Three major Kansas universities will be scrambling for money to keep their athletics programs competitive under a proposed class-action settlement that could force them to share revenue with student athletes, Kansas lawmakers were told Friday.
Doug Girod, chancellor for the University of Kansas, laid out the difficult financial future that lies ahead in the aftermath of a class-action lawsuit alleging that NCAA rules were anti-competitive and violated antitrust laws in the way the athletes were denied income.
Joined by officials from Kansas State and Wichita State, Girod explained the implications of $2.8 billion in damages that would be shared across the NCAA and five major athletic conferences such as the Big 12, the SEC, the ACC and the Big 12.
But that same settlement, which received preliminary approval from a federal judge last fall, also would allow schools to start paying players next school year. A final hearing is set for this April, the day of the NCAA championship basketball game.
Each institution would be allowed to allocate up to $20.5 million to its athletes, which equals 22% of television and other revenue at the largest schools.
There’s an automatic escalator of 4% built in for years two and three and it will be recalculated every three years during the 10-year life of the settlement.
Ultimately, school officials said the cap could grow to $33 million.
“We now own this process,” Girod told the House commerce committee Friday.
“We will not be paying athletes,” he said. “We will be sharing our revenue with these athletes. That money, you don’t have to spend it. Just like you don’t have to do a lot of things in our world.
“It’s just a question of whether you want to be competitive or not and whether you want to continue to drive the economy in the way that we do or not,” he said.
Girod added, “We also know that to be competitive in this new environment we’re going to need to enter into this new revenue sharing model, which really essentially adds another $20 million to our budgets and we have no revenue stream to support that.”
He said the schools have done a good job of largely running their athletic programs independently, but the revenue sharing issue is not one they will likely solve on their own.
Republican state Rep. Sean Tarwater, chair of the commerce committee noted, that KU’s athletic revenues generally exceed expenses.
He asked Girod if the school’s athletics budget would fall into the red because of the proposed revenue sharing arrangement.
“Yes,” he said.
“This is an additional $20 million into everybody’s budget with no way to pay for it because they’re already using what they have to break even,” he said.
He said KU athletics writes an $18 million check to the university for tuition, room and board as well as some other services for student athletes.
On a national level, he said schools are grappling with how to deal with what essentially means adding millions more to their athletics department budget if they want to compete.
“Everybody’s scrambling. This is a late 2024 settlement. So, this is new on everybody’s plate, and yet it goes into effect in July.”
Girod said KU is already cutting $15 million out of its athletics budget even before it has to address the anti-trust settlement.
“We’re trying to be as lean and mean as we can. We’re looking for new revenue opportunities, obviously. We’re looking everywhere we can to figure out how to do this.”
Then Tarwater turned to the tricky issue of state funding.
As a member of the House Appropriations Committee, Tarwater noted that none of the schools before the committee sought funding for athletics.
He asked Girod directly whether that would change in the future if the schools want to remain competitive.
“You know, the short answer is yes,” Girod said. “We don’t have an ask for you today. We haven’t even had time to really get together to figure this out.”
He said there haven’t been conversations with the Board of Regents, which is where budget discussions for higher education start.
He added that the judgment wasn’t even tentatively approved until the fall.
“We’re going to have to be figuring this out pretty quick,” he said. “There is no new revenue stream, and we cannot solve this on our own.”
Kansas State Athletic Director Gene Taylor said his department has been self funded and the school has been fortunate to have generous donors for capital investments.
“At some point, the amount they’re going to be willing to help us is going to be limited,” Taylor told the committee.
“We’re looking at every revenue source we possibly we have from the external side, how can find new revenue sources, how can we be creative.
“Obviously controlling expenses is big,” he said.
Taylor said the school is trying to educate donors about the implications of what the settlement means for the competitiveness of the athletics program.
“Other states are looking at this and are looking at funding their athletics programs,” he said.
“Texas and Oklahoma and some of these states surrounding us are looking at ways to help their athletic programs through some funding,” he said.
Girod said there might be some endowment money available, but 80% of it is restricted, adding that it wouldn’t reach the level that’s needed to solve the approaching problem.
Girod said he had no interest in imposing more fees or raising tuition to pay for athletics.
“We have worked very hard with you all to keep tuition down to make our schools affordable,” he told the lawmakers.
“We’ve heard loud and clear from you all that should be Job One,” he said.
“We don’t anticipate increasing prices to support our programs,” he said.
Wichita State Athletics Director Kevin Saal said he couldn’t foresee his school sharing $20.5 million with its 300 athletes in 16 sports.
Unlike KU and K-State, Wichita State does not field a football team.
Nevertheless, Saal said the school’s revenue sharing would still likely be on par with the percentage of revenue that K-State and KU would be faced with spending to recruit and retain elite-level athletic talent.
