BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 1525 (Padilla) - Postsecondary Student Athlete Bill of Rights. Amended: April 26, 2012 Policy Vote: Education 6-1 Urgency: No Mandate: No Hearing Date: May 24, 2012 Consultant: Jacqueline Wong-Hernandez SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Bill Summary: SB 1525 enacts the Student Athlete Bill of Rights (SABR), which would apply to intercollegiate athletic programs at universities in the state that receive an average of $10 million or more in revenue derived from media rights for intercollegiate athletics. The SABR would require that qualifying universities that do not renew the athletic scholarship of a student who has suffered an injury resulting from his or her participation provide an equivalent scholarship, as specified. It requires that each qualifying athletic program conduct a financial and life skills workshop for first and third-year athletes, as specified. The SABR further requires that the university continue to pay specified medical expenses for a student athlete who was injured. This bill provides that the institutions to which this bill applies shall rely exclusively on income derived from media rights for intercollegiate athletics to defray the costs of this bill. Fiscal Impact: University of California (UC): Potentially significant cost pressure on the UCLA and UC Berkeley campus budgets to backfill any reduction of support for activities that currently receive financial support from media rights revenues. California State University (CSU): The CSU does not believe that any of its campuses currently meet the threshold for the SABR to apply, but projects that San Diego State University (SDSU) will in the near future. The CSU estimates that it will incur annual increased costs of $500,000 when the bill applies SDSU. Financial aid programs: Potential state savings, to the extent that former student-athletes are extended SB 1525 (Padilla) Page 1 scholarships paid for by media rights funds, instead of being entitled to, or competing for, state and institutional aid upon losing an athletic scholarship. Background: California does not currently regulate coverage of athletically-related medical expenses for college student-athletes, nor require the extension of athletic scholarships to student-athletes who have been injured and no longer participate in the activity for which their scholarships were given. Beginning January 1, 2012, California postsecondary educational institutions that offer athletic scholarships are required to provide specific information on their websites, such as the National Collegiate Athletic Association (NCAA) policy on scholarship duration, the most recent cost of attendance, and the policy on athletically- related medical expenses. (Education Code § 67365) The NCAA recently adopted several new rules that have not yet been implemented, including granting the authority for Division I schools to offer multi-year athletic scholarships and a $2,000 stipend, and increased academic standards. The 2011-12 Guide for the College-Bound Student-Athlete, and other links on the NCAA website, provides information about athletically-related financial aid and recruiting regulations. Specifically: 1) Athletic scholarships in Divisions I and II are initially awarded for up to one academic year, and may be renewed annually for up to five years (D-I) or up to a total of 10 semesters/15 quarters (D-II); 2) athletic scholarships can be renewed, altered, or canceled from year to year for almost any reason; 3) athletic scholarships are awarded in a variety of amounts; and, 4) the total amount of financial aid a student-athlete can receive may be limited, and may affect whether a student-athlete may accept additional financial aid. Proposed Law: This bill enacts a number of protections for student-athletes, geared toward ensuring a student-athlete is able to complete his or her education if he or she loses an athletic scholarship due to injury, and to be paid for from "media rights" revenue. Most significantly, it requires that: If an athletic program does not renew an athletic scholarship of a student athlete who has suffered an injury SB 1525 (Padilla) Page 2 resulting from his or her participation in the athletic program, either because of the injury or for any other nondisciplinary reason (if the athletic program does not reach a certain average graduation rate), the institution of higher education shall provide an equivalent scholarship for up to 6 years, as specified. An athletic program shall be responsible for paying the medical insurance premiums of each of its student-athletes whose household income would qualify them for Cal Grant A, and covering claims resulting from their participation in the athletic program. An athletic program shall be responsible for paying the insurance deductible amount applicable to the claim of any student athlete who suffers an injury resulting from his or her participation in the athletic program and makes a claim relating to that injury, for up to 5 years after the claim is made. An athletic program adopt and implement guidelines to prevent, assess, and treat sports-related concussions and dehydration. It also requires a program to adopt and implement exercise and supervision guidelines for any student athlete identified with potentially life-threatening health conditions. Staff Comments: The cost of adopting the SABR will depend on a variety of factors, including: a) which institutions its rules will apply to; b) the extent to which those institutions already comply with its provisions; c) the ways in which athletics media rights revenue is spent currently by the affected institutions; and, d) the level of involvement the SCO will need to have with affected or soon-to-be-affected athletics programs. SABR applicability to a particular institution of higher education hinges on whether or not the institution receives an average of $10 million in annual "revenue derived from media rights for intercollegiate athletics, as determined by the Controller". This bill defines several terms in the SABR's "General Provisions" section, but it does not define "media rights". Additionally, the bill specifies that the SCO will determine how much annual revenue an institution received from media rights, without delineating what income streams should be considered. It appears that the SCO will be left to determine which revenues to consider and to evaluate each institution's athletics revenues to determine whether they meet the $10 SB 1525 (Padilla) Page 3 million threshold, above which this bill's requirements apply. In order to comply with this bill's requirements, the SCO will likely have to develop a definition of "media rights" and a process for evaluating income sources to athletic programs. The SCO would also have to annually audit a number of public and private postsecondary institutions' athletic programs that may not ultimately have to comply with SABR, in order to simply make a firm determination of whether or not they derive $10 million in annual income specifically from media rights. This requirements is likely to drive significant new annual workload for the SCO and the institutions being evaluated. For the portion of the bill that requires an injured student-athlete to be extended the same financial support level in the event that he or she loses an athletic scholarship, there will be institutional costs and cost pressures, depending on how many students this applies to, and the level of their scholarship support. The bill specifies that a replacement scholarship will be derived from media rights funds within the athletics program, but it assumes that there are sufficient unencumbered funds to cover those costs. Funds spent on student aid for students who do not have renewed athletics scholarships put pressure on funds for additional athletics scholarships, as well as any other activities funded by the athletics program; typically, high-revenue sports fund the existence of teams in less popular sports, as well as athletics infrastructure, coaches' salaries, athletic trainers used across teams, etc. To the extent that money is diverted for SABR purposes, there will likely be cost pressure on the institutions' other funds (such as student fees) to support programs, facilities, and salaries currently funded by the athletics programs. The same cost pressure would exist to the extent that students' medical insurance expenses, as specified, will be paid by athletic funds. The UC is self-insured, and currently covers athletic injuries at 100% for at least a year and, in the case of UC Berkeley, up to two years of treatments even if the student leaves the campus; this costs the UC more than $100,000 annually. This bill extends the timetable to five years, which will add significantly to costs for an athlete's injuries. The SABR scholarship provisions also apply to student-athletes whose scholarships are not renewed for reasons not related to injuries. This bill uses, but does not define, the term SB 1525 (Padilla) Page 4 "nondisciplinary," as it applies to the reasons for which a student-athlete's scholarship is not renewed. This ambiguity is significant, because it is tied to the financial responsibilities the institution would have to a student who is denied a scholarship renewal for non-injury. Presumably, "nondisciplinary" would include failure to meet minimum grade requirements, but it is unclear what else might be covered, since there is broad flexibility to not renew scholarships. This bill provides an exception for "an athletic program with a graduation rate that is above 60 percent, disaggregated by sport". In the sentence, "graduation rate" modifies "athletic program" rather than "sport"; so, it is unclear whether the author intends to treat differently two student-athletes within the same athletics program, who play different sports based upon their particular sports team's graduation rate. Whatever the parameters, there will be some number of students that an affected institution would have to continue to provide scholarships for, from athletic funds, despite the student's original athletic scholarship not being renewed. One consequence of this would be that it creates additional cost pressure on the areas previously identified, which are currently supported by athletics funds. Another could, however, result in state savings to UC system and state savings, to the extent that these student-athletes would otherwise be placed in the general financial aid pool along with all other UC students seeking Cal Grants, institutional aid, etc.; mandating that media rights revenue continue to provide scholarship support to these students relieves other financial aid sources, to the extent that these students would have qualified for other sources. This bill also requires athletics programs to adopt and implement guidelines to prevent, assess, and treat sports-related concussions and dehydration; to implement exercise and supervision guidelines for any student athlete identified with potentially life-threatening health conditions; and, to hold specified workshops for student-athletes. The UC reports that it is already in compliance with these requirements, and would not incur additional costs. Proposed Author Amendments: The proposed amendments would: 1) add new intent language providing that an institution of higher education shall not utilize funds which benefit the general student body for the purposes of this bill; 2) delete all SB 1525 (Padilla) Page 5 references to the SCO and its authority to enforce the provisions of this bill; 3) define the term "media rights"; and 4) add a provision stating that an institution of higher education subject to this bill may supplement athletics media rights revenues with grants and other non-public funds which are not already dedicated for the academic or financial aid purposes of the general student body to defray any costs accrued under this section. Committee Amendments: 1) Add new intent language providing that an institution of higher education shall not utilize funds which benefit the general student body for the purposes of this bill, as proposed by the author; 2) define the term "media rights"; and 3) Reduce the maximum required time limit for replacement scholarships to 4 years.