Treasury and Investment Management

Keeping State and Local Revenues in the Game

Page from August 2022 GFR

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.