Penn State, The Seen and the Unseen: Part Two

Allow me to first post this disclaimer.  I am a proud Pennsylvania State University Alumni.  I base the opinions that are to follow on a mix of personal history and Penn State culture.  I have done my best to separate myself from the love I have for the institution that helped to mold me, and the compassion I have for all human beings. These opinions were made both in the heat of the moment and in a logical frame of mind.  After initially building my opinions, I took the time to compile them into two posts…

Part Two:  The Parable of the Broken Window

For the record, I fully agree with the NCAA imposed fines of $60 million.  I believe that Penn State has the opportunity to be the nationwide leader in rape abuse programs for adults and children alike.  I also believe that they had every intention to do so, but not at that level.  I believe that the imposed fines are an appropriate non-criminal penalty for the university.  I want to make the specific difference between criminal and non-criminal penalties as the following economic breakdown is in response to the non-criminal sanctions imposed by the NCAA.  Criminally, those responsible for the rape, and those responsible for the protection of the rapist should also face indictment.  Guilt should be established in a court of law, not in the sanctions of a membership induced body.  Regardless of their admission of responsibility, the NCAA has no right to impose sanctions based on a criminal matter, without those charges being presented in a court of law for an able body of peers to decide the fate of.  No matter their intention, the collateral damage from the NCAA/Big-10 imposed sanctions is far-reaching.

This economic breakdown will be staged as followed:  The setting, the actors, the sanctions and the impact.  I am not a PhD Economist.  However, I do have a solid understanding of economic theory and opportunity cost.  It is not without saying that I received my education in economics from the Pennsylvania State University.  The proposed economic impact is just theory, years will have to pass to see the true impact of such a decision.

The Setting

The region of Central Pennsylvania; State College, PA; Pennsylvania State University; Commonwealth Campuses.

The Actors

Student athletes, student academics, faculty, staff, resident non-student/faculty

The Sanctions

$60 million in fines to be spread out over five years;  A reduction in scholarships from 85 to 65 per year; Zero bowl eligibility for four years; Zero Big 10 Championship games for four years; Zero Big 10 bowl sharing revenue for four years; Five years probation; Removal of all football wins from 1998-’11.

The Impact

Stewart Mandel, of Sports Illustrated’s “Inside College Football,” summed it up best, “To anyone who has ever contended that the Penn State story was about more than football, take a look at where we’ve arrived…the student section at Nittany Lions homes games was renamed; a statue was removed from Beaver Stadium; and now, the football program will be stripped of its parts, with players forced to find a new school if they ever want to sniff the postseason.”  I contend that the punishment was never more than football, or they would have stopped at the fines, or increased the fines.  That would have been completely acceptable.  In an effort to enforce ruling against Joe Paterno, posthumously, the University and the NCAA stripped him of his legacy.  A legacy built on reputation built well before 1998.  Nevertheless, I can accept that.  He may have very well perjured in front of a grand jury, and he most certainly was involved in the cover up.  A great man, made a grievous mistake he should never be allowed to live down.  The economic impact to the region and to the university is huge.  Here is my analysis…

Take the adult workforce that is employed in  low-wage positions throughout “The Setting.” Let’s assume that these employees  are non-student / non-faculty residents. Also assume that most of these non-student / non-faculty employees are employed based on the ebb and flow of the university. With Pennsylvania State University being the major metropolitan area for revenue generation.  Like a lot of residents of the Central Pennsylvania Region, “the actors” are people who nor do not come from wealth and rely on these jobs for total life sustenance.  This positions are to include:  Food service workers, retail store workers (non-management), retail managers and transportation service workers, police officers, firefighters. postal workers, etc…

These businesses are entirely dependent on three things: Incoming students, incoming Alumni and the aggregate of those plus non-student / non-alumni football fans. With special attention given to football games, as State College, PA swells to the third largest city in Pennsylvania on game weekends.

The economic impact begins, as it was intended, with the football program.  First, a removal of the incentive to draw top talent, or any talent to the PSU system will result in a non-competitive product.  Especially given the top-tier talent already in place within the Big 10. This will invariably result in a decrease in demand for the PSU football product.  Second, the lack of all bowl revenue, in addition to the fines will indirectly translate into tuition increases across the board, removal of academic programs, and removal of scholarship availability to athletes and non-athletes alike. I want to highlight, indirectly, as the unintended consequences will be far more damning than the intended ones.  Please, read on.  The PSU endowment may be large, but so is the cost of running a statewide university. The availability of academic and athletic programs to the commonwealth universities of PSU is partially derived from the revenue generated through the athletic department, plus additional revenue generated from a top-tier academic program. Third, I mention top-tier academic program because with reduced funding from athletics, these programs may diminish without considerable donation increases.

The indirect unintended results of the direct intended actions will result in a  further reduced student enrollment based on thediminished academic product and an inability to fund student enrollment in the commonwealth schools, which is in direct relation to reduced football-centric revenue and revenue generated from increased student influx, generated from the influx of non-alumni, based on the caliber of talent present academically and the ability to service higher rates of freshmen enrollment. This all translates into diminished regional revenue;  Food service, retail, athletically and academically.

Translation:  That non-student / non-faculty, worker in the low-wage position, will no longer be needed to handle the massive influx of demand that occurs on a seasonal basis. The lack of expected influx will lead to a decline in demand for low-wage employment, which will result in a decline of the income and value generation for the same wage bracket.  Jobs currently held by full-time residents will only need to be filled by students.  A workforce bracket that historically accepts low wage positions on a seasonal basis.  This is in addition to the seasonal positions that are already filled by the student body.  On top of all that, the small-businesses that rely on this seasonal influx to stay in business may go out of business, further reducing the demand for low wage positions.

Simply put, those who need minimum wage to survive will be the first to lose jobs, because demand is down and supply of low-skill labor is extremely high with the existing student body.  With little to no chance of employment,  some large group of residents, who were entirely dependent on the university for revenue, are now burdened with unemployment, further deepening the pool of victims from the disgusting tragedy.

That’s my take on everything.  Judge me as you will.

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