Penn State Sanctions: Financial Issues Could Haunt Athletic Program for Years
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Penn State's punishments are numerous and severe, and as mentioned earlier, they might even be enough to warrant a voluntary suspension of the program. But there's one sanction that's going to directly affect the entire athletic department, and probably long after the terms of the sanctions have passed—the fine.
Penn State is subject to $60 million in fines from the NCAA, to be paid over five years, all going to a fund for charities that prevent underage sexual abuse and survivors of that abuse. That's a miraculous amount of money for a nonprofit sector that really doesn't see a whole lot of money very often, but it's also, frankly, more money than Penn State has to throw around.
Penn State's annual revenues vastly exceed the $12 million a year the NCAA is going to extract. Heck, Penn State's share of the Big Ten's television revenue (which, thankfully, the conference never felt compelled to touch) exceeds that. That's good, too, because a great amount of Penn State's money comes from an annual state grant, and per the Reading Eagle, that money isn't fine-paying money:
The university's annual state grant has strings attached, said state Sen. David G. Argall, a Schuylkill County Republican who represents part of Berks County and sits on the Senate Appropriations Committee.
It must be used for education-related expenses or research, he said.
"They absolutely cannot use state taxpayer dollars to pay the fine," Argall said. "That much is very clear."
What's the most damaging part of Penn State's sanctions?
Thus, Penn State is probably going to make up for it by just scaling back on everything else in the athletic department, since football is the cash cow and everything else isn't, right? So this just hurts other programs and it's another instance of the NCAA ultimately punishing the wrong people, right?
Well, wrong. The NCAA specifically ruled that Penn State wouldn't be able to do that. From the official statement: "No current sponsored athletic team may be reduced or eliminated in order to fund this fine."
In other words, this is going to have to come at the expense of the football team, and that will likely include borrowing against future earnings of the football program in order to stick with the NCAA's mandate of a five-year payback.
Does that sound troubling, especially with the future of Penn State's football program in doubt? It certainly sounds troubling to Moody's Investors Service, who are poised to drop Penn State's credit rating as a result. Per the Associated Press (via SI.com):
Moody's Investors Service said Monday it may cut its rating on Penn State's credit as the university deals with the fallout from the Jerry Sandusky child sexual-abuse case and sanctions against the school's football team.
The agency has an 'Aa1' rating on Pennsylvania State University's credit. That is its second-highest possible rating. The firm said a recent report by former FBI Director Louis Freeh and sanctions levied by the NCAA could hurt student enrollment and fundraising for the university, and the school also faces uncertainty in the form of ongoing federal and state investigations.
Penn State has about $1 billion in debt, Moody's said. A downgrade could make it more expensive for Penn State to borrow money, which would be another long-term cost in a scandal that has already cost the school immeasurably.
And all of this is before the civil lawsuits roll in, buoyed by the conclusions of the Freeh report and Penn State's affirmations of those conclusions as part of the NCAA consent decree.
Even Penn State's secondary sources of money are balking at this situation. According to StateCollege.com, State Farm Insurance indicated that it was pulling its sponsorship of the football team, which includes radio ads and stadium signage. It wasn't disclosed how much that's costing Penn State—remember, Graham Spanier cited sponsorships as one reason why Penn State shouldn't be subject to open records laws—but now is not the time for money to dry up for this athletic department.
Or maybe it is. Maybe, as Jason Gay of the Wall Street Journal notes, the money was the problem in the first place. Maybe a de-emphasis on big-money athletics is what the collegiate atmosphere needs. But that's not Penn State's problem to fix by itself, especially as the rest of the Big Ten continues swimming in its Scrooge McDuck vaults of gold coins. And good luck getting that to stop.
So let's assume it doesn't stop, because the accumulation of great wealth never does. Let's assume everyone in the Big Ten, Penn State included, continues with this financial arms race in athletics. Penn State's not going to be playing on the same level as the rest of the conference for a long time.
And this isn't just pocketbook video game playing here; money equals better facilities, better resources, better everything for the team (except for paying players anything, obviously). If Penn State can't keep up there, it can't keep up in football, period, and that's the type of disparity that can (and likely will) haunt the athletic program long after it's allowed to start putting 85 guys on scholarship again.
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