Keeping State and Local Revenues in the Game.

• Author: Marlowe, Justin
• Position: PERSPECTIVE

College sports fans were shocked last month to learn that two decidedly not-Midwestern schools--the University of Southern California and the University of California-Los Angeles--will soon join the Big Ten Conference. Whether this "surf and turf" arrangement is good for college athletics is a debate for another day. What's without question, albeit less obvious, is that this move highlights some crucial emerging trends in state and local revenues.

There's no question that professional sports boost state and local revenues. In 2019, pro sports franchises generated around $100 billion in total revenues, according to figures from their respective leagues. More than a few of those dollars flow to state and local coffers. Team merchandise and game-day concessions generate sales taxes. Player and coach salaries boost state and local personal income taxes. Home games generate tax revenues from ticket sales, parking, and lodging.

What's less clear is how much of that revenue is "net new." In other words, are all those sales, amusement, and other taxes new to a team's home city, or do fans who attend a game or tune in on TV simply shift their spending and attention away from movies, concerts, and other entertainment? A growing body of academic research and the recent trend toward private rather than public financing of pro sports stadiums suggest the latter.

Meanwhile, much of the growth in pro sports is abroad. The NBA is actively courting an estimated 300 million pro basketball fans in China. NFL teams now play multiple games each year in London, Mexico City, Tokyo, and other international venues in search of new fans there. This bodes well for those franchises, but perhaps not so much for their hometowns' finances.

But when thousands of fans converge on an otherwise sleepy college town for a gameday Saturday, local finance officials can count on an undeniable revenue boost. About 350 universities play big-time football and basketball, and several hundred more host other athletics of all sorts. Localized figures on college sports' direct fiscal impacts are hard to find, but there's no question that they matter.

That's why USC and UCLA moving to the Big Ten is a proverbial "canary in the coalmine" for state and local finances. According to the National College Athletics Association, inflation-adjusted median revenues at the largest schools increased 43 percent from 2005 to 2019. Much of that growth is from television rights. During that same time...