Louisiana is on the verge of a **groundbreaking shift** in sports betting legislation, aiming to inject an impressive **$24 million** into the athletic departments of its top public universities. This move not only highlights Louisiana’s commitment to enhancing college athletics but also charges the state into the forefront of a competitive landscape.
The New Legislative Frontier for College Sports
As legislation heads to Governor **Jeff Landry’s** desk, Louisiana is poised to become the **first state** to raise taxes on sports betting specifically to benefit college athletics since a landmark **NCAA settlement** was approved, allowing schools to directly compensate athletes for their **name, image, and likeness (NIL)**. This historic change is creating a ripple effect, with states like Arkansas leading the charge by waiving state income taxes on NIL payments made to student-athletes <1>.
With more states likely to adopt innovative strategies to enhance their college sports programs, the **competition is only heating up**. “These bills and the inevitable ones that will follow are intended to make states ‘college-athlete friendly,’” says **David Carter**, founder of the Sports Business Group consultancy. However, these measures also raise questions about *perceived preferential treatment* for athletes.
NCAA Rules: A Game Changer
The new NCAA guidelines for direct payments to college athletes will be effective from **July 1**. In the inaugural year, each **Division I** school can allocate up to **$20.5 million** to athletes. While larger programs may find this target easier to reach, smaller institutions face the dilemma of diverting funds from other essential areas. Additionally, the settlement allows athletes to **receive NIL income** from third-party entities, such as donor-backed collectives <2>.
Legislative Support: Echoes of Football Passion
The **Louisiana legislation** garnered final approval just days after the judge’s ruling on the NCAA athletes’ settlement, but had been in formative discussions for months. During these discussions, **athletic directors** from various Louisiana universities collaborated with lawmakers to tackle the financial strains by redistributing a portion of the state’s sports betting tax revenue.
The pivotal question among lawmakers was the size of the tax hike. The initial suggestion aimed for the state’s **15% tax** on online betting to double. Ultimately, they settled on a **21.5% tax rate** after negotiations with industry stakeholders.
One-quarter of this revenue, estimated at **$24.3 million**, will be allocated equally among **11 public universities** competing in Division I football. The funds are earmarked for “**benefiting student athletes**,” covering scholarships, insurance, medical expenses, facility upgrades, and legal fees related to the settlement.
Although this tax revenue won’t directly translate to NIL payouts, it could enhance university resources, paving the way for more robust financial support for athletes.
“We love football in Louisiana – that’s the easiest way to say it,” remarked **Republican state Rep. Neil Riser**, the bill’s sponsor.
The Financial Strain on Smaller Institutions
Financial strains aren’t just confined to Louisiana; they resonate across the nation, particularly affecting the athletic departments of smaller universities. Top-tier Division I football programs generate substantial income through media rights, corporate sponsorships, and ticket sales, with only **7%** typically coming from student fees and government support, as noted in the **Knight-Newhouse College Athletics Database** <3>.
Conversely, schools in Division I football bowl conferences derived **63%** of revenues from institutional support, while universities without football teams relied on government aid for **81%** of their athletic budgets. Riser pointed out that Louisiana’s smaller institutions have been reallocating funds from their general budgets to remain competitive in the sports arena, particularly as the state reaps millions from sports betting activities centered around collegiate athletics.
“Without the athletes, we wouldn’t have the revenue. It’s only fair that we give something back while supporting the universities’ general funds,” Riser emphasized.
Leading the Charge: Other States in the Mix
If the legislation passes, Louisiana will join **North Carolina** as the second state to dedicate a share of its sports wagering tax revenues to college athletics. North Carolina commenced online sports betting last year, allocating part of an **18% tax** to the athletic departments of its **13 public universities** <4>.
Amid ongoing discussions about budget plans, North Carolina aims to channel revenues to enhance athletic programs at notable institutions like the **University of North Carolina at Chapel Hill**. Meanwhile, the **University of Kentucky** trustees recently approved a **$31 million operating loan** for their athletics department as it navigates direct NIL payments to athletes <5>.
As states recognize the significant financial stakes involved in college athletics, the trend towards allocating tax funds for athletic departments is becoming ever-more common. As **Patrick Rishe**, executive director of the sports business program at Washington University in St. Louis, observes, attracting better athletes elevates visibility and economic activity for states. “You don’t want to be the state that’s left exposed or at a disadvantage,” he cautions.
