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Study concludes shuttered football program at UAB made money

A study released Thursday by an independent economic analysis firm challenges the claim by University of Alabama-Birmingham officials that the football program had to be dropped for financial reasons, asserting that, in fact, the sport makes money for the university -- and that surpluses would grow in the coming years.

The report comes in response to the move by the Conference USA school to shutter the sport on the grounds that it could no longer afford to financially support football, especially with schools moving to cover the full cost of attendance with athletic scholarships. UAB also eliminated rifle and bowling.

"We find that the three sports in question did not cost the university anywhere near the $3.75 million indicated on UAB's accounting statements," wrote Dan Rascher and Andy Schwarz, partners of Bay Area firm OSKR. "Instead, after making the sort of adjustments suggested by the economics literature, we conclude that the three sports were effectively break-even to slightly positive. Football and bowling showed a modest positive return for 2013-14, the last year for which complete data was available. Rifle showed a deficit, but the three-sport balance was positive to the tune of $75,000."

Rascher and Schwarz were consultants for the plaintiffs in the Ed O'Bannon v. NCAA trial, which produced a favorable ruling for college athletes and opened the door for schools to offer cost-of-attendance scholarships. On the stand, Rascher had challenged the accounting methods used by the NCAA to assert that most athletic departments in major conferences lose money. He and Schwarz used the same alternative methods of analysis to conclude that UAB is overstating expenses and understating revenues.

They wrote that athletic scholarships cost UAB 65 percent less than their listed prices, as any tuition number assigned to that scholarship is not a hard cost to the university. Additionally, they argue that financial benefits of being a member of Conference USA are "far superior" to any alternate affiliation with a nonfootball conference because of media revenues that -- while not at the level of the larger conferences -- are valuable and will continue to grow with the College Football Playoff driving even more money into college sports.

Schwarz and Rascher say there will even be enough money to cover athletic scholarships at the cost-of-attendance level, which includes incidental expenses above tuition, board, books and fees. Conference USA, following the lead of the larger conferences, voted this year to allow programs to offer full scholarships if they want. The NCAA also has lifted controls on how much programs can feed their athletes.

"We conclude that going forward, anticipated improvement in ticket sales from 2013-14 levels and new College Football Playoff revenues will outpace new expenses from Cost of Attendance stipends and unlimited food allowances," they wrote. "Once these new revenues and expenses kick in, we anticipate the aggregate annual surplus from football, bowling, and rifle would exceed $500,000, even without including the anticipated but hard-to-quantify benefits to admissions and enrollment, donations, and media exposure."

OSKR began looking at UAB finances after it was hired on March 7 to prepare a report for the UAB athletic task force. A week later, the $80,000 contract was canceled by the university over its concerns that OSKR would be biased in its approach. OSKR continued with its work anyway. The 156-page report released Thursday is product of that analysis and is likely to stir debate about the decision to drop football. When announced last year, players and boosters reacted angrily, and on a national level, UAB was seen as a symbol of what could come of college sports as athletes gain access to the revenues they help generate for athletic programs.

Kellee Reinhart, spokesperson for the University of Alabama Board of Trustees, said the board has no comment on the OSKR study.

OSKR says its analysis, based on UAB finances and national studies on the economics of college sports, was calculated to produce conservative estimates. If more generous assumptions are made about anticipated revenues and expenses, the annual surplus could exceed $2.2 million.

Like many universities, UAB has drawn increasing revenue from student fees and other forms of university support to bolster its competitive and financial objectives. CBS Sports last week reported that in 2012-13, 64 percent of UAB's athletic budget came from those sources. The OSKR analysis assumes that the three sports under study would receive none of that institutional support.