1.7 million to the school's academic-support center to pay for tutors and "life skills" workshops for athletes. "I think we're paying somebody $25 an hour to tutor physics," says Mr. Smith.