California College Athletes Could Cash in Under Proposed Revenue-Sharing Bill

Under the College Athlete Protection Act, payment amounts would be based on how much revenue the programs earn on an annual basis.

Under a proposed bill in the California State Assembly, state colleges and universities would be required to share a percentage of revenue with athletes :: Kirby Lee/USA TODAY Sports

California, the state that spearheaded sweeping name, image and likeness (NIL) reform, is now seeking to advance the rights of college athletes another step—with revenue sharing.

Assemblymember Chris Holden, a Democrat from Pasadena, introduced on Thursday the College Athlete Protection Act, legislation that could radically change the economics around college athletics.

The College Athlete Protection Act requires the state’s colleges and universities to share a percentage of revenue with athletes participating in football, men’s basketball and women’s basketball. Payment amounts are based on how much revenue the programs earn on an annual basis, according to a text of the bill, which was shared with Sports Illustrated ahead of Thursday’s announcement.

The bill, Assembly Bill 252 (AB252), tethers a portion of an athlete’s pay to graduation; does not consider athletes employees of their universities; requires schools to provide medical care and scholarships for athletes after their eligibility; and, in a severe penalty, calls for the suspension of athletic directors for at least three years if they cut roster spots, reduce scholarship amounts or discontinue sports programs.

“It’s no shock that college athletes experience injuries on the field, on the court or in the game/match,” Holden said in a statement to SI. “What is shocking is the lack of protections helping athletes when they are down, or too afraid to say anything because of the repercussions, loss of scholarships and ultimately loss of a promising career. This ends now, with AB252.”

The legislation, dropping amid an athlete rights movement that has generated sweeping changes to archaic NCAA policies, touches on a raging issue percolating throughout college sports. The revenue-sharing debate has gained momentum as revenue growth within the college sports industry continues to expand through multimillion-dollar football and basketball television deals.

Similar to its NIL legislation, California could put its universities in a precarious position. The College Athlete Protection Act would require them to break NCAA rules in what could be another blow to the organization's crumbling bedrock of amateurism. California became the first in a string of states to pass laws allowing its college athletes to earn compensation from NIL, a move that forced the NCAA to abolish its age-old prohibitions on the issue.

This new bill is another affront to current NCAA bylaws. The organization, made up of the schools themselves, limits what universities can provide to athletes to tuition and cost of attendance. Direct pay to athletes—known as “pay-for-play”—is prohibited.

While a similar bill failed last year in the California State Senate, most notably because of gender equity concerns, this tweaked version provides schools with more flexibility in adhering to both Title IX and revenue-sharing provisions, and its sponsor, Holden, is the chair of the State Assembly’s powerful Appropriations Committee. Those factors breed optimism in this version passing through California’s two-chamber, Democrat-controlled state legislature.

The bill has strong support from the National College Players Association (NCPA), an athlete advocacy group backed by the U.S. Steelworkers and led by former UCLA linebacker Ramogi Huma. The organization is responsible for an aggressive years-long push for athletes to get a piece of the cash pie.

“The status quo in NCAA sports is abusive, deadly and exploitative,” Huma said in a statement to SI. “This bill would ensure college athletes have crucial protections and can share in an equitable amount of the revenue they produce in a way that supports degree completion.”

According to the bill, athletes are capped at $25,000 a year in payments, but any excess money—it could be in the millions—would be placed into a trust so players can earn the funds upon completion of their degree. From the time they are college eligible, they’d have six years to graduate or forfeit the funds.

The bill stipulates that schools must share revenue with athletes in sports that earn twice as much revenue as that sport spends on athletic scholarships. At most schools, those sports include football, men’s basketball and women’s basketball.

Athletes would earn 50% of the revenue from their respective sport, but that figure is offset by the amount they receive in athletic scholarships. A school would be required to pay athletes the difference.

For instance, according to 2018 budget figures provided to the U.S. Department of Education, USC football brought $50 million of revenue. The school paid out about $6.3 million in scholarships. That leaves a $19 million gap between the amount paid in scholarships ($6.3 million) and 50% of the total sport’s revenue ($25 million).

According to the bill, USC would be required to distribute that sum ($19 million) to its 85 scholarship football players. On average, each player would earn about $215,000 a year. Men’s basketball players at USC would earn about $155,000. Women’s basketball players would get $110,000.

However, the bill offers schools a second route to paying athletes in the form of new revenue. If a school should choose this path, all new revenue earned in a particular year would be distributed among athletes participating in the qualifying sports.

For example, if School A’s football program brought in revenue of $50 million in 2021 and $60 million in 2022, School A would be required to distribute the $10 million in new revenue to athletes. If there is no change in revenue from one year to the next, athletes are owed nothing.

This new revenue option was not in the original bill, introduced last year. It gives universities a chance to distribute a smaller amount of additional funds to athletes in order to preserve other non-revenue-generating sports programs, many of them Olympic sports teams such as swimming and diving, track and field and gymnastics. These sports, as well as many women’s basketball programs, often lose millions of dollars a year.

At the highest level of FBS, Olympic sports are often buoyed financially by profits turned in football and men’s basketball—profits that, in theory, would be used to pay athletes in a revenue-sharing model. But the vast majority of FBS programs do not report any profit, some of them even losing money on major sports like football and basketball. In this case, Olympic sports are often buoyed by student fees, donations or postseason tournament payouts.

Huma says there is additional revenue not categorized by sport—such as donations—that can be reallocated to athletes under a revenue-sharing model. There are other ways to shift around funds to pay athletes, such as decreasing exorbitant coaching salaries in football and basketball, slowing facilities upgrades and renovations and reducing massive staff sizes.

In the aforementioned USC example, the school would pay out more than $21 million annually in additional funds to athletes under the revenue-sharing model—or about 18% of its total athletic revenue. That number could soon change given conference realignment.

The bill, if passed, would take effect in January 2024, the year when USC and UCLA are expected to join the Big Ten and see their athletic budgets balloon. The Big Ten struck a TV deal valued at more than $1 billion annually, more than doubling USC’s and UCLA’s current media rights distribution from the Pac-12. Much of the new revenue filtering into those athletic departments could find their way into athletes’ hands under the proposed legislation.

Surging dollar figures are behind the current athletes rights movement. In the latest example, conference commissioners and presidents just approved an expansion to the College Football Playoff that could fetch $2 billion a year in television revenue, experts believe.

The NCPA and its executive director, Huma, have been some of the most public critics of the NCAA’s amateurism rules. The group got a victory in June 2021 when the U.S. Supreme Court unanimously ruled against the NCAA in a case over education-related athlete benefits.

The ruling further eroded the association’s facade of amateurism at a time when state laws opened the door for athletes to begin earning compensation from their NIL, now a flourishing industry that’s seen brands and boosters distribute millions to college players.

The NCAA, caught in a purgatory between amateurism and professionalism, continues to be pushed toward the professional model, and many believe more change is on the way. That includes employment status for athletes.

The California bill offers an important notation: Payments to athletes should “not serve as evidence of an employment relationship.” Athlete employment status is one of the many raging debates within the industry, with the NCAA and college administrators pushing back against the notion.

However, there is significant movement to deem athletes as employees. The National Labor Relations Board announced last month that it plans to pursue unfair labor practice charges against USC, the Pac-12 and the NCAA as single and joint employers of FBS football players and Division I men’s and women’s basketball players. The move was announced 10 months after the NCPA filed a charge with the NLRB office.

Experts say it is an ideal time for athletes to be deemed employees, given the Supreme Court’s Alston ruling, the implementation of NIL, the NCAA’s restructuring and, maybe most importantly, a Democratic-controlled White House and U.S. Senate.

“Every day the status quo seems to be more unsustainable,” Tulane sports law professor Gabe Feldman said in an SI interview last spring. “Some significant change is likely to happen in the near future. There is consensus: Athletes should be given more. The question: How do we do that while protecting the foundation of college sports?”

The new California bill would not only grant athletes a piece of their team’s revenue. Other provisions in the bill include:

• Schools cannot cancel athletic scholarships based on the revenue sharing payments.
• Schools reporting $20 million or more in revenue must pay athletes two years of post-eligibility medical care; schools reporting $50 million or more in revenue must cover such care for four years after eligibility expires. (Many FBS programs already adhere to this provision.)
• Athletic directors could be suspended for “a minimum of three years” if they eliminate entire sports, roster spots or aggregate scholarship amounts “while paying an athletic administrator or coach an annual salary of $500,000 or more.”
• A 21-member College Athlete Protection Panel will oversee and administer the legislation and will create subcommittees on health and safety, agent certification and recruiting transparency.
• The CAP Panel should adopt standards to certify (1) college athlete agents; (2) agencies that employ agents; (3) attorneys representing college athletes in NIL contracts; and (4) financial advisers or marketing agents.