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College Coaches' Salaries and the Cost of Doing Business

by on July 17, 2018 4:30 AM

On May 25, Penn State filed its annual Right-to-Know Law Report with the governor’s office, the General Assembly, the Auditor General and the State Library. It then takes a few weeks to get released to the public, and when it invariably does, it makes the news.

That it makes the news is a relatively recent phenomenon. Because Penn State is not a Section 501(c)(3) organization, it is not required to file an annual Form 990 return with the IRS. The Form 990 asks charitable organizations and foundations to list their highest paid employees and contractors, and because this information is then made public through various websites you can easily find out how much an organization’s top earners make.

But since Penn State is not a 501(c)(3) organization it did not file a Form 990 or any other document that would allow the public access to such salary information. Back in those “dark ages” there was always speculation among the denizens of Happy Valley as to who was at the top of the income pyramid at dear old State.

Then a decade ago, the Right To Know Law, Act 3 of 2008, was approved by the Gov. Ed Rendell. This law required the four state-related institutions (Temple University, University of Pittsburgh, Pennsylvania State University, and Lincoln University) to report to the state all the information on the Form 990 as well as the salaries of all officers and directors, and the highest 25 employee salaries who are not officers and directors. And they had to do it by May 30 of each year (hence Penn State’s filing date of May 25 above).

Suddenly all the “who makes how much” speculation was put to rest.

So it was that a little over a week ago many news outlets, including this one, reported Penn State’s latest filing and who the top paid employees at Penn State are. Or were. One thing to keep in mind about these reports is they are old news. Since Penn State’s fiscal year ends on June 30, the information they file the following May is over a year old by the time we, the public, get our grubby gossip-mongering hands on it. The salaries reported a week ago were for the period from July 1, 2016 through June 30, 2017. It’s now July 17, 2018 – more than a year later.

However, the important thing for all of us grubby gossip-mongers is that we now know who was at the top of that payment pyramid in 2016-17. As if there was ever much doubt.

Penn State Head Football Coach James Franklin is listed on page 8 of the Form 990 section of that report as receiving $5,260,471 of reportable compensation. Which is almost exactly three times the amount reported for the next closest person. That would be the CEO of Hershey Medical Center, A. Craig Hillemeier, who earned $1,750,608 in reportable compensation. In what I’m sure is amusing to each of these gentlemen, the report also lists that each spends an average of 50 hours per week at work. I’m guessing that number is very low for both of them.

On the page immediately prior, Penn State President Eric Barron is listed as receiving $1,027,113 of compensation. Imagine that dichotomy – you are the head of a $6 billion-a-year organization and someone at least two rungs below you on the corporate ladder makes five times more than you.

I present this information for those of you who bemoan this apparent contradiction for the mission of Penn State. And for almost every other large Division I football university. It’s extremely common for the head football coach at these schools to be the highest-compensated person. And the amount these coaches get paid continues to grow. Salaries, apparel company fees, bonuses, appearance fees… no sooner does one school announce they either hired or retained a head coach and are paying them an enormous salary, and you think no school could possibly justify paying someone more, that, well, a school does pay someone more.

And every year these reports come out, especially now with the focus on concussions and their after-effects, at Penn State and other schools the questions arise – should we continue with football? Has it gotten too big and too dangerous? Are we paying these colossal wages to coaches for what is nothing more than a game?

Luckily we have a Penn State president who has taken this situation to heart, weighed in on the subject, and taken action. Here are his thoughts:

Athletic contests became so spectacular that they quickly and in alarming measure attracted the attention of the public. Gate receipts grew, and gate receipts at institutions whose teams won the greatest number of games, exceeded the gate receipts at other institutions. This seems to make it desirable that there should be set up at each institution every possible facility designed to increase the chances of victory. Competition became keen for skilled coaches. Salaries for these men mounted in direct relation to their success in winning games. Great stadiums were built, involving millions of dollars. The time and energy of student players were so completely absorbed that they remained students in name only. Pressure was brought to bear upon institutions to offer subsidies to promising young athletes. Serious abuses developed from which students suffered and which compromised the character and reputation of American colleges and universities. The spirit of good sportsmanship departed. The futility and viciousness of the whole situation began to be apparent to all thinking persons.

Those are the words of Penn State President Ralph Dorn Hetzel, the 10th president of Penn State, who served from 1927 until 1947.

And what was done about it at that time? Many other scholarly writers, including emeritus University Archivist Lee Stout have covered this subject before, but here’s the CliffsNotes version: Before the 1930 season Penn State got rid of their 75 athletic scholarships, football coaches were given academic rank and placed under the supervision of a non-coaching director, and players no longer received special tutoring.

And what happened?

A football team that had compiled a 65-30-7 record under coach Hugo Bezdek in the preceding 12 years, went 47-44-7 over the next 12 years, including five losing seasons. And they played a schedule of opponents many considered significantly inferior to those before. Fans were unhappy.

Guess what? In May 1949, Penn State’s Board of Trustees voted to bring back football scholarships. In the immortal words of Paul Harvey, you know the rest of the story.

So for those out there who find fault with coaches’ salaries and the “business” of college football – and Penn State is passionate about pointing out that the entire athletic department is self-funded and no tax or tuition dollars support it – college football has been a big business for more than a hundred years. Athletics is an integral part of the collegiate experience. If you don’t want your tax or tuition dollars spent on it, then athletic departments need to be self-sustaining and football is the cash cow that drives the business. So enjoy the show or stop paying attention, because chances are good those coaches salaries are just going to continue getting larger and larger.

Maybe we should all consider a career change?

John Hook is the president of The Hook Group, a local management consulting firm, and active in several nonprofit organizations. Previously John spent 25 years in executive, management and marketing positions with regional and national firms. John lives in Ferguson Township with his wife Jackie and their two children.
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