Under a bill proposed in the California State Assembly, state colleges and universities would be required to share a percentage of revenue with athletes.
Kirby Lee/USA Today Sports
California, the state that spearheaded comprehensive name, image, and likeness (NIL) reform, is now seeking to advance the rights of college athletes one step further — with revenue sharing.
Assemblyman Chris Holden, a Pasadena Democrat, on Thursday introduced the College Athlete Protection Act, legislation that could fundamentally change the economics around college athletics.
The College Athlete Protection Act requires state colleges and universities to share a percentage of revenue with athletes participating in football, men’s basketball, and women’s basketball. Payment amounts are based on how much revenue the software earns on an annual basis, according to the text of the invoice it was shared with Sports Illustrated before Thursday’s announcement.
Bill Association Code 252 (AB252), crediting a portion of an athlete’s pay to graduation; It does not consider working athletes for their universities; requires schools to provide medical care and scholarships to athletes after they are eligible; It calls for, in severe punishment, athletic directors to be suspended for at least three years if they eliminate player rosters, cut scholarship amounts, or discontinue athletic programs.
“It’s no shock that collegiate athletes sustain injuries on the field, on the court, or in the game/game,” Holden said in a statement to SI. “What is shocking is the lack of protections that help athletes when they are down, or too afraid to say anything because of the repercussions, losing scholarships and ultimately losing a promising career. That ends now, with AB252.”
The legislation, which falls amid an athlete-rights movement that has brought sweeping changes to long-standing NCAA policies, touches on a raging issue creeping through college sports. The revenue-sharing debate has gained momentum as revenue growth in the college sports industry continues to expand with multimillion-dollar football and basketball deals.
Similar to its no-education legislation, California could put its universities in a precarious position. The College Athlete Protection Act would require them to break NCAA rules in what could be another blow to the organization’s crumbling rule for amateurs. California became the first in a series of states to pass laws allowing college athletes to receive compensation from the NIL, a move that forced the NCAA to overturn longstanding taboos on the issue.
This new law is another insult to the current NCAA regulations. The organization, made up of the schools themselves, determines what universities can offer athletes in tuition and cost of attendance. Direct payment to athletes – known as “pay-to-play” – is prohibited.
While a similar bill failed last year in the California State Senate, notably over gender equality concerns, this amended version provides schools with more flexibility in complying with both Title IX and revenue-sharing provisions, and its sponsor, Holden, is the president. From the powerful Appropriations Committee of the State House. These factors generate optimism in this version that passes through the bicameral California legislature, which is controlled by Democrats.
The bill has strong support from the National College Players Association (NCPA), an athletic advocacy group backed by the US Steelworkers and led by former UCLA linebacker Ramoji Homma. The organization is responsible for a years-long vigorous campaign for athletes to get a piece of the cash pie.
“The status quo in NCAA sports is abusive, deadly, and exploitative,” Homma said in a statement to SI. “This bill will ensure that collegiate athletes have access to critical protections and can participate in a fair amount of the revenue they produce in a manner that supports certification completion.”
According to the bill, payments to athletes are set at $25,000 per year, but any excess money — it could be in the millions — would be put into a trust so the players could earn money upon completion of their studies. From the time they become eligible for college, they will have six years to graduate or the funds will be forfeited.
The bill states that schools must share revenue with athletes who generate twice the revenue that those sports spend on athletic scholarships. In most schools, these sports include football, men’s basketball, and women’s basketball.
Athletes will earn 50% of their sport’s revenue, but this number is offset by the amount they receive in athletic scholarships. The school will be required to pay the difference to the athletes.
For example, according to 2018 budget figures submitted to the US Department of Education, USC football brought in $50 million in revenue. The school has paid out about $6.3 million in scholarships. This leaves a $19 million gap between the amount paid in scholarships ($6.3 million) and 50% of the sport’s total revenue ($25 million).
According to the bill, USC would be required to distribute this amount ($19 million) to 85 rookie football players. On average, each player earns about $215,000 a year. USC men’s basketball players earn about $155,000. Women’s basketball players will receive $110,000.
However, the bill provides schools with a second avenue to pay athletes in the form of new revenue. If the school chooses this path, all new revenue earned in a given year will be distributed to athletes participating in qualifying sports.
For example, if School A’s football program generates $50 million in revenue in 2021 and $60 million in 2022, School A would be required to distribute $10 million in new revenue to the athletes. If there is no change in revenue from year to year, the athletes will have nothing.
This new revenue option was not in the original bill, which was introduced last year. It gives universities an opportunity to distribute a smaller amount of extra money to athletes in order to maintain other, non-revenue-producing sports programs, many of which are Olympic sports teams such as swimming and diving, track and field, and gymnastics. These sports, as well as many women’s basketball programs, often lose millions of dollars annually.
At the highest level in FBS, Olympic sports are often financially supported by profits funneled into football and men’s basketball — earnings that, in theory, could be used to pay athletes in a revenue-sharing model. But the vast majority of FBS programs do not report any profit, and some even lose money in major sports such as football and basketball. In this case, Olympic sports are often supported through student fees, donations, or post-season tournament payments.
Homma says there are additional revenues not categorized by sport — such as donations — that could be reallocated to athletes under the revenue-sharing model. There are other ways to shift around money to pay athletes, such as reducing exorbitant coaching salaries in football and basketball, slowing facility upgrades and renovations and reducing huge headcounts.
In the USC example mentioned above, the school would pay more than $21 million annually in additional money to athletes under the revenue-sharing model—or about 18% of its total athletic revenue. This number could change soon due to conference reorganization.
If the bill passes, it will take effect in January 2024, the year UCLA and UCLA are expected to join the Big Ten and see their athletic budgets balloon. The Big Ten has a television deal valued at more than $1 billion annually, more than double the current media rights distribution of USC and UCLA from the Pac-12. Much of the new revenue filtered into those sports divisions could find its way into the hands of athletes under the proposed legislation.
Rising dollar figures is behind the current athletes’ rights movement. In the latest example, conference commissioners and presidents have just approved an expansion of the college football game that could bring in $2 billion a year in television revenue, experts believe.
The NCPA and its executive director, Huma, have been some of the most vocal critics of the NCAA’s amateur rules. The group secured a victory in June 2021 when the US Supreme Court ruled unanimously against the NCAA in a case involving education-related athlete benefits.
The ruling further eroded the league’s amateur façade at a time when state laws opened the door for athletes to begin raking in NIL payouts, now a booming industry that has seen brands and boosters hand out millions to college players.
Caught in a purgatory between amateur and professional, the NCAA continues to push toward the professional model, and many believe more change is on the way. Includes career mode for athletes.
The California bill makes an important notation: Payments to athletes “must not serve as evidence of an employment relationship.” The state of athlete employment is one of many heated debates within the industry, with NCAA officials and colleges fighting the notion.
However, there is a significant movement to consider athletes as employees. The National Labor Relations Board announced last month that it plans to pursue unfair labor practices charges against USC, the Pac-12 and the NCAA as both single and joint employers of FBS football players and Division I men’s and women’s basketball players. The move was announced 10 months after the NCPA filed an indictment with the NLRB.
It’s the perfect time for athletes to be considered employees, experts say, given the Supreme Court’s Alston ruling, the NIL’s implementation, the NCAA’s restructuring, and perhaps most importantly, the Democratic-controlled White House and U.S. Senate.
“Every day the status quo seems unsustainable,” Tulane mathematical law professor Gabe Feldman said in an interview with SI last spring. Some significant change is likely to happen in the near future. There is a consensus: Athletes should be given more. Question: How do we do that while protecting the foundations of college sports? “
The new California bill wouldn’t just give athletes a cut of their team’s revenue. Other provisions in the bill include:
- Schools cannot cancel athletic scholarships based on revenue sharing payments.
- Schools with incomes of $20 million or more must pay athletes two years of Medicare after eligibility; Schools with revenues of $50 million or more must cover this sponsorship for four years after eligibility ends. (Many FBS programs already comply with this requirement).
- Athletic directors can be suspended “for at least three years” if they cancel all sports, player rosters, or aggregate scholarship amounts “while paying the athletic official or coach an annual salary of $500,000 or more.”
- A 21-member College Athlete Protection Committee will oversee and manage legislation and will establish subcommittees on health and safety, agent certification, and employment transparency.
- The CAP committee shall adopt criteria for accrediting (1) college athletic agents; (2) Agencies that use agents. (3) Attorneys representing college athletes in nil contracts. and (iv) financial advisors or marketing agents.