I can’t decide which is more surprising: Democrats and Republicans in my home-state Florida Legislature agreeing on a high-profile economic issue, or me hoping they will copy a new California law.
Politics does not create new bedfellows as often as it used to. But sports – particularly college sports – is one realm where red and blue matter only when they are school colors. Hardly anything unites Americans today more than the spectacle of mostly penniless student-athletes being exploited by overpaid, self-serving administrators and coaches who alternate between pious platitudes and thinly veiled threats.
This is how it has come to pass that both the Democratic leader and a Republican member of the Florida House of Representatives have introduced bills for the coming session that would allow student-athletes to hire agents and to make money from endorsements, social media and other uses of their name and likeness.
The proposal follows the model of California’s Fair Pay to Play Act, which passed that state’s Legislature with overwhelming bipartisan support (and over the strident objections of the NCAA and the state’s colleges). Gov. Gavin Newsom signed the bill into law at the end of September.
The law does not require schools to treat student-athletes as employees, or to pay them at all, beyond the scholarships and modest cash stipends they may now receive. The only requirement is that schools cannot prevent an athlete from entering into endorsement deals with outside bidders. It does not even take effect until Jan. 1, 2023. By that time, every NCAA football player who is on the field this fall will have concluded his college career except for playoffs, barring serious injury or other interruption. This year’s freshman basketball players will be in the run-up to that spring’s March Madness, which of course is one of the cash cows the NCAA is trying to hide in its barn while pretending that the resulting revenue stream is merely the milk of academic human kindness. Virtually none of today’s sophomores, juniors or seniors will directly benefit from the new law.
California lawmakers designed the act this way to give the NCAA time to update its rules, since currently those rules conflict with the California statute. A 2023 start date gives college sports plenty of time to adapt. It is vastly more time than California gave the music industry when it upended its financial model, as I discussed in this space last week. Yet to say that the college community is ready to make a good-faith effort to look after its student-athletes is to discuss a completely different community than the one that exists here on Earth in the United States of America.
The two bills in Florida are similar to the California model. They are not copies of it, though. Either version would take effect sooner than California’s, in July 2020. The Florida version would also only permit enrolled students, rather than prospects, to sign endorsement deals. However, like the California law, Florida’s would prohibit the NCAA from preventing athletes from signing such deals and would allow the players to hire state-licensed agents.
Florida isn’t alone in taking California’s lead. Vox reported that lawmakers in more than dozen states have either proposed similar laws or expressed plans to do so. New York, Illinois, Pennsylvania and South Carolina are among the states on board. Some bills would go further than California in requiring schools to pay athletes directly, or to cover their health care costs after college.
Surprising no one, the NCAA has issued dire threats about what could happen if these laws pass. In a statement following the signing of the California bill into law, the NCAA said, “As more states consider their own specific legislation related to this topic, it is clear that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field for 1,100 campuses and nearly half a million student-athletes nationwide.” The association’s president, Mark Emmert, called the law an “existential threat” to college sports in a CBS Sports interview. Emmert further told the Indianapolis Star that the law will turn effectively athletes into employees. The NCAA threatened to bar California schools outright due to the fear that they would have an unfair recruiting advantage – almost certainly an empty threat, but one designed to scare those schools into opposing the law.
There is a plausible, yet not especially large, chance that the universities will succeed in challenging state laws. They might argue that these statutes infringe on congressional powers to regulate interstate commerce – even if the commerce in question is the collusive appropriation of student-athletes’ off-the-field economic opportunities. A Supreme Court ruling on the issue probably could not happen before today’s middle schoolers finished their college careers. So the simplest fix is for Congress to pass legislation along the lines of California’s. The idea is not far-fetched; Republicans and Democrats voted to pass the Fair Pay to Play Act unanimously in the California Assembly, and nearly unanimously in the state Senate. If the measure can get such strong bipartisan support in a place like California – or Florida – Congress is not out of the question.
For colleges, a federal law is probably the worst-case scenario. Not only would it end the NCAA’s argument against a “patchwork” of different laws nationwide, but it could go even further than California’s law did. For example, Congress might explore whether the schools should be paying their athletes. Or it might clarify when and how antitrust laws apply to the NCAA, both overall and in its various conferences. Such an outcome might make the NCAA wish it had quietly changed the rules on its own terms rather than suing every state that passes a law like California’s, or encouraging individual colleges do so.
Some well-meaning parties, as well as some parties whose good intentions are debatable, assert that student-athletes should be allowed to make money on the side, but that the money should be held in trust for them. Once his or her college career ended, the athlete would gain access to the accrued funds. A few points are worth keeping in mind on this topic.
First, most student-athletes are at least 18 years old, and some are older than 21. This makes them legal adults. There are many adults who would benefit greatly from professional advice and management of their money. This is what you would expect me to say, since my colleagues and I are financial advisers. But adults deserve the right to make their own decisions, including the decision to seek or forgo financial advice.
Second, colleges may think they ought to be the ones collecting and holding such funds on behalf of their student-athletes (inevitably taking a cut for their services). Bear in mind that these are the same institutions that: a) have allowed their own costs, and resulting charges to their students, spiral out of control for decades; b) have never flinched from encouraging those students from taking on mountains of debt they often have little prospect of repaying from the earnings generated in their field of study; and c) call my home at least three nights every week to beg for donations, a consequence of the fact that my wife and I hold degrees from four different institutions.
After decades of appropriating the skills and efforts of student-athletes for their own gain, these schools now want to manage their money?
A better idea, although one that I hope will not divert lawmakers from the bigger picture, might be to require those who pay student-athletes and other performers who are still minors in blocked accounts. These would be unavailable to the students, their parents or anyone else until the students reach adulthood. This, too, is a model California set out, albeit many decades ago in a statute known as the Coogan Act. Named for Jackie Coogan, a silent-era child actor who later sued his parents over mismanagement of his earnings, the Coogan Act requires the use of such blocked accounts to protect child performers’ assets until they come of age. (My colleague Ben Sullivan discussed Coogan accounts in more detail in our firm’s Sentinel newsletter last year.)
The $14 billion college sports industry wants to pretend that it has some right to athletes’ fame, because the athletes wouldn’t be famous without the colleges. Even this is a weaselly misstatement. In most college sports, athletes are scarcely famous at all. And in the high-profile sports of football and basketball, there is already media attention to students at the high school level, when they sign letters of intent to play for a particular school before setting foot on campus. These kids have been honing their crafts practically since they learned to walk, at great effort and expense – theirs and their families’. The schools then swoop in and announce that if these athletes want to play, they can’t get paid.
It’s not right. It was never right. When something so universally offends the sensibilities of an otherwise polarized body politic, it is time to act. Sometimes that means looking for models and allies in places you typically wouldn’t.
Posted by Larry M. Elkin, CPA, CFP®
photo by Ken Lund
I can’t decide which is more surprising: Democrats and Republicans in my home-state Florida Legislature agreeing on a high-profile economic issue, or me hoping they will copy a new California law.
Politics does not create new bedfellows as often as it used to. But sports – particularly college sports – is one realm where red and blue matter only when they are school colors. Hardly anything unites Americans today more than the spectacle of mostly penniless student-athletes being exploited by overpaid, self-serving administrators and coaches who alternate between pious platitudes and thinly veiled threats.
This is how it has come to pass that both the Democratic leader and a Republican member of the Florida House of Representatives have introduced bills for the coming session that would allow student-athletes to hire agents and to make money from endorsements, social media and other uses of their name and likeness.
The proposal follows the model of California’s Fair Pay to Play Act, which passed that state’s Legislature with overwhelming bipartisan support (and over the strident objections of the NCAA and the state’s colleges). Gov. Gavin Newsom signed the bill into law at the end of September.
The law does not require schools to treat student-athletes as employees, or to pay them at all, beyond the scholarships and modest cash stipends they may now receive. The only requirement is that schools cannot prevent an athlete from entering into endorsement deals with outside bidders. It does not even take effect until Jan. 1, 2023. By that time, every NCAA football player who is on the field this fall will have concluded his college career except for playoffs, barring serious injury or other interruption. This year’s freshman basketball players will be in the run-up to that spring’s March Madness, which of course is one of the cash cows the NCAA is trying to hide in its barn while pretending that the resulting revenue stream is merely the milk of academic human kindness. Virtually none of today’s sophomores, juniors or seniors will directly benefit from the new law.
California lawmakers designed the act this way to give the NCAA time to update its rules, since currently those rules conflict with the California statute. A 2023 start date gives college sports plenty of time to adapt. It is vastly more time than California gave the music industry when it upended its financial model, as I discussed in this space last week. Yet to say that the college community is ready to make a good-faith effort to look after its student-athletes is to discuss a completely different community than the one that exists here on Earth in the United States of America.
The two bills in Florida are similar to the California model. They are not copies of it, though. Either version would take effect sooner than California’s, in July 2020. The Florida version would also only permit enrolled students, rather than prospects, to sign endorsement deals. However, like the California law, Florida’s would prohibit the NCAA from preventing athletes from signing such deals and would allow the players to hire state-licensed agents.
Florida isn’t alone in taking California’s lead. Vox reported that lawmakers in more than dozen states have either proposed similar laws or expressed plans to do so. New York, Illinois, Pennsylvania and South Carolina are among the states on board. Some bills would go further than California in requiring schools to pay athletes directly, or to cover their health care costs after college.
Surprising no one, the NCAA has issued dire threats about what could happen if these laws pass. In a statement following the signing of the California bill into law, the NCAA said, “As more states consider their own specific legislation related to this topic, it is clear that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field for 1,100 campuses and nearly half a million student-athletes nationwide.” The association’s president, Mark Emmert, called the law an “existential threat” to college sports in a CBS Sports interview. Emmert further told the Indianapolis Star that the law will turn effectively athletes into employees. The NCAA threatened to bar California schools outright due to the fear that they would have an unfair recruiting advantage – almost certainly an empty threat, but one designed to scare those schools into opposing the law.
There is a plausible, yet not especially large, chance that the universities will succeed in challenging state laws. They might argue that these statutes infringe on congressional powers to regulate interstate commerce – even if the commerce in question is the collusive appropriation of student-athletes’ off-the-field economic opportunities. A Supreme Court ruling on the issue probably could not happen before today’s middle schoolers finished their college careers. So the simplest fix is for Congress to pass legislation along the lines of California’s. The idea is not far-fetched; Republicans and Democrats voted to pass the Fair Pay to Play Act unanimously in the California Assembly, and nearly unanimously in the state Senate. If the measure can get such strong bipartisan support in a place like California – or Florida – Congress is not out of the question.
For colleges, a federal law is probably the worst-case scenario. Not only would it end the NCAA’s argument against a “patchwork” of different laws nationwide, but it could go even further than California’s law did. For example, Congress might explore whether the schools should be paying their athletes. Or it might clarify when and how antitrust laws apply to the NCAA, both overall and in its various conferences. Such an outcome might make the NCAA wish it had quietly changed the rules on its own terms rather than suing every state that passes a law like California’s, or encouraging individual colleges do so.
Some well-meaning parties, as well as some parties whose good intentions are debatable, assert that student-athletes should be allowed to make money on the side, but that the money should be held in trust for them. Once his or her college career ended, the athlete would gain access to the accrued funds. A few points are worth keeping in mind on this topic.
First, most student-athletes are at least 18 years old, and some are older than 21. This makes them legal adults. There are many adults who would benefit greatly from professional advice and management of their money. This is what you would expect me to say, since my colleagues and I are financial advisers. But adults deserve the right to make their own decisions, including the decision to seek or forgo financial advice.
Second, colleges may think they ought to be the ones collecting and holding such funds on behalf of their student-athletes (inevitably taking a cut for their services). Bear in mind that these are the same institutions that: a) have allowed their own costs, and resulting charges to their students, spiral out of control for decades; b) have never flinched from encouraging those students from taking on mountains of debt they often have little prospect of repaying from the earnings generated in their field of study; and c) call my home at least three nights every week to beg for donations, a consequence of the fact that my wife and I hold degrees from four different institutions.
After decades of appropriating the skills and efforts of student-athletes for their own gain, these schools now want to manage their money?
A better idea, although one that I hope will not divert lawmakers from the bigger picture, might be to require those who pay student-athletes and other performers who are still minors in blocked accounts. These would be unavailable to the students, their parents or anyone else until the students reach adulthood. This, too, is a model California set out, albeit many decades ago in a statute known as the Coogan Act. Named for Jackie Coogan, a silent-era child actor who later sued his parents over mismanagement of his earnings, the Coogan Act requires the use of such blocked accounts to protect child performers’ assets until they come of age. (My colleague Ben Sullivan discussed Coogan accounts in more detail in our firm’s Sentinel newsletter last year.)
The $14 billion college sports industry wants to pretend that it has some right to athletes’ fame, because the athletes wouldn’t be famous without the colleges. Even this is a weaselly misstatement. In most college sports, athletes are scarcely famous at all. And in the high-profile sports of football and basketball, there is already media attention to students at the high school level, when they sign letters of intent to play for a particular school before setting foot on campus. These kids have been honing their crafts practically since they learned to walk, at great effort and expense – theirs and their families’. The schools then swoop in and announce that if these athletes want to play, they can’t get paid.
It’s not right. It was never right. When something so universally offends the sensibilities of an otherwise polarized body politic, it is time to act. Sometimes that means looking for models and allies in places you typically wouldn’t.
Related posts: