The Lasting Impact of NCAA Sanctions: SMU and the Death Penalty

Kerianne Lawson∗ West Virginia University John Chambers College of Business and Economics Department of Economics

Abstract In 1987, the Southern Methodist University (SMU) football program received the NCAA’s harsh- est penalty, also known as the death penalty. SMU was caught committing two or more major violations of NCAA rules in less than five years. Therefore, under the repeat offender clause, their football program was terminated for the 1987-1988 school year, and they chose to take the next season off as well. Before this unprecedented and highly publicized scandal, SMU was a nationally ranked and competitive team. In the years following the death penalty, the team struggled to find success. Using the synthetic control method, this article measures the cost of the death penalty in terms of athletic success and the university’s finances. JEL codes: Z20, Z23, I22

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1 1 Introduction

The Southern Methodist University (SMU) football team received the NCAA’s “death penalty” in 1987.

This is the harshest punishment that the NCAA can give to an athletic program, and SMU is the only collegiate football program to received the death penalty.1 The punishment was handed down under the repeat offender clause, which NCAA to shut down an athletic program if the schools has two or more violations of NCAA policies within five years. In SMU’s case, the violations were related to compensating players. The NCAA discovered SMU continued to pay players despite already being on probation for a previous offense. Therefore, they had grounds to impose their harshest penalty.

In February 1987, the news broke about SMU and the death penalty. The list of punishments included cancelling SMU football’s 1987 season, no home games in the 1988 season, no bowl games or televised games through 1989, restrictions on recruiting and hiring coaching staff, and loss of scholarships. Even though the athletic scholarships to SMU had been terminated, players remained eligible to play in the 1987 season at other schools. In the days following the news of SMU receiving the death penalty, dozens of SMU football players transferred to other schools, or were forced to leave the school because they could not afford tuition without a scholarship. SMU elected to cancel their 1988 season in addition to the 1987 season. They resumed play in the fall of 1989. The death penalty was a devastating blow to SMU’s football program. Members of the NCAA committee who made the decision have since stated that they never expected to actually give out the death penalty when they created the policy, but that SMU left them no choice (Dodds, 2015). They were caught cheating, again, and red-handed. Many believe that the NCAA felt that they needed to make an example out of a school to warn others out there who were also paying their players (Dodds, 2015; Farrey,

2001).

Since the NCAA handed down its most severe punishment to SMU, no other football program has received the death penalty, while many have been eligible to receive it (Farrey, 2001). John Lombardi once said that the death penalty was like a nuclear bomb on SMU and it is still affecting the school in the after shocks

(Dodds, 2015; Farrey, 2001). At a glance, it seems true. SMU’s football program has struggled over the years. Not only has the team experienced very little success on the field, but there hasn’t been the same support from the fans like there was before the death penalty (Dodds, 2015). Before the death penalty, SMU football was one of the best programs in the country. Overnight, they went from one of the most formidable opponents in college football, to no program at all.

1The other programs that have received the death penalty are men’s basketball for 1952, University of Southwestern Louisiana men’s basketball for 1973–1975, men’s soccer for 2004-2005, and MacMurray College men’s for 2005-2007.

2 In order to understand the effect of the death penalty on SMU and its football program, there needs to be a counterfactual. But, it is impossible to observe what would have happened to SMU had they not received the death penalty. Thus, constructing a synthetic counterfactual version of SMU using the Synthetic Control

Method can show what might have happened to SMU had the NCAA not given them the death penalty.

Then, the synthetic version of SMU is compared it to what actually happened. First, this article looks at how SMU performed compared to the synthetic counterfactual and how the death penalty affected SMU.

Second, it discusses if and by how much SMU has recovered from death penalty.

This article builds on the literature that discusses the relationship between a collegiate athletic program’s success and school finance. Namely, how winning in sports affects a college or university’s tuition revenue

(Alexander and Kern, 2009; Mixon, 1995; Mixon et al., 2004), gifts and donations (Humphreys and Mondello,

2007; Grimes and Chressanthis, 1994), or student applications (Chressanthis and Grimes, 1993; Pope and

Pope, 2009). This article looks at changes in tuition revenue, gifts and donations revenue, as well as auxiliary revenue and expenditure, which primarily comes from the athletic program, after the death penalty.

Additionally, this article is related to the research done on how badly a scandal, athletic or otherwise, can hurt a school financially or in academic performance. Eggers et al. (2020) and Groothius et al. (2019) show that sanctions on NCAA basketball programs has adverse effects on academic outcomes, such as the quantity of applications and the quality of those applicants. Rooney and Smith (2019) find that high-profile scandals, not just athletic ones, at universities negatively affect the number of applicants in the following year. McCannon and Johnson (2020) study the Penn State football scandal and find that incoming freshman

GPAs and SAT scores were significantly lower after the scandal.

This article looks at an incredibly unique and extreme case which, surprisingly, has never been discussed in the sports economics literature. The goal of this article is to employ a causal econometric method to better understand the true cost of the NCAA death penalty. The following outcomes are examined: win percentage, NFL draft selections, tuition revenue, gifts and donations revenue, revenue from sports, expenditures on sports.

2 Related Literature

Studying the impact of NCAA sanctions on an athletic program, or a university is not new to the literature.

Sanctions can affect the competitive balance in sports (Depkin and Wilson, 2006) and employment and promotion decisions about coaches (Soebbing et al., 2015). Eggers et al. (2020) and Groothius et al. (2019)

3 find that post season bans on collegiate level basketball teams negatively affect the quality and quantity of applications to the college or university, and these results persist for years after the ban is lifted. McCannon and Johnson (2020) also look at the quality of the incoming freshman classes at Penn State University after the football scandal in 2011. They discover that the average high school GPA is 0.12 points lower after the scandal and the proportion of students with a high SAT Math score is down 4.8 percentage points. The Penn

State scandal was much larger than a post season ban in terms of how it affected the school and the media coverage surrounding it. The NCAA refrained from giving the death penalty to Penn State, even though they considered it (Axon and Brady, 2014).

In addition to NCAA sanctions, a school may be affected by other scandals. Rooney and Smith (2019) look at highly publicized scandals at universities and finds that there is a reduction in the number of applications (about 10%) and this persists for around 2 years after the news breaks. Interestingly, Rooney and Smith (2019) compare the result to the previous literature and says that a public scandal does about the same damage to applications as falling 10 spots in the college football rankings. This article is bridging these two ideas and discussing a scandal that is related to sports. When SMU football got the death penalty, it was the harshest possible punishment and it was highly publicized.

3 Data

The data in this study come from a number of sources. Football team statistics come from the Sports

Reference website. College football teams that had data available for every season from 1980 to 2019 were included in the main specification’s donor pool. The variables used from Sports Reference are the overall win percentage, strength of schedule score, the point differential (total points scored minus total points allowed), and if the teams were ranked by the AP poll during the season. To determine which schools had former players selected in the NFL draft, we used the the pro-football section of Sports Reference which has the draft results for the 1981-2019 NFL drafts. Data on each university’s finances and student population come from the National Center for Education Statistics (NCES) dataset known as the Integrated Postsecondary

Education Data System (IPEDS). The summary statistics for all of the data are presented in Table 1.

Figure 1 shows the locations of all of the colleges and universities included in the donor pool in the main specification. SMU is located in Dallas, Texas. Schools qualified to be in the donor pool if they had a

Division 1 football team in every seasons from 1980 to 2019.

4 Table 1: Summary statistics Variable Mean SD Min Max Overall win % 0.527 0.224 0.000 1.000 Conference win % 0.506 0.263 0.000 1.000 Point differential 1.760 11.141 -38.400 39.900 NFL draft selections 2.279 2.305 0.000 17.000 Strength of schedule 2.230 4.316 -15.010 12.180 Tuition & fees revenue (in millions) 208.770 241.091 3.238 2,043.450 Private gifts revenue (in millions) 54.353 101.703 0.000 1,578.600 Sports revenue (in millions) 91.910 92.755 0.922 899.25 Sports expenditures (in millions) 95.570 104.528 0.720 1,250.87 Fall undergraduate attendance 19,011 9,351 2,501 56,562 Percent female undergraduates 48.80 0.080 6.50 63.70

Figure 1: Locations of all colleges and universities considered in the donor pool selection. SMU is highlighted in red (in Dallas, TX)

5 4 Results

4.1 Synthetic Control Method

The synthetic control method allows for the construction of a synthetic version of SMU which can represent what would have happened to SMU if the football program had not been terminated in 1987. This synthetic

SMU acts as a counterfactual which can then be compared to what actually happened. This method was developed by Abadie and Gardeazabal (2003).

The synthetic control method constructs the synthetic version of the treated unit by combining a weighted average of other units, known as donors. The objective is to find the combination that best matches actual

SMU before the death penalty. The donors are 93 other colleges and universities with Division I football teams from 1980 to 2019. The treatment begins in 1987, when SMU’s team was not allowed to participate in the football season. The donors are assigned weights between 0 and 1 to construct a synthetic SMU that best matches actual SMU from 1980 to 1987. Then, the two versions of SMU are compared after the death penalty for the various outcomes studied. In order to assign weights properly, covariates are used like conference win percentage, point differential, strength of schedule rating, a private school dummy, fall undergraduate attendance and the percent of undergraduates that are female.

McCannon and Johnson (2020) also use the synthetic control approach in their article on the Penn State football scandal and undergraduate admissions. Like the death penalty for SMU, that scandal was unlike any other event and therefore constructing a synthetic counterfactual is an ppropriate method to measure the effect. Others have used the synthetic control to study the effect of NFL team expansions on local economics (Islam, 2019), economic liberalizations (Billmeier and Nannicini, 2013; Lawson et al., 2019), the reunification of Germany (Abadie et al., 2015), the effect of California’s Proposition 99 (Abadie et al., 2010), to name a few.

Table 2 presents the schools that received a weight greater than 0 for each of the outcome variables.

There are a handful of schools that make up the majority of the weight for each construction of a synthetic version of SMU, such as Baylor, BYU, Miami (FL), and Tulsa. The schools that received weights greater than zero were mostly private schools and around the same size as SMU. Table 3 shows the averages for actual SMU compared to the synthetic SMU for each outcome. The synthetic version of SMU is very similar to the actual numbers for SMU before the death penalty. Figures 2 - 7 are the the plots of the synthetic

SMU and actual SMU over time.

Figure 2 is the synthetic control results for overall win percentage. After the death penalty, the actual

6 Table 2: Donor pool Overall NFL draft Sports Sports Gifts Tuition School win % selections revenue expenditures revenue revenue Air Force 0.000 0.000 0.000 0.001 0.000 0.000 Alabama 0.000 0.001 0.000 0.000 0.000 0.000 Arizona 0.000 0.001 0.000 0.000 0.000 0.000 Arizona State 0.000 0.001 0.000 0.000 0.000 0.000 Arkansas 0.000 0.001 0.000 0.000 0.000 0.000 Auburn 0.000 0.001 0.000 0.000 0.000 0.000 Baylor 0.000 0.001 0.000 0.301 0.000 0.414 Boston College 0.000 0.001 0.000 0.000 0.576 0.126 Brigham Young 0.033 0.122 0.057 0.000 0.081 0.000 Florida 0.000 0.001 0.000 0.000 0.000 0.000 Florida State 0.000 0.001 0.485 0.000 0.000 0.000 Fresno State 0.119 0.190 0.000 0.000 0.000 0.000 Georgia 0.000 0.413 0.000 0.001 0.000 0.000 Illinois 0.000 0.001 0.000 0.000 0.000 0.000 Iowa 0.000 0.001 0.000 0.000 0.000 0.000 LSU 0.000 0.001 0.000 0.000 0.000 0.000 Maryland 0.000 0.001 0.000 0.000 0.000 0.000 Miami (FL) 0.648 0.000 0.000 0.211 0.109 0.215 Miami (OH) 0.000 0.001 0.000 0.000 0.000 0.000 Michigan 0.000 0.001 0.000 0.000 0.000 0.000 Nebraska 0.000 0.000 0.050 0.155 0.001 0.061 Notre Dame 0.000 0.000 0.000 0.000 0.041 0.000 North Carolina 0.000 0.001 0.000 0.000 0.000 0.000 Northern Illinois 0.000 0.001 0.000 0.000 0.000 0.000 Ohio State 0.000 0.001 0.000 0.000 0.000 0.000 Oklahoma 0.000 0.001 0.000 0.000 0.000 0.000 Oklahoma State 0.000 0.001 0.000 0.000 0.000 0.000 Penn State 0.000 0.144 0.000 0.000 0.000 0.000 Pittsburgh 0.000 0.001 0.000 0.000 0.000 0.000 San Jose State 0.000 0.001 0.000 0.000 0.000 0.000 Southern Mississippi 0.000 0.001 0.122 0.113 0.000 0.000 Tennessee 0.000 0.001 0.000 0.000 0.000 0.000 Texas 0.000 0.001 0.000 0.000 0.000 0.000 Texas A&M 0.000 0.001 0.000 0.000 0.000 0.000 Toledo 0.000 0.001 0.000 0.000 0.000 0.000 Tulsa 0.199 0.092 0.286 0.216 0.187 0.184 UCLA 0.000 0.001 0.000 0.000 0.000 0.000 USC 0.000 0.001 0.000 0.000 0.000 0.000 Virginia Tech 0.000 0.001 0.000 0.000 0.000 0.000 Washington 0.000 0.001 0.000 0.000 0.000 0.000 West Virginia 0.000 0.001 0.000 0.000 0.000 0.000 Wyoming 0.000 0.001 0.000 0.000 0.000 0.000

7 SMU football team did not play for two seasons, so the win percentage plummets to zero. It takes actual

SMU about 10 years to reach where the synthetic version of SMU is. SMU joined the Western Athletic

Conference after the conference that they were previously in, the dissolved. Arguably, the Southwest Conference fell apart because of SMU and the death penalty (Dodds, 2015). After SMU joins the WAC, they experience a season of success with their new coach, and then actual SMU continues to struggle, while the synthetic SMU is consistently having winning seasons. From this figure, it is difficult to determine exactly when, if at all, SMU football recovered from the death penalty. Aside from the 1997 season, actual SMU did not meet or exceed the winning percentage of the synthetic SMU until 2009, 22 years after the death penalty.

Next, this article looks at how the death penalty affected the number of SMU players selected in the NFL draft. The death penalty could affect NFL draft selections in a number of ways. The list of punishments that

SMU received in 1987 included banning television appearances and bowl games, as well as some recruiting and scholarship restrictions. These punishments could affect the quality of players that chose to attend SMU, and the exposure of players of the team. Also, the stigma surrounding SMU may have affected players, who otherwise would have been drafted even if they played on a bad team at a different school, simply because they attended SMU. Figure 3 plots these results over time. The draft years are matched to the fall football season that would have happened immediately before the spring draft. The first year that actual SMU meets or exceeds synthetic SMU is 2010, which is likely due to the success in the 2009 and 2010 seasons under coach . From Figures 2 and 3, this is suggestive evidence that it took SMU over 2 decades to recover from the death penalty, in terms of athletic performance.

Next, this article looks at a number of outcomes related to the school’s finances based on reports to the

NCES Integrated Postsecondary Education Data System. All of which are reported in millions of dollars.

Colleges and universities report their auxiliary revenue, which includes athletic program revenue. Other things included in the calculation of auxiliary revenue are student health services, room and board, dining, and other campus stores. Figure 4 shows the difference between actual SMU and synthetic SMU in auxiliary revenue over time. Figure 5 is the synthetic control results for auxiliary expenditures. Both figures show that SMU did not generate as much revenue and did not spend as much on athletics and other auxiliary programs when compared to a counterfactual synthetic SMU that represents what would have happened if they did not get the death penalty. Furthermore, the difference is much greater for revenue than it is for expenditure.

Next, this article looks at revenue, in millions of dollars, from private gifts, grants and donations. Studies

8 have shown that there is a positive relationship between athletic success and giving to the university (Coughlin and Erekson, 1984; Grimes and Chressanthis, 1994; Humphreys and Mondello, 2007; Stinson and Howard,

2007, 2008; Walker, 2015). Figure 6 presents these results. Initially, SMU’s revenue from gifts is much lower than synthetic SMU. Then, in 1996, when the university joins a new athletic conference and experiences a taste of success for the first time since the death penalty, donations shoot up. From then on, the plotted lines for SMU and its synthetic counterfactual follow a similar cyclical pattern, with the actual SMU lower than the synthetic. The peaks and valleys in Figure 6 line up very closely with the ups and downs in SMU’s win percentage, shown in Figure 2.

Figure 7 shows the synthetic control results for tuition revenue over time. It does not appear that tuition revenue was affected by the death penalty. Alexander and Kern (2009) find that athletic success was associated with higher willingness to pay for out of state tuition, but this was for large public institutions.

Smith (2012) find that this affect effectively disappears when private institutions are included in the data.

Therefore, these results are consistent with Smith (2012). The death penalty harmed athletics, and non- tuition revenue, but that did not greatly affect tuition revenue.

4.2 Placebo Tests

Instead of using SMU as the treated unit, the placebo test considers what the synthetic control would look like if the other colleges or universities were the treated unit. So, after re-running the main specification with each of the 93 other schools as the treated unit, the difference between each actual and synthetic version of the school is then plotted and compared to the difference between actual SMU and synthetic SMU. Figures

8 - 13 are the plots from the placebo tests for each of the outcome variables. The p-value of the placebo test reveals if the main result is statistically different from the placebo results. The p-values for the placebo tests are reported in Table 3.

5 Conclusion

The objective of this article is to understand the effects of the death penalty on SMU and its football team.

The effects are varied and change over time. By looking at this unique event, it sheds light on a possible reason why the NCAA has not given the death penalty to a football program since.

Financially, SMU earned and spent less on auxiliary endeavors, which includes athletics, though the lost revenue is far greater than the reduction in expenditures. There is also evidence that SMU did not generate

9 Table 3: Predictor means Overall NFL draft Sports Sports Gifts Tuition Variable win % selections revenue expenditures revenue revenue Actual Synthetic Synthetic Synthetic Synthetic Synthetic Synthetic Overall win % 0.756 0.746 0.755 – – – – NFL draft selections 3.571 – 3.571 – – – – Sports revenue 18.083 – – 18.233 – – – Sports expenditures 12.102 – – – 12.169 – – Gifts revenue 6.458 – – – – 6.610 – Tuition revenue 48.473 – – – – – 48.494 Conference win % 0.759 0.788 – 0.757 0.759 0.719 0.759 Point differential 10.443 10.929 10.500 10.334 10.430 6.891 9.996 Strength of schedule 1.941 2.315 1.945 1.966 1.909 1.867 1.941 Private school 1.000 – – – – 0.994 0.938 Fall attendance 10,900 10,926 21,773 17,689 10,901 10,905 12,676 % Female 0.521 0.521 0.521 0.518 0.503 0.521 0.519 MSPE – 0.070 1.395 2.478 2.389 0.359 0.999 Placebo test p-value 0.161 0.849 0.376 0.817 0.903 0.667

Figure 2: Synthetic control results for overall win percentage

10 Figure 3: Synthetic control results for NFL draft selections

11 Figure 4: Synthetic control results for sports revenue

12 Figure 5: Synthetic control results for sports expenditure

13 Figure 6: Synthetic control results for gifts and donations revenue

14 Figure 7: Synthetic control results for tuition revenue

15 Figure 8: Placebo test plot for overall win percentage

16 Figure 9: Placebo test plot for NFL draft selections

17 Figure 10: Placebo test plot for sports revenue in millions

18 Figure 11: Placebo test plot for sports expenditures in millions

19 Figure 12: Placebo test plot for gifts revenue in millions

20 Figure 13: Placebo test plot for tuition revenue in millions

21 as much revenue from gifts and donations, at least for the first 10 years or so after the death penalty. There did not appear to be a change in tuition revenue because of the death penalty.

As far as athletics go, SMU football struggled for two decades after the death penalty. Compared to the synthetic SMU, SMU had fewer players drafted into the NFL. The stigma surrounding the school, inability to play in televised games for several seasons, as well as their difficulty winning all contributed to why SMU could not recruit NFL caliber players. It’s difficult to determine when it will be safe to say that SMU has recovered, but only one season from the death penalty in 1987 to 2009 met or exceeded the synthetically constructed counterfactual.

This article shows that the impact of the death penalty is long lasting, perhaps much longer than the

NCAA ever anticipated when they punished SMU in 1987. The results may explain the NCAA’s hesitancy to give the death penalty to other schools, even if they are eligible for it (Axon and Brady, 2014; Farrey,

2001). While there is a path to recovery, the school and its football team are still dealing with the aftermath over 30 years later.

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