Louisiana’s college sports programs are losing money. Can sales taxes save them?

More recent fiscal analyses from the University of Louisiana System, which includes seven schools with Division I programs, show the problem is even worse. Every athletic department essentially carried a multi-million dollar debt that placed a significant burden on its university, as schools had to use other revenue, including tuition and student housing fees, to cover the gap, administrators have said.  

In a search for a solution, university leaders are considering setting up economic development districts, like one LSU recently created around its Baton Rouge campus, that would give their school access to sales tax revenue already being collected. 

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The spending problem

University leaders, school system board members and state legislators readily acknowledge athletics spending is a problem for Louisiana universities. 

The situation is only becoming more acute with revenue sharing, which allows Division I athletic programs to directly pay their athletes. 

A full financial report of the first year with revenue sharing expenses won’t be released until January, but amounts UL System schools report spending on their athletes range from $400,000 at Northwestern State University, which has an athletics budget of around $15 million, to $726,000 at the University of Louisiana at Lafayette, where the sports budget is around $46 million. 

The issue is not unique to Louisiana. A recent report from the U.S. Government Accountability Office found 94% of the roughly 365 Division I athletic programs spend more money than they make. Their sports budget shortfall has grown by over $10 million over the previous decade.

The report found universities cover the gap with student fee and tuition revenue, in some cases federal student financial aid. Students at non-power conference schools, which includes the entire UL System, contribute on average between $1,700 and $2,700 annually to their athletic departments, the report found. In some cases, that includes a student fee levied to directly support athletics. 

Regardless of the source, reliance on student support is likely to become an issue for athletic departments as colleges approach an enrollment cliff. 

Louisiana’s population is shrinking and its birth rate is declining. The state is projected to see a 7.5% to 15% decrease in students who attend college by 2029, the Public Affairs Research Council detailed three years ago in a report on falling enrollment in Louisiana. 

The budget deficits have many in Louisiana on edge as schools struggle to make ends meet, impacting campus employment and student experiences. 

UL Lafayette’s $46 million in athletics spending put them in the red by $13 million, contributing significantly to a fiscal crisis that has halted the university’s academic aspirations. The school had to lay off staff and still struggled to make payroll, and its research faculty could not travel to conferences to share their findings because promised funding was unavailable. 

An athletic department shortfall also contributed to the crisis at the University of New Orleans, which subsequently led to the struggling school being transferred back to the LSU System to become LSU New Orleans. The department faced a nearly $5 million deficit and was ordered to slash its budget 25%. 

On a smaller scale, athletics impacted the University of Louisiana at Monroe’s budget crunch, though the university’s smaller $6 million shortfall was more easily mitigated. 

Louisiana lawmakers have watched university finances worsen over the past several years and have introduced measures to help stabilize budgets, though they have not gone as far as to increase state support for higher education that has dramatically dropped over the prior 15 years. 

Changes to state law have given universities control over their tuition and fees and access to a fund for campus maintenance construction projects that aims to dole out up to $2 billion over 10 years. 

Legislators also diverted a portion of sports gambling tax money to schools to spend on things that help student athletes, with each Division I program receiving about $2 million annually. 

The legislature has also initiated more stringent financial monitoring, including mandated quarterly reports from each university that will include athletics spending, as well as a report from the Board of Regents examining athletics financing and forecasting the potential impact of that spending. 

How Louisiana colleges will use an infusion of tax money for their sports programs

<h3>Solution pitched</h3>

This year, lawmakers approved a measure university officials hope will be a game changer. 

Act 374 by Sen. Stewart Cathey, R-Monroe, gives every state university the ability to set up an economic development district. Only LSU, Southern and UL Lafayette were previously allowed to do so. 

Cathey said the districts would redirect sales taxes already being collected within their confines for use by the university, though they are also allowed to levy new taxes. Though Cathey said his legislation was not specifically designed with athletics in mind, university officials see it as an opportunity to boost their sports programs. 

“If you think about the economic impact that athletic athletic departments have on their local economy, how are we capitalizing on those potential tax dollars that are out there and the economic development that’s being driven by the athletics departments?” Louisiana Tech athletic director Ryan Ivey said in an interview. 

University of Louisiana System President Rick Gallot said he anticipates each of its schools will eventually set up an economic development district. 

Though they could offer a budget boon, the districts have not been without their challenges. 

LSU’s district is the subject of a lawsuit challenging its constitutionality. Its boundaries were explicitly drawn to exclude any residential areas, thus dodging the requirement that no new taxes can be levied without approval of voters who live in the area subject to them. 

Cathey’s law specifies new economic development districts can only include university property. He said his intention was that no taxpayers live in the districts, though that could spell trouble. 

“The basic principle here is no taxation without representation,” said attorney William Most, who’s representing plaintiffs in the LSU case. “If other schools follow the law, they are less likely to have trouble. If they try to follow LSU’s lead in trying to cut voters out of the approval process, they are more likely to have trouble.” 

University athletic departments are looking at other ways to reverse their shortfalls. 

Louisiana Tech left Conference USA to join the Sunbelt Conference, which will save the university approximately $1 million annually, Ivey said.

On the revenue side, Louisiana universities are embracing corporate sponsorships like jersey patches and facility naming rights. Though the exact revenue figures from these deals are difficult to nail down, University of Louisiana at Monroe athletics director SJ Tuohy said each can be counted on to bring in at least six figures annually for a smaller program like his. 

Schools are also looking to copy LSU’s success in hosting non-athletic events in their sports venues. When country music star Zach Bryan played Tiger Stadium, for example, the athletic department brought in over $17 million. 

One solution that appears to be off the table for now is for Louisiana’s smaller schools to drop to a lower division. 

A move to NCAA Division II would lower schools’ scholarship and travel costs, while dropping to Division III could eliminate scholarship costs entirely. 

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