Florida Board of Governors allows auxiliary funds to athletics
Will more states follow in the Sunshine State's footsteps?
With the House v. NCAA settlement finalized, programs have to start accounting for how they’re going to do this revenue sharing business.
We’ve already looked at one prominent method - Tennessee’s talent fee on ticket prices. The state of Florida just threw another one out there that, frankly, might have more resounding shockwaves.
That would include all of the public Florida institutions - meaning FBS schools Florida, Florida State, Florida Atlantic, South Florida, UCF and FIU could make full use of this.
But where is this coming from? And is it sustainable?
Auxiliary Funds
If you don’t work in higher education or haven’t had anyone go through college recently, auxiliary funds may not be something you’re familiar with.
In it’s simplest form, auxiliary funds are cash that the university uses to pay for non-state funded activities. You can assume that private colleges are nearly fully funded on auxiliary funds. But public schools can use these to offset the incoming Title IV aid and money that accounts for most of their operating expenses.
You can see universities use auxiliary funds to pay for CRMs like Blackboard or Canvas, fund conferences, pay instructors, or other educational-related activities. That’s because the schools have to use those funds on those expenditures - they can’t simply decide to spend it on something willy nilly. The Board of Governors or Board of Trustees have to approve each allocation and it has to support the university’s mission.
Go get a little further into the weeds of higher education budgeting, there are four main revenue streams for a university: tuition (i.e. the cost to attend classes), state/federal funding (i.e. grants, Title IV governmental funding, etc.), endownment/donations and auxiliary revenue. The other three are clear, but what is auxiliary revenue?
That oftentimes comes from non-tuition based student fees. Consider room and board, meal plans, and other fees tacked onto the final bill. Those are auxiliary revenue streams that primarily fund auxiliary funds.
For most schools, those funds go right back into education, paying for things like facility imporvements, instructors, conferences and more. But the Florida Board of Governors is now allowing schools to pull from that fund for revenue-sharing purposes.
Why did the Board of Governors pass this amendment?
Florida Board of Governors member Alan Levine told local news that the temporary expansion of auxiliary fund uses is to “take some pressure off of donors” in the wake of the House v. NCAA settlement’s final approval.
They went even further, likely to justify the need to support the universities’ missions, with Levine saying “if we don’t act, there’s a really good chance our universities will be severely disadvantaged. I don’t think anyone wants that.”
When we looked at Kentucky’s strategy of splitting their athletic department off into an LLC, we discussed a popular idea across higher eduation - the Front Porch theory. Since we went more in-depth there, I won’t get too into it here, so feel free to check out that article for more information.
The main thought process in the Front Porch theory is that the university’s athletic department serves as the instituation’s front porch of sorts. It’s how the larger, non-local public learns of the university. And, when athletics are doing good, enrollment and retention tend to trend positively. You can see this in Alabama’s enrollment spikes during the Nick Saban era, a jump in enrollment at UCF after their 2017 perfect season, and any number of March Madness Cinderellas that suddenly have thousands of additional applications than expected.
So, while Levine’s statement that not passing this would set their teams up for failure may not seem like a reason to suddenly divert millions of dollars from other educational-focused funds, there is validity in that. If a school suffers prolonged downturns in revenue sports - football and basketball in particular - you could assume that enrollment may drop some.
Now, that may not be enough for some folks to consider opening up $22.5 million in auxiliary funds to start paying athletes instead of renovating libraries and paying educational staff, and that’s fair as well. There is no good answer here.
But, it is only a temporary measure, runnign through 2028 so the universities and their donor bases can come up with a sustainable way to revenue share with athletes while maintaining the same or similar budgets as pre-House.
Will other states adopt this?
Sorry, that’s kind of a trick question. Florida’s not a trend-setter, they’re behind the trend.
Plenty of other states already allow universities to dip into their auxiliary funds to pay for athletic-based expenditures. For example, the State of Arizona fully incorporated the athletics budget into their public schools’ overall budgets, allowing money to freely flow between the two. Others, like Colorado and Ohio already allow auxiliary funds to go to athletics.
The reason this is a big deal is simply because Florida didn’t allow auxiliary funds to go towards athletics. And, right now, it’s unclear if any of the schools besides Florida State are planning to use any of those funds for athletics.
There’s plenty of justifiable concern that actions like this would raise student fees across Florida’s public higher education system. And that’s a justified concern.
It’s hard to compare tuition rates to similar schools that allow that auxiliary fund sharing because of cost of living differences across state lines and different facilities and funding schedules for universities. Comparing Florida State to Colorado’s tuition rates wouldn’t tell us anything about if the Florida public system will increase student fees.
But this hasn’t been that large of an issue as other states have adopted and continued with sharing auxiliary funds with athletics. I don’t see a big institutional problem, especially with the Florida Board of Governors being explicitly clear that this will not be renewed and will fully run its course by 2028.
After that, it’s up to the schools to figure it out themselves.
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