NCAA President Myles Brand correctly stated in the March 15 NCAA News that because the Association's academic reform effort is well under way, reform focus will shift to the financial aspects of college athletics. Indeed, interest in the "business of college sports" is at an all-time high. Such interest frequently begs the question, "What can be done to curb the financial arms race of college athletics?"

Laying aside the more important question of why intercollegiate athletics seems to be the only aspect of the American education system that is scrutinized under a financial microscope, the arms race issue isn't as clear as it may appear at first glance. Maybe there is an arms race and maybe not.

For example:

Maybe -- Since 1993, total operating expenses for a Division I-A institution has increased from an average of $7 million to more than $12 million -- an increase in excess of 70 percent. Beyond Division I-A, interest wanes, as do the total dollars involved. Nonetheless, Division I-AA total expenditures also have risen by more than 70 percent, from about $4 million to more than $7 million, and Division I-AAA from $3 million to about $6 million. The average Division II school with football is spending less than $3 million (less than $2 million without football), and Division III schools are about half that much.

Maybe not -- There are several factors that mitigate the issue of rising costs.

Athletics spending 10 years ago represented, on average, less than 4 percent of the total institutional operating budget. Athletics spending for the most recent fiscal year still averages less than 4 percent. Thus, if athletics spending has escalated, it has done so at the same pace as other spending on higher education.

When the most recent Division I-A averages are restated to eliminate the effects of inflation, the 10-year increase in spending is $2.6 million (from $7 million to 9.6 million restated dollars.) Thus, the real increase is a little more than one-third. (The U.S. Department of Labor's Consumer Price Index was used for the adjustment.)

All too often critics of athletics spending cite only the level of expenses, rather than examining the program's net cost -- that is, expenses reduced by revenues generated.

A significant portion of the increase in spending has been in women's programs, which have grown by 250 percent from less than $2 million to more than $5 million during this period in I-A. This increase is well justified and likely less than what is needed.

Student-athlete grants-in-aid represent 15 percent of total operating costs in Division I-A (more than 30 percent in Divisions I-AA and I-AAA.) The 59 percent growth rate of this expense line has contributed to the growth in overall expenses and is caused by two factors: (a) the increase in the number of student-athletes and (b) the increase in the cost of tuition and fees. The first of these represents the primary mission of college athletics, and the second is not within the control of athletics administration.

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Maybe -- One of the two primary focal points of the arms-race discussion is coaches' compensation, with the other being facilities. Salaries and benefits represent almost 30 percent of total operating expenses in Division I-A and an even higher portion of expenses in other divisions. Increases in this area have only slightly exceeded the overall average over the past 10 years (73 percent.) The well-publicized million-dollar coaches in football and men's basketball is anecdotal evidence of this increased spending. Further evidence was shed during the 2003 football season when our look at the 25 schools included in a weekly football poll revealed a total of 15 football coaches and 10 men's basketball coaches with salaries higher than the CEOs of their respective institutions.

Maybe not -- It is inarguable that the current level of coaches' compensation represents misplaced priorities. Nonetheless, salaries are market-driven. If a school seeks to hire the best accounting professor available, the market dictates the salary. The same is true when a school seeks to fill coaching positions. Average starting salaries for accounting faculty have risen fivefold since 1980, a significant portion of which has taken place since 1993. It also could be argued that the escalating coaches' salaries reflect the growth in popularity of football and men's and women's basketball, as well as increases in ticket sales and television revenue.

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Maybe -- Since we began conducting the revenues and expenses study for the NCAA in 1993, the most elusive of all cost items has been facilities construction and renovation. Many of these costs are reflected off the athletics budget, and total costs generally are financed through bond issues spread over a number of years. (With the assistance of the National Association of College and University Business Officers, as well as a Carnegie Mellon grant, measures are now under way to collect these data.) The anecdotal evidence is clear, however, that substantial sums of money are being invested in athletics facilities. The football facility at the University of Oregon and the basketball facility at Ohio State University are examples. And the multi-million dollar basketball practice facility at the University of Florida served to kick-start the drive for a similar facility at the University of Kentucky. Spending on athletics facilities is huge.

Maybe not -- Two years of studying the facilities issue has resulted in several possible reasons to believe that the recent activity in facilities is not all related to keeping ahead of one's peers. Following are some explanations for at least a portion of the spending.

Timing. Facilities are aging. Indeed, many stadiums and coliseums on the national scene are at the point in their life cycle at which they must either be replaced or renovated. The "Big House" at the University of Michigan was constructed in 1927 at a total cost of $1.1 million. The most recent major structural renovation was in the 1970s. Nebraska's Memorial Stadium, which now seats more than 77,000, was built in 1923 for $430,000. And Ohio State's Ohio Stadium, which is more than 80 years old and was built for $1.3 million, just received a three-year, $194-million renovation.

More timing. Much of the expansion of athletics facilities has taken place in recent years at a time when college athletics has enjoyed unprecedented popularity. Ticket demand has been increasing annually, and the pre-9/11 U.S. economy was strong. The timing was right to undertake such projects.

Funding. Much of the cost of expansion has been recovered through increased ticket sales and the leasing or sale of suites. Eighty percent of the renovation cost of Ohio Stadium was financed in this manner, and the University of Tennessee, Knoxville, asserts that the continuing expansion of Neyland Stadium has been financed in similar fashion.

Multi-use. Many of the facilities built in recent years are multi-use facilities, serving all students, faculty and staff, and not just varsity athletics. The $15 million recreation center built by Transylvania University to serve a student body of 1,000 illustrates this trend.

Campus-wide expansion. To a large extent, recent athletics facilities have been expanding at the same pace as other facilities on campus. The 1980s and 1990s saw record levels of expansion of residence halls, classroom buildings and administrative space, as well as stadiums and coliseums.

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Does the financial arms race exist? Maybe, maybe not. There is no question that there are excesses that result from recruiting wars and misplaced priorities. But lest we judge too quickly, we should remember that we are really talking about a relatively few schools. There are more than 1,100 institutions in the NCAA, 117 of which are in Division I-A. Of those I-A schools that report operating deficits, more than 60 percent report less than a $1-million loss. Indeed, it takes Kentucky about 10 days to spend the equivalent of a full year's budget at Division III Transylvania across town.

In addition, perhaps we should not judge an athletics program by its financial results unless we are prepared to do the same with other co-curricular programs. There are many more appropriate measures for an athletics program. And if college athletics, with all its intrinsic values, is worth having as a part of American academia, then it is worth paying for.

Daniel L. Fulks is the faculty athletics representative and director of the accounting program at Transylvania University. He also authors the biennial report "Revenues and Expenses of NCAA Intercollegiate Athletics Programs -- Financial Trends and Relationships."