Louisiana is poised to hike taxes on sports betting to pump more than $24 million into athletic departments at the state’s most prominent public universities.
More states seem almost certain to adopt their own creative ways to gain an edge — or at least keep pace — in the rapidly evolving and highly competitive field of college sports.
“These bills, and the inevitable ones that will follow, are intended to make states ’college-athlete friendly,’” said David Carter, founder of the Sports Business Group consultancy and an adjunct professor at the University of Southern California. But “they will no doubt continue to stoke the debate about the `perceived’ preferential treatment afforded athletes.”
The biggest question for lawmakers was how large of a tax increase to support. The initial proposal sought to double the state’s 15% tax on net proceeds from online sports betting. But lawmakers ultimately agreed on a 21.5% tax rate in a compromise with the industry.
One-quarter of the tax revenue from online sports wagering — an estimated $24.3 million — would be split equally among 11 public universities in conferences with Division I football programs. The money must be used “for the benefit of student athletes,” including scholarships, insurance, medical coverage, facility enhancements and litigation settlement fees.
The state tax money won’t provide direct NIL payments to athletes. But it could facilitate that indirectly by freeing up other university resources.
The legislation passed overwhelmingly in the final days of Louisiana’s annual session.
“We love football in Louisiana – that’s the easiest way to say it,” said Republican state Rep. Neil Riser, who sponsored the bill.
Many colleges and universities across the country have been feeling a financial squeeze, but it’s especially affected the athletic departments of smaller schools.
But the remaining schools in Division I football bowl conferences got a median of 63% of the revenue from such sources last year. And schools without football teams got a median of 81% of their athletic department revenues from institutional and governmental support or student fees.
Riser said Louisiana’s smaller universities, in particular, have been struggling financially and have shifted money from their general funds to their sports programs to try to remain competitive. At the same time, the state has taken in millions of dollars of tax revenue from sports bets made at least partly on college athletics.
“Without the athletes, we wouldn’t have the revenue. I just felt like it’s fairness that we do give something back and, at the same time, help the general funds of the universities,” Riser said.
Given the money involved in college athletics, it’s not surprising that states are starting to provide tax money to athletic departments or — as in Arkansas’ case — tax relief to college athletes, said Patrick Rishe, executive director of the sports business program at Washington University in St. Louis.
“If you can attract better athletes to your schools and your states, then this is more visibility to your states, this is more potential out-of-town economic activity for your state,” Rishe said. “I do think you’re going to see many states pursue this, because you don’t want to be the state that’s left exposed or at a disadvantage.”
