Existing law, known as the Student Athlete Bill of Rights, requires intercollegiate athletic programs at 4-year private universities or campuses of the University of California or the California State University that receive, as an average, $10,000,000 or more in annual revenue derived from media rights for intercollegiate athletics to comply with prescribed requirements relating to student athlete rights.

This bill would prohibit California postsecondary educational institutions except community colleges, and every athletic association, conference, or other group or organization with authority over intercollegiate athletics, from providing a prospective intercollegiate student athlete with compensation in relation to the athletes name, image, or likeness, or preventing a student participating in intercollegiate athletics from earning compensation as a result of the use of the students name, image, or likeness or obtaining professional representation relating to the students participation in intercollegiate athletics. The bill also would prohibit an athletic association, conference, or other group or organization with authority over intercollegiate athletics from preventing a postsecondary educational institution other than a community college from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the students name, image, or likeness. The bill would require professional representation obtained by student athletes to be from persons licensed by the state. The bill would specify that athlete agents shall comply with federal law in their relationships with student athletes. The bill would prohibit the revocation of a students scholarship as a result of earning compensation or obtaining legal representation as authorized under these provisions. The bill would prohibit a student athlete from entering into a contract providing compensation to the athlete for use of the athletes name, image, or likeness if a provision of the contract is in conflict with a provision of the athletes team contract. The bill would prohibit a team contract from preventing a student athlete from using the athletes name, image, or likeness for a commercial purpose when the athlete is not engaged in official team activities, as specified.

These provisions would become operative on January 1, 2023.

This bill would require the Chancellor of the California Community Colleges to convene a community college athlete name, image, and likeness working group composed of individuals appointed on or before July 1, 2020, as specified. The bill would require the working group to review various athletic association bylaws and state and federal laws regarding a college athletes use of the athletes name, image, and likeness for compensation and, on or before July 1, 2021, submit to the Legislature and the California Community College Athletic Association a report containing its findings and policy recommendations in connection with this review.

 UNFINISHED BUSINESS  

Bill No: SB 206

Author: Skinner (D) and Bradford (D), et al.

Amended: 9/3/19

Vote: 21

SENATE EDUCATION COMMITTEE: 7-0, 4/3/19

AYES: Leyva, Wilk, Chang, Durazo, Glazer, McGuire, Pan

SENATE APPROPRIATIONS COMMITTEE: 4-2, 5/16/19

AYES: Portantino, Bradford, Hill, Wieckowski

NOES: Bates, Jones

SENATE FLOOR: 31-5, 5/22/19

AYES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Morrell, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NOES: Bates, Grove, Jones, Nielsen, Stone

NO VOTE RECORDED: Borgeas, Moorlach

ASSEMBLY FLOOR: 73-0, 9/9/19 - See last page for vote

SUBJECT: Collegiate athletics: Fair Pay to Play Act

SOURCE: National College Players Association

OSKR

DIGEST:

This bill allows, commencing on January 1, 2023, college student athletes to earn compensation for the use of their own name, image, or likeness (athletic endorsements). This bill allows student athletes to obtain professional legal representation, such as that provided by a sports agent, in relation to their college athletics. This bill provides protections for student athletes that elect to engage in the compensation and representation activities described therein.

Assembly Amendments

exempt community colleges from this bill’s provisions relating to student athlete compensation and representation; require the California Community Colleges (CCCs) to convene a working group to review current rules governing the use of student athletes’ name, image, and likeness; prohibit student athletes’ from entering into endorsement contracts that are in conflict with team contracts; prohibit team contracts from prohibiting student athletes from commercializing the athletes’ name, image, and likeness when the athletes are not engaged in official team activities; and add legislative intent language.

ANALYSIS:

Existing law:

1) Enacts the Student Athlete Bill of Rights, which requires intercollegiate athletics at four-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with the prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury. (Education Code § 67450)

2) Prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities. (EC § 67360)

3) Prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:

a) To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution.

b) To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program. These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the National Collegiate Athletic Association (NCAA). (EC § 67360)

4) Defines “student athlete” as an individual who attends an elementary, junior high, high school, or postsecondary educational institution, and who participates in any interscholastic athletic program in California, including an individual who receives scholarship funds for his or her athletic participation and an individual who does not receive scholarship funds for his or her athletic participation. (EC § 67360 et seq)

This bill:

1. Exempts community colleges from the provisions of this bill as it relates to student athlete compensation and representation in institutions of higher education.
2. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from receiving compensation for the use of their own name, image, or likeness. This bill provides that earning compensation through athletic endorsements shall not affect the student’s scholarship eligibility.
3. Prohibits any group with authority over intercollegiate athletics from preventing a postsecondary educational institution from participating in intercollegiate athletics as a consequence of that institution allowing its student-athletes to earn athletic endorsements.
4. Prohibits any organization with authority over intercollegiate athletics from providing prospective student athletes with compensation in relation to the athlete’s name, image, or likeness.
5. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from obtaining professional representation in relation to their college athletics, provided that the professional representation is in compliance with federal law and is performed by persons licensed by the state.
6. Prohibits the revocation of a student-athlete’s scholarship as a consequence of receiving endorsements, or as a consequence of obtaining professional representation as authorized under these provisions.
7. Prohibits a student athlete from entering into an athletic endorsement contract that is in conflict with a provision of the athlete’s team contract.
8. Requires a student athlete who enters into an endorsement contract to disclose the contract to an appropriate official of the institution at which the athlete is enrolled.
9. Requires an institution, upon asserting a conflict between an athlete’s athletic endorsement contract and the team contract, to inform the athlete or the athlete’s legal representation concerning the provisions that are in conflict.
10. Prohibits a postsecondary educational institutions athletic program, other than community colleges, from establishing a contract that prevents student athletes from participating in athletic endorsements.
11. Requires the Chancellor of the CCCs convene a working group to do both of the following:
    1. Review existing CCC bylaws, state and federal laws, and NCAA bylaws regarding a student athletes’ use of athletic endorsements.
    2. Submit a report of findings and policy recommendations relating to the above to the CCC Athletic Association and the Legislature on or before July 1, 2021.
12. Provides that #1-10 are to become effective on January 1, 2023.
13. Makes legislative findings and declarations.

Comments

1. Need for the bill. According to the authors, “SB 206 allows athletes at California’s public and private colleges to earn income through sponsorships endorsements. SB 206 does not require colleges to pay or employ athletes and its provision do not put a cost on colleges. SB 206 also relieves the pressures to turn pro before graduating be allowing students to provide for themselves financially without facing loss of their athletic scholarship.”
2. NCAA restrictions on financial aid. NCAA bylaws impose strict restrictions on the types of financial aid and benefits that student-athletes may receive. Student-athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those that receive full athletic scholarships. NCAA rules state that any student-athlete who receives financial aid or benefits other than that permitted by the NCAA shall not be eligible for intercollegiate athletics. Further, NCAA rules forbid a student-athlete from receiving preferential benefits or treatment because of the athlete’s reputation, skill or potential to be a professional athlete.
3. NCAA prohibitions. The “cost of attendance” is an amount calculated by an institutional financial aid office using federal regulations, and includes the total cost of tuition and fees, room and board, books and supplies, transportation, and other expenses related to attendance at the institution. Firstly, the NCAA prohibits athletic programs at institutions of higher education from compensating their athletes at an amount that exceeds the cost of attendance. NCAA Power 5 student-athletes receive yearly stipends of $2,000 to $4,000 to cover cost-of-living expenses. Meanwhile, the NCAA reported a revenue of $1.1 billion for the 2017 fiscal year.

Secondly, The NCAA rules forbid student-athletes to agree, orally or in writing, to be represented by an agent or organization in the marketing of his or her athletic ability or reputation until after the completion of the last intercollegiate contest, including postseason games. In addition, NCAA rules forbid a student-athlete or his/her representative from negotiating or signing a playing contract in any sport in which the athlete intends to compete, or to market the name or image of the athlete.

Both of these rules apply to NCAA student athletes regardless of their scholarship status. That is, athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay and representation prohibitions as those who receive full athletic scholarships.

1. Violation of NCAA bylaws. Violations of NCAA bylaws impact the eligibility of student-athletes, and the teams for which they play, for participation in NCAA competition. Violations may result in harsh penalties on the student, the team and the university. Penalties may include financial sanctions, repayment of monies received from NCAA championship competition, forfeiture of contests, and expulsion from the association. NCAA-member institutions wrote letters concerning violations of NCAA bylaw 12.1.2, which dictates ways in which a student can lose their amateur status, and NCAA bylaw 12.5.2.1, which makes a student ineligible for participation if they accept compensation for name, image and likeness or for the endorsement of commercial products.
2. Uncertainty in Future of NCAA Bylaws. As noted in the Assembly Appropriations Committee, “The NCAA has voiced concerns with this bill, and has made reference to revoking NCAA eligibility of California universities if this bill becomes law. However, there is evidence NCAA may consider changes to these bylaws. In May 2019, the NCAA announced it was convening a work group around the issue, which would release its findings in October 2019. With this in mind, the bill contains intent language stating that the provisions of this bill, were it to become law, would be revisited after this report is released. Moreover, this measure contains a three-year delay in implementation, which is intended to give time for adoption of rules, regulations and conforming legislation.”

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. One-time General Fund costs to the CCCCO of about $500,000.
2. Ongoing General Fund cost pressures to the University of California (UC), likely in the hundreds of thousands of dollars, for staff to ensure compliance and to manage procedures related to the bill's conflict of interest provisions.
3. Ongoing General Fund cost pressures to the California State University (CSU), likely in the low millions of dollars annually, for staff to ensure compliance and to manage procedures related to the bill's conflict of interest provisions.
4. Unknown, ongoing General Fund cost pressures to UC and CSU to pay fines resulting from violations of NCAA bylaws, to the extent this bill results in NCAA fines.
5. Unknown, ongoing system-wide revenue losses to UC and CSU to the extent they lose NCAA and conference eligibility as a result of this bill.

SUPPORT: (Verified 9/9/19)

National College Players Association (co-source)

OSKR (co-source)

American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County, and Municipal Employees

Association of African Americans in Fire Service

California Faculty Association

California Labor Association

California State Student Association

International Union, United Automobile, Aerospace Agricultural Implement Workers of America

UAW Local 2865

UAW Local 5810

University Professional & Technical Employees – CWA Local 9119

United Steelworkers

University of California Student Association

One individual

OPPOSITION: (Verified 9/9/19)

Association of Independent California College and Universities

California State University

Stanford University

University of California

University of Southern California

One individual

ASSEMBLY FLOOR: 73-0, 9/9/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Eggman, Flora, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Bigelow, Diep, Fong, Limón, O'Donnell, Patterson

Prepared by: Chanel Matney / ED. /

9/9/19 22:58:25

**** END ****

SENATE THIRD READING

STR Bill Id:SB 206

Author:(Skinner and Bradford)

As Amended Ver:September 3, 2019

Majority vote

SUMMARY:

Allows, commencing on January 1, 2023, college student athletes to earn compensation for the use of their own name, image, or likeness and also obtain professional representation such as a sports agent, in relation to their college athletics.

Major Provisions

1. Specify that a postsecondary educational institution will not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student's name, image, or likeness.
2. Further specify that earning compensation from the use of a student's name, image, or likeness will not affect the student's scholarship eligibility.
3. Provide that an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association (NCAA), will not prevent a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student's name, image, or likeness.
4. Additionally provide that an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the NCAA, will not prevent a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student's name, image, or likeness. Also, explicitly specified is that:
   1. A postsecondary educational institution, athletic association, conference, or other group or organization with authority over intercollegiate athletics will not provide a prospective student athlete with compensation in relation to the athlete's name, image, or likeness;
   2. Professional representation obtained by student athletes will be from persons licensed by the state. Professional representation provided by athlete agents will be by persons licensed, as specified; and,
   3. Athlete agents representing student athletes shall comply with the federal Sports Agent Responsibility and Trust Act, as specified, in their relationships with student athletes.
   4. A scholarship from the postsecondary educational institution in which a student is enrolled that provides the student with the cost of attendance at that institution is not compensation for purposes of this section, and a scholarship will not be revoked as a result of earning compensation or obtaining legal representation.
5. Specify that a student athlete's individual contracts or sponsorships shall not contain any provision in conflict with any provision of an existing contractual obligation of the student athlete's team contracts or sponsorships.
6. Require a student athlete to disclose to their university any contracts for compensation based on the use of the student's name, image, or likeness.
7. Require the university asserting a conflict between the student's contract and the teams' contract or sponsorship to disclose to the student the relevant conflicting contract provisions.
8. Declare that a team contract of a postsecondary educational institution's athletic program entered into on, or after, January 1, 2023, shall not prevent a student athlete from using the athlete's name, image, or likeness for a commercial purpose when the athlete is not engaged in official team activities.
9. Define, for purposes of this section, "postsecondary educational institution" to mean any campus of the University of California (UC), the California State University (CSU), or an independent institution of higher education, as defined in Education Code Section 66010, or a private postsecondary educational institution, as defined in Education Code Section 94858.
10. Establish a name, image, and likeness working group that will be charged with reviewing California Community College Athletic Association (CCCAA) bylaws and making recommendations to CCCAA and the Legislature, as provided, no later than July 1, 2021.
11. Declare the intent of the Legislature to monitor the NCAA working group created in May 2019 to examine issues relating to the use of a student's name, image, and likeness and revisit this issue to implement significant findings and recommendations of the NCAA working group in furtherance of the statutory changes proposed by this act.
12. Declare the intent of the Legislature to continue to develop policies to ensure appropriate protections are in place to avoid exploitation of student athletes, colleges, and universities.

COMMENTS:

Please see the policy committee analysis for a full discussion of the measure.

According to the Author:

"…Inside Higher Education and Drexel University revealed that over 80% of full-scholarship athletes live at or below the federal poverty level. Meanwhile, the NCAA and universities use these athletes to generate billions in profits, through ads, TV deals and ticket sales. Athletes face severe repercussions if they receive compensation from sponsorship deals or use their own image for financial gain. For many athletes, college is the only time that their name, image, and likeness is profitable. Athletes have lost eligibility to participate in their sport for things such as accepting groceries and assistance with rent. Meanwhile they generate millions [of dollars] for universities and billions [of dollars] for the NCAA. The NCAA president Mark Emertt made over 3 million dollars in salary just last year, while any athletes who put their bodies on the line struggle to make ends meet. SB 206 will prevent any student in California from losing their scholarship due to compensation on their own name, image, and likeness."

Arguments in Support:

The bill's cosponsor, The Alliance for Boys and Men of Color, writes in support to say, "Many collegiate athletes are participating without a guaranteed scholarship or no scholarship at all. Scholarships may be revoked for poor performance in their respective sport or failure to participate in 'voluntary' workouts. University studies have found that athletes are spending 32 to 44 hours a week on their respective sports. The time commitment athletes dedicate make it practically impossible for athletes to obtain outside employment to provide for themselves or families." They add that, "SB 206 will give young athletes the dignity of a fair wage."

The American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO, adds in support, "In addition, (under SB 206) athletes cannot be prohibited from consulting with an agent. This is important for allowing college athletes to prepare for their future in professional athletics."

Finally, Teamsters write to share their belief that, "athletes should have a financial avenue to provide for their families without facing loss of their athletic scholarship."

Arguments in Opposition:

Opposition to this bill spans public and private institutions, and includes both four-year and community colleges. Opposition wrote to express concern in several key areas:

Inconsistency with prior court rulings. Stanford University wrote that, "…SB 206 is inconsistent with recent court rulings, first in O'Bannon v. NCAA, and more recently in Alston v. NCAA that determined that all student-athlete benefits must be tied directly to education purposes only."

NCAA Bylaws Violation. NCAA-member institutions wrote concerning violations of NCAA bylaw 12.1.2, which dictates ways in which a student can lose their amateur status, and NCAA bylaw 12.5.2.1, which makes a student ineligible for participation if they accept compensation for name, image, and likeness or for the endorsement of commercial products. The University of Southern California states, "This bill would put the student-athlete, their teammates, and the athletics programs at risk of losing NCAA and conference eligibility, which would result in the loss of educational benefits and other competitive opportunities for UC student-athletes."

Current NCAA working group. The Association of Independent California Colleges and Universities (AICCU) wrote that "Last month the NCAA announced the creation of a working group that will review the NCAA's policies around name, image, and likeness. …We believe SB 206 should be held, in order for this work to conclude and for policymakers to then assess what changes to state law are appropriate without putting athletic programs and student athletes at risk."

Request by NCAA and PAC-12 Conference for delay in legislation. The President of the NCAA has reached out to request delay in hearing SB 206, asking "On behalf of the nearly 1,300 NCAA member colleges, universities and conferences, I write to request respectfully that the Assembly (Committees on Arts, Entertainment, Sports, Tourism and Internet Media and Higher Education) postpone further consideration of Senate Bill 206, the Fair Pay to Play Act, while we review our rules."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. One-time General Fund costs to the CCCCO of about $500,000.
2. Ongoing General Fund cost pressures to the University of California (UC), likely in the hundreds of thousands of dollars, for staff to ensure compliance and to manage procedures related to the bill's conflict of interest provisions.
3. Ongoing General Fund cost pressures to the California State University (CSU), likely in the low millions of dollars annually, for staff to ensure compliance and to manage procedures related to the bill's conflict of interest provisions.
4. Unknown, ongoing General Fund cost pressures to UC and CSU to pay fines resulting from violations of NCAA bylaws, to the extent this bill results in NCAA fines.
5. Unknown, ongoing systemwide revenue losses to UC and CSU to the extent they lose NCAA and conference eligibility as a result of this bill.

VOTES:

SENATE FLOOR: 31-5-2

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Morrell, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NO: Bates, Grove, Jones, Nielsen, Stone

ABS, ABST OR NV: Borgeas, Moorlach

ASM ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND INTERNET MEDIA: 5-0-2

YES: Chu, Chiu, Friedman, Kamlager-Dove, Nazarian

ABS, ABST OR NV: Diep, Choi

ASM HIGHER EDUCATION: 11-0-1

YES: Medina, Choi, Arambula, Bloom, Gabriel, Irwin, Kiley, Levine, Low, Santiago, Weber

ABS, ABST OR NV: Patterson

ASM APPROPRIATIONS: 15-1-2

YES: Gonzalez, Bigelow, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Brough

ABS, ABST OR NV: Diep, Fong

UPDATED:

VERSION: September 3, 2019

CONSULTANT: Dana Mitchell / A.,E.,S.,T., & I.M. / (916) 319-3450 FN: 0001736

Date of Hearing: August 14, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 206

Author:(Skinner) – As Amended Ver:July 11, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows, commencing on January 1, 2023, student athletes at public and private postsecondary institutions, except for community colleges, to earn compensation for the use of their own name, image or likeness. The bill also allows these student athletes to obtain professional representation, such as a sports agent. The bill prohibits an athletic association, conference or other group or organization from preventing a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image or likeness.

The bill also states the intent of the Legislature to monitor the National Collegiate Athletic Association (NCAA) working group created in May 2019 to examine issues relating to the use of a student’s name, image and likeness and revisit the issue as needed.

The bill directs the California Community College Chancellor’s Office (CCCCO) to convene an athlete name, image and likeness working group for its athletes to review the bylaws and laws for community college athletes and submit a report to the Legislature by July 1, 2021, with its findings and recommendations.

FISCAL EFFECT:

1. One-time General Fund costs to the CCCCO of about $500,000 to hire two limited-term staff to lead the name, image and likeness working group at the community colleges, convene the working group and write the report.
2. Ongoing General Fund cost pressures to the University of California (UC), likely in the hundreds of thousands of dollars, for staff to ensure compliance with the provisions of this bill. The UC has seven universities that participate in an NCAA division.
3. Ongoing General Fund cost pressures to the California State University (CSU), likely in the low millions of dollars annually, for staff to ensure compliance with the provisions of this bill. The CSU has 21 universities that participate in an NCAA division.
4. Unknown, ongoing General Fund cost pressures to UC and CSU, potentially in the millions of dollars, to pay fines resulting from violations of NCAA bylaws, to the extent this bill results in NCAA fines. It is unclear if these fines would be lawful, however, because this bill would require universities to allow students to violate the NCAA bylaws. Uncertainty surrounding the bylaws more generally is discussed in comment #5.
5. Unknown, ongoing systemwide revenue losses to UC and CSU, potentially in the tens of millions of dollars, to the extent they lose NCAA and conference eligibility as a result of this bill. These losses would pertain primarily to a loss of NCAA funding, which includes student athlete scholarships; television revenue; ticket sales; and licensing and sponsorships. It is unclear whether it would be lawful for universities to lose eligibility as a result of this bill because this bill prohibits an athletic association, conference or other group or organization from preventing a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image or likeness. Uncertainty surrounding the bylaws more generally is discussed in comment #5.

COMMENTS:

1. Purpose. According to the author:

SB 206 allows athletes at California’s public and private colleges to earn income through sponsorships endorsements. SB 206 does not require colleges to pay or employ athletes and its provision do not put a cost on colleges. SB 206 also relieves the pressures to turn pro before graduating be allowing students to provide for themselves financially without facing loss of their athletic scholarship.

1. Background. The NCAA is a voluntary membership association of nearly 1,300 colleges and universities, athletics conferences and sports organizations that administer intercollegiate athletics. Representatives from member schools and conferences propose, debate and vote on bylaws that govern the association. The NCAA enforces these rules, which govern, among other things, student-athlete financial aid, employment and transfer eligibility. The NCAA competitions take place among colleges and universities that share the same division, of which there are three. Division I and Division II schools offer athletic scholarships, while Division III schools may or may not. Generally, larger schools compete in Division I and smaller schools in Divisions II and III. In California, 58 schools compete in one of the NCAA divisions.
2. NCAA Compensatory Bylaws. The NCAA generally enforces rules to uphold “amateurism” in intercollegiate athletics. The NCAA indicates the primary goal of requiring college athlete to maintain amateur status, as they define it, is to ensure college athletes are students before they are athletes. To maintain amateurism, and therefore compete as a student athlete in the NCAA and related conferences, the NCAA requires a student athlete to follow certain rules, as described in the organization’s bylaws. Some rules are related to a student athlete’s academic life while others are related to a student athlete’s athletic life.

With regard to student athlete compensation, NCAA bylaws determine student athletes may receive financial aid only as permitted by the NCAA, which typically is capped at the cost of attending the university at which a student athlete competes. Student athletes may not gain any compensation from their name, image or likeness, may not be represented by a sports agent and may not be paid as employees, among other compensatory restrictions. These rules apply to NCAA student athletes regardless of their scholarship status. That is, athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those who receive full athletic scholarships. (The NCAA makes certain exceptions in its compensatory bylaws, however. For example, tennis players can annually accept up to $10,000 in prize money and student athlete Olympians may accept Olympic winnings.)

Two NCAA bylaws are challenged by this bill: the prohibition of student athletes earning compensation from the use of their own name, image and likeness and the prohibition of student athletes obtaining professional representation, such as a sports agent.

“Name, image and likeness compensation” pertains to the ability to profit from the use of an athlete’s name or appearance. The term is broad and could include revenue from a video game with a player resembling a student athlete or a sponsorship agreement with a merchandiser. However, it also can apply to less high-profile activities, such as income from coaching a summer sports camp.

1. NCAA Bylaw Violations. The consequences of violating NCAA bylaws can be harsh and may jeopardize the eligibility of student athletes, and the teams for which they play, from participation in NCAA competition. Penalties may include fines, repayment of monies received from NCAA championship competition, forfeiture of contests and expulsion from the association.
2. Uncertainty in Future of NCAA Bylaws. The NCAA has voiced concerns with this bill, and has made reference to revoking NCAA eligibility of California universities if this bill becomes law. However, there is evidence NCAA may consider changes to these bylaws. In May 2019, the NCAA announced it was convening a work group around the issue, which would release its findings in October 2019. With this in mind, the bill contains intent language stating that the provisions of this bill, were it to become law, would be revisited after this report is released. Moreover, this measure contains a three-year delay in implementation, which is intended to give time for adoption of rules, regulations and conforming legislation.

Several other state legislatures and congress have considered legislation regarding student athlete compensation and name, image and likeness, specifically. This is an indication that the appetite to challenge the bylaws related to student athlete compensation is not California-specific.

1. University Concerns. The UC Office of the President, CSU Chancellor’s Office, Association of Independent California Colleges and Universities (an organization that represents private, nonprofit postsecondary institutions) and several private nonprofit institutions, such as the University of Southern California and Stanford University, have registered opposition to this bill. Their concerns include general concerns with cost pressures and revenue losses and specific concerns with how revenue losses would affect non-revenue-generating athletic programs.
2. Related and Prior Legislation. SB 1575 (Padilla), Chapter 625, Statutes of 2012, established the Student Athlete Bill of Rights, which requires public and private four-year universities that do not renew a student's athletic scholarship to provide an equivalent scholarship to that student, requires an athletic program to be responsible for medical expenses of its student athletes resulting from their participation in the athletic program and establishes a trust fund into which institutions of higher education that receive at least $10 million in annual revenue from media rights for intercollegiate athletics contribute funds.

AB 1518 (Chu), of this session, would authorize a sports agent to offer or provide money or any other thing of benefit or value to a student athlete if it is authorized by, and is in compliance with, an official written policy of the student athlete’s school and the terms of the contract comply with the bylaws of the NCAA. The bill is pending a Senate floor vote.

AB 1573 (Holden), of this session, would add to the Student Athlete Bill of Rights provisions authorizing institutions of higher education to establish a degree completion fund, prepare notices containing pertinent data relating to the rights of students and add provisions prohibiting institutions of higher education from intentionally retaliating against a student. The bill is pending before the Senate Appropriations Committee.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: July 9, 2019

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

SBPCA Bill Id:SB 206

Author:(Skinner) – As Amended Ver:June 20, 2019

SENATE VOTE: 31-5

SUBJECT: Collegiate athletics: Fair Pay to Play Act

SUMMARY: Allows, commencing on January 1, 2023, college student athletes to earn compensation for the use of their own name, image, or likeness and also obtain professional representation such as a sports agent, in relation to their college athletics. Specifically, this bill:

1. Specifies that a postsecondary educational institution will not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.
2. Specifies that earning compensation from the use of a student’s name, image, or likeness will not affect the student’s scholarship eligibility.
3. Specifies that an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association (NCAA), will not prevent a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.
4. Specifies that an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the NCAA, will not prevent a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image, or likeness. Also explicitly specified is that:
   1. A postsecondary educational institution, athletic association, conference, or other group or organization with authority over intercollegiate athletics will not provide a prospective student athlete with compensation in relation to the athlete’s name, image, or likeness;
   2. Professional representation obtained by student athletes will be from persons licensed by the state. Professional representation provided by athlete agents will be by persons licensed, as specified; and,
   3. Athlete agents representing student athletes shall comply with the federal Sports Agent Responsibility and Trust Act, as specified, in their relationships with student athletes.
5. A scholarship from the postsecondary educational institution in which a student is enrolled that provides the student with the cost of attendance at that institution is not compensation for purposes of this section, and a scholarship will not be revoked as a result of earning compensation or obtaining legal representation.
6. Defines, for purposes of this section, “postsecondary educational institution” to mean any campus of the University of California (UC), the California State University (CSU), or the California Community Colleges (CCC), an independent institution of higher education, as defined in Section 66010, or a private postsecondary educational institution, as defined in Section 94858.
7. Declares the intent of the Legislature to monitor the NCAA working group created in May 2019 to examine issues relating to the use of a student’s name, image, and likeness and revisit this issue to implement significant findings and recommendations of the NCAA working group in furtherance of the statutory changes proposed by this act.
8. Declares the intent of the Legislature to continue to develop policies to ensure appropriate protections are in place to avoid exploitation of student athletes, colleges, and universities.

EXISTING LAW:

1. Enacts the Student Athlete Bill of Rights, which requires intercollegiate athletics at four-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with the prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury. (Education Code (EDC) Section 67450)
2. Prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities. (EDC Section 67360)
3. Prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:
   1. To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution; and,
   2. To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program. These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the NCAA. (EDC Section 67360)
4. Defines “student athlete” as an individual who attends an elementary, junior high, high school, or postsecondary educational institution, and who participates in any interscholastic athletic program in California, including an individual who receives scholarship funds for the individual’s athletic participation and an individual who does not receive scholarship funds for athletic participation. (EDC Section 67360 et seq.)

FISCAL EFFECT: According to the Senate Committee on Appropriations:

1. Compliance staff: the CSU indicates that additional compliance staff would be needed for each of its 21 NCAA Division I and Division II athletic programs at a cost ranging from $3.2 million to $4.2 million. The UC has six NCAA Division I athletic programs and one NCAA Division II athletic program and indicates it would need additional staff for each program at a cost ranging from $1.0 million to $1.4 million General Fund.
2. NCAA penalties: the UC indicates that the total cost of the fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.
3. Revenue losses: the CSU estimates systemwide revenue losses to be anywhere from $9 million to $15 million as a result of this measure. The UC indicates revenue losses for being out of compliance with the NCAA as well but the actual figures are unknown and would vary based on campus and conference affiliation.

COMMENTS: Need for the bill. According to the author, “…Inside Higher Education and Drexel University revealed that over 80 percent of full-scholarship athletes live at or below the federal poverty level. Meanwhile, the NCAA and universities use these athletes to generate billions in profits, through ads, TV deals and ticket sales. Athletes face severe repercussions if they receive compensation from sponsorship deals or use their own image for financial gain. For many athletes, college is the only time that their name, image and likeness is profitable. Athletes have lost eligibility to participate in their sport for things such as accepting groceries and assistance with rent. Meanwhile they generate millions [of dollars] for universities and billions [of dollars] for the NCAA. The NCAA president Mark Emertt made over 3 million dollars in salary just last year, while any athletes who put their bodies on the line struggle to make ends meet. SB 206 will prevent any student in California from losing their scholarship due to compensation on their own name, image and likeness.”

What is the NCAA? The NCAA is a voluntary, membership association of nearly 1,300 colleges and universities, athletics conferences and sports organizations that administer intercollegiate athletics. Although the NCAA promotes intercollegiate athletics and student-athletes, its core function is to create rules and ensure a level playing field in intercollegiate athletic competition. Representatives from member schools and conferences propose, debate, and vote on bylaws that govern the association. The NCAA enforces these rules, which govern, among other things, student-athlete financial aid, employment, and transfer eligibility.

In its 2016-2017 fiscal year, the NCAA took in approximately $1.06 billion in revenue. The NCAA competitions take place among colleges and universities that share the same Division, of which there are three. Division I and Division II schools offer athletic scholarships, while Division III schools may or may not. Generally, larger schools compete in Division I and smaller schools in II and III.

Other Associations. Student athletics are governed by many different sanctioning bodies with different rules. The welfare of California student-athletes are overseen by a variety of athletic sanctioning bodies, whose rules and oversight ability differ depending on the size, location, and course offering of the various institutions of higher education.

The major sanctioning organizations include the NCAA (described above), the National Association of Intercollegiate Athletics (NAIA), the National Junior College Athletic Association (NJCAA), the California Community College Athletic Association, and the National Christian College Athletic Association (NCCAA). Even within these major sanctioning bodies, rules differ. For instance, the NCAA rules governing Division I, II and III institutions of higher education are not necessarily the same across divisions.

How is this bill incompatible with NCAA bylaws? As noted in the Senate Education Committee analysis, the NCAA maintains bylaws that regulate recruiting, scholarship levels, timing and methods of communication between institutions of higher education and student athletes. Committee staff notes that athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those that receive full athletic scholarships.

1. Financial Aid. Currently, NCAA bylaws impose a number of restrictions on student-athlete financial aid. Any student-athlete who receives financial aid other than that permitted by the Association shall not be eligible for intercollegiate athletics. Such payment is not allowed because it would be compensation based upon athletic skill, a preferential benefit not available to the general student population. As it stands, NCAA rules forbid a student-athlete from receiving preferential benefits or treatment because of the athlete’s reputation, skill or potential to be a professional athlete.

Specifically prohibited financial aid, benefits and arrangements include, but are not limited to, the following:

• 1. An employment arrangement for a prospective student-athlete's relatives;
  2. Gift of clothing or equipment;
  3. Co-signing of loans;
  4. Providing loans to a prospective student-athlete's relatives or friends;
  5. Cash or like items;
  6. Any tangible items, including merchandise;
  7. Free or reduced-cost services, rentals or purchases of any type;
  8. Free or reduced-cost housing;
  9. Use of an institution's athletics equipment (e.g., for a high school all-star game);
  10. Sponsorship of or arrangement for an awards banquet for high school, preparatory school or two-year-college athletes by an institution, representatives of its athletics interests or its alumni groups or booster clubs; and,
  11. Expenses for academic services (e.g., tutoring, test preparation) to assist in the completion of initial-eligibility or transfer-eligibility requirements or improvement of the prospective student-athlete's academic profile in conjunction with a waiver request.

1. Cost of Attendance. NCAA bylaws stipulate that an institution will not award financial aid to a student-athlete that exceeds the cost of attendance that normally is incurred by students enrolled in a comparable program at that institution. The “cost of attendance” is an amount calculated by an institutional financial aid office, using federal regulations, that includes the total cost of tuition and fees, room and board, books and supplies, transportation, and other expenses related to attendance at the institution. A student-athlete is not eligible to participate in intercollegiate athletics if they receive financial aid that exceeds the value of the cost of attendance as defined in this NCAA bylaw.
2. Agents. NCAA rules forbid student-athletes to agree, orally or in writing, to be represented by an agent or organization in the marketing of their athletic ability or reputation until after the completion of the last intercollegiate contest, including postseason games. The NCAA prohibition includes an agreement that is not effective until after the last game.

NCAA rules forbid a student-athlete or their representative from negotiating or signing a playing contract in any sport in which the athlete intends to compete, or to market the name or image of the athlete.

1. Consequences of non-compliance with NCAA bylaws. Violations of NCAA bylaws impact the eligibility of student-athletes, and the teams for which they play, for participation in NCAA competition. Violations may result in harsh penalties on the student, the team and the university. Penalties may include financial sanctions, repayment of monies received from NCAA championship competition, forfeiture of contests, and expulsion from the association.

Relevant court and administrative decisions. This measure is the latest in a line of actions attempting to monetize student athletes’ talents as collegiate athletes.

1. The first major effort came in 2009 when Ed O’Bannon sued the NCAA for authorizing and profiting from use of his likeness and statistics from his years as a college basketball star in a video game without compensation. The case, O'Bannon v. National Collegiate Athletic Association, was filed as an antitrust class action lawsuit against the NCAA, in which the plaintiffs’ challenged the NCAA’s use of the images of its former student athletes for commercial purposes. The suit argued that former student athletes are entitled to financial compensation for the NCAA’s use of their image. The NCAA maintained that providing such compensation would be a violation of its rules and bylaws. In 2014, an original ruling was made in favor of O’Bannon, holding that the NCAA’s bylaws are a violation of antitrust law. However, in 2015, the Ninth Circuit Court of Appeals reversed the District Court’s ruling, holding that under a rule of reason standard, the NCAA had a permissible purpose in upholding amateurism. (O'Bannon v. National Collegiate Athletic Association, 802 F. 3d 1049, (9th Cir. 2015))
2. The next major effort came in 2014 when a group of Northwestern University football players attempted to declare themselves employees and unionize. It was a split decision, with the players being found at the district level to be employees, but the National Labor Relations Board (NLRB) denying recognition of their effort to unionize, siding with the University and NCAA, who in part had asserted, “recognition of the players as employees violates long standing precedent” of amateurism.
3. The most recent case is that of Alston v. NCAA, wherein the plaintiffs challenged the legality of the NCAA and its’ member institutions practice of capping grants-in-aid at the cost-of-attendance based on federal antitrust laws. The NCAA contended that the rules were necessary because they served several procompetitive purposes permissible under federal antitrust laws. The court ruling in favor of the plaintiffs, holding that the NCAA can no longer “limit non cash education-related benefits and academic awards,” while allowing the NCAA to retain a substantial amount of discretion over student-athlete compensation that is unrelated to education. The ruling also provided that the NCAA allow conferences to create their own rules and policies for scholarship, and allow student athletes to receive a scholarship valued at greater than the total cost of attendance. The case settled with the NCAA agreeing to pay the estimated 40,000 member class of former students $208 million arrears. Because the NCAA had already changed their rules to allow institutions to offer full costs of attendance there were no future damages.

Arguments in support. The Alliance for Boys and Men of Color, a co-sponsor of this legislation, writes that, “Restrictive rules paired with time commitment and poverty have a negative impact on academic performance. Studies show more than half of California’s NCAA Division 1 and Division 2 colleges have one or more teams with graduation rates below 60 percent. Approximately 40 percent of NCAA Division 1 and Division 2 athletes say they do not have enough time to keep up with academics during the season, and many say athletics prevent them from taking classes. California’s African-American athletes are overrepresented in revenue producing sports and suffer the lowest graduation rates. SB 206 provides a path to allow collegiate athletes to make money on their name, image and likeness while still in college. But it does not require schools to pay athletes directly nor allow any of these payments to affect scholarship offers or eligibility.”

The American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO, write in support that, “…athletes cannot be prohibited from consulting with an agent. This is important for allowing college athletes to prepare for their future in professional athletics. While universities are intended to be centers of academia, some athletes are enrolled solely to participate in sports before they transition to the professional level. It is critical that they are provided with guidance along this route and are not misled by those who may be in compliance with NCAA standards, but do not have the athlete's best interests in mind. Sports agents act on behalf of the athletes they represent, and therefore, should not be shunned while college athletes are at the crucial preliminary stages of their careers.”

The California-Hawaii State Conference of the NAACP supports the bill based on their belief that, “For many athletes, college is the only time they may profit from their participation in sports. The NCAA reveals less than 1% of women's college basketball players will make it to the WNBA, and less than 2% of men's college basketball, football, and soccer will ever play professionally.”

Arguments in opposition. Opposition to this bill spans public and private institutions, and includes both four-year and community colleges. Opposition wrote to express concern in several key areas:

1. Inconsistency with prior court rulings. Stanford University wrote that, “…SB 206 is inconsistent with recent court rulings, first in O'Bannon v. NCAA, and more recently in Alston v. NCAA that determined that all student-athlete benefits must be tied directly to education purposes only. In fact, although the court in Alston ruled against the NCAA, the judge held that payments not tethered to education, like name, image, and likeness payments, are not permitted because they are ‘professional-level cash payments, unrelated to education, that could blur the distinction between college sports and professional sports and thereby negatively affect consumer demand for Division I basketball and FBS football.’"
2. NCAA Bylaws Violation. NCAA-member institutions wrote concerning violations of NCAA bylaw 12.1.2, which dictates ways in which a student can lose their amateur status, and NCAA bylaw 12.5.2.1, which makes a student ineligible for participation if they accept compensation for name, image and likeness or for the endorsement of commercial products.

The University of California wrote that “…SB 206 creates a circumstance in which student athletes at UC could be in violation of NCAA bylaw 12.1.2 and NCAA bylaw 12.5.2.1. These bylaws strictly prohibit student-athletes from receiving compensation through use of their name, image, or likeness, and provides penalties for student-athletes and institutions who fail to comply. This bill would put the student-athlete, their teammates, and the athletics programs at risk of losing NCAA and conference eligibility, which would result in the loss of educational benefits and other competitive opportunities for UC student-athletes. This is an issue that would affect more student-athletes beyond recipients of scholarships. Allowing student-athletes to receive compensation from outside sponsors would jeopardize the University’s existing sponsorship agreements, leading to budget cuts and the likely elimination of non-revenue sports.”

The University of Southern California (USC) noted that “SB 206 would encourage students to violate the NCAA bylaws, becoming athletically ineligible and putting athletic teams and athletic departments at risk. The NCAA has two bylaws that specifically prohibit participation in intercollegiate competition if they receive any outside compensation. In the past, when a single student has engaged in any activity that violates the NCAA rules, the entire team and program are negatively impacted. In 2010, USC’s athletic program was investigated and punished for NCAA rules violations by our football, men’s basketball and women’s tennis teams. As part of the investigation, two former USC athletes were found to have violated NCAA rules by accepting compensation from sports agents. The Trojan athletic program received some of the harshest penalties ever handed down to a Division 1 program. [These included:]

• 1. The USC football team was forced to vacate the final two wins in its 2004 national championship season, as well as all of its wins in 2005;
  2. The USC football team was banned from bowl games in both 2010 and 2011;
  3. The USC football team was docked 30 scholarships over the next three years (2012-13, 2013-14 and 2014-15); and,
  4. The USC basketball team gave up all of its wins from the 2007-08 season and sat out of postseason play in 2010.”

1. Current NCAA working group. The Association of Independent California Colleges and Universities (AICCU) wrote that “Last month the NCAA announced the creation of a working group that will review the NCAA’s policies around name, image, and likeness. The group includes conference commissioners, student athletes from Division 1, 2, and 3, and other administrators for student athletics. The group will examine modifications to current policies, and prepare a final report which will be released in October. We believe SB 206 should be held in committee, in order for this work to conclude and for policymakers to then assess what changes to state law are appropriate without putting athletic programs and student athletes at risk.”
2. Community College-specific concerns. The California Community College Athletic Association (CCCAA) wrote in opposition, noting that “…our programs are organized differently from athletic programs at four-year institutions…[our] policies and procedures have created an environment in which a student-athlete puts academics first. Our collegiate athletics is not subsidized by high profile TV rights and are instead designed to increase student success, equity, and access.

“SB 206 (Skinner) would reverse the steps that our colleges, the CCCAA, and state policymakers have made to emphasize academics by permitting student-athletes to generate revenue based on their athletic ability. It will naturally shift the focus of a student-athlete from excelling academically to performing well on the athletic field.

“Finally, SB 206 (Skinner) would result in a reduction of competitive equity among our programs. It would open the door to local boosters or businesses to pay student-athletes and begin to attract the most talented athletes in our system. A reduction in competitive equity for our programs would create an imbalanced playing environment and could reduce interest in playing at our institutions.”

Request by NCAA and PAC-12 Conference. The President of the NCAA has reached out to this Committee to request delay in hearing SB 206, asking “On behalf of the nearly 1,300 NCAA member colleges, universities and conferences, I write to request respectfully that the Committee on Arts, Entertainment, Sports, Tourism and Internet Media and the Committee on Higher Education postpone further consideration of Senate Bill 206, the Fair Pay to Play Act, while we review our rules. We recognize all of the efforts that have been undertaken to develop this bill in the context of complex issues related to the current collegiate model that have been the subject of litigation and much national debate. Nonetheless, when contrasted with current NCAA rules, as drafted the bill threatens to alter materially the principles of intercollegiate athletics and create local differences that would make it impossible to host fair national championships. As a result, it likely would have a negative impact on the exact student-athletes it intends to assist. We believe this initiative necessitates conversations and agreements among member universities and colleges about how we can constructively engage. We humbly ask that the California legislature provide NCAA member schools the time and opportunity to thoroughly assess issues surrounding student-athlete name, image and likeness (NIL), including potential unintended consequences that might arise if SB 206 is passed as written.”

Committee comments. Committee staff notes that amendments taken in the Senate Appropriations Committee delays implementation of this bill until January 1, 2023, and amendments taken in the Assembly Committee on Entertainment, Sports, Tourism, and Internet Media state the intent of the Legislature monitor the NCAA working group noted in opposition comments, and to revisit this policy to implement significant findings and recommendations in the NCAA working group’s October report. Taken together, these provisions are designed to give the legislature time to assess the impact of this legislation on the collegiate athletics landscape, while also allowing for a continued conversation with stakeholders as this issue is addressed nationally.

Amendments. The Committee has recommended, and the author has accepted, amendments that will remove “California Community Colleges” for the definition of “postsecondary educational institution” listed in EDC Section 67456(e) as proposed in SB 206.

Additionally, the Committee has recommended, and the author has accepted amendments that will create a name, image, and likeness working group that will be charged with reviewing CCCAA’s bylaws and making recommendations to CCCAA and the Legislature. This working group, led by the California Community College Chancellor’s Office, will include, but not be limited to, CCC coaches, CCC student athletes, CCC administrators, and a CCCAA representative. The recommendations shall be presented to the Legislature and CCCAA no later than July 1, 2021.

The author has requested amendments that will strike language in Section 1(b) that names the act, and allows it to be cited, as the “Fair Pay to Play Act.”

Pending and prior legislation. AB 1518 (Chu) of the current session, would authorize an athlete agent to offer or provide money or any other thing of benefit or value to a student athlete if it is authorized by, and is in compliance with, an official written policy of the student athlete’s school and the terms of the contract comply with the bylaws of the National Collegiate Athletic Association. AB 1518 is pending in the Senate Judiciary Committee.

AB 1573 (Holden), of the current session, would add to the Student Athlete Bill of Rights (SABR) provisions authorizing institutions of higher education to establish a degree completion fund, prepare notices containing pertinent data relating to the rights of students, as specified, and provisions prohibiting institutions of higher education from intentionally retaliating, as defined, against a student athlete as provided. AB 1573 is pending in the Senate Appropriations Committee.

AB 2747 (Holden, 2018) would have authorized college athletes to self-organize, as specified. Requires campuses to establish a process by which the complaints of student athletes may be reported and investigated, as specified. Prohibits a student athlete from being penalized for receiving gifts or income, as specified. Establishes and defines collegiate mandated reporters, as specified. AB 2747 was held in the Senate Appropriations Committee.

AB 2220 (Bonta, 2017) would have expanded the Student Athlete Bill of Rights (SABR) from four universities to all intercollegiate athletic programs that provide athletic scholarships, as defined, and would have removed the limitation in existing law for funding of SABR provisions to media rights revenues derived from the university athletic department. It would further have provided a private right of action, as specified, to college athletes who claim to have had any rights established under the SABR violated by an institution of higher education, including any of its personnel, as defined, and changed references from "student athlete" to "college athlete." AB 2220 was held in the Senate Appropriations Committee.)

AB 1435 (Gonzalez-Fletcher, 2017) would have established the College Athlete Protection Act under the administration of the College Athlete Protection Commission, which would be established by the bill, for the protection of college or university athletes participating in intercollegiate athletic programs offered by institutions of higher education located in California. AB 1435 was held in the Senate Education Committee.

SB 1525 (Padilla), Chapter 625, Statutes of 2012 established the Student Athlete Bill of Rights, requiring public and private four-year universities that do not renew a student's athletic scholarship to provide an equivalent scholarship to that student, requiring an athletic program to be responsible for medical expenses of its student athletes resulting from their participation in the athletic program, and establishing a trust fund into which institutions of higher education that receive at least $10 million in annual revenue from media rights for intercollegiate athletics contribute funds.

SB 193 (Murray, 2003) would have enacted the Student Athletes' Bill of Rights, which in essence, would have removed NCAA authority over California student athletes. The bill also sought to entitle student athletes to workers' compensation benefits, and require higher education institutions to report on student athletes annually, as specified. SB 193 was held in the Assembly Education Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees, AFL-CIO
California Faculty Association
California Hawaii State Conference of the NAACP
UAW Local 5810
University Professional & Technical Employees-CWA Local 9119

1 Individual

Opposition

Association of Independent California Colleges & Universities
California Community College Athletic Association
California State University, Office of the Chancellor
Chief Executive Officers Of California's Community Colleges
Stanford University
University of California
University of Southern California

Analysis Prepared by: Kevin J. Powers / HIGHER ED. / (916) 319-3960

Date of Hearing: June 25, 2019

ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND INTERNET MEDIA

Kansen Chu, Chair

SBPCA Bill Id:SB 206

Author:(Skinner) – As Amended Ver:June 20, 2019

SENATE VOTE: 31-5

SUBJECT: Collegiate athletics: Fair Pay to Play Act.

SUMMARY: This bill would allow college student athletes to earn compensation for the use of their own name, image, or likeness and also obtain professional representation such as a sports agent, in relation to their college athletics. Specifically, this bill:

1. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from receiving compensation for the use of their own name, image, or likeness.
2. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from obtaining professional representation in relation to their college athletics, provided that the professional representation is in compliance with federal law and is performed by persons licensed by the state.
3. Prohibits any group with authority over intercollegiate athletics from preventing a postsecondary educational institution from participating in intercollegiate athletics as a consequence of that institution allowing its student-athletes to earn athletic endorsements.
4. Prohibits the revocation of a student-athlete’s scholarship as a consequence of receiving endorsements, or as a consequence of obtaining professional representation as authorized under these provisions.
5. Defines “postsecondary educational institutions” as any campus at the University of California (UC), the California State University (CSU), the California Community Colleges, independent institutions of higher education, and private postsecondary educational institutions.
6. States that the statute shall not become effective until January 1, 2023.

EXISTING LAW:

1. Enacts the Student Athlete Bill of Rights, which requires intercollegiate athletics at four-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with the prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury.
2. Prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities.
3. Prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:
   1. To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution.
   2. To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program. These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the National Collegiate Athletic Association (NCAA).
4. Defines “student athlete” as an individual who attends an elementary, junior high, high school, or postsecondary educational institution, and who participates in any interscholastic athletic program in California, including an individual who receives scholarship funds for his or her athletic participation and an individual who does not receive scholarship funds for his or her athletic participation.

FISCAL EFFECT: According to the Senate Committee on Appropriations:

• Compliance staff: the CSU indicates that additional compliance staff would be needed for each of its 21 National Collegiate Athletic Association (NCAA) Division I and Division II athletic programs at a cost ranging from $3.2 million to $4.2 million. The UC has six NCAA Division I athletic programs and one NCAA Division II athletic program and indicates it would need additional staff for each program at a cost ranging from $1.0 million to $1.4 million General Fund.

• NCAA penalties: the UC indicates that the total cost of the fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.

• Revenue losses: the CSU estimates systemwide revenue losses to be anywhere from $9 million to $15 million as a result of this measure. The UC indicates revenue losses for being out of compliance with the NCAA as well but the actual figures are unknown and would vary based on campus and conference affiliation.

COMMENTS:

1. Author and supporters statement of need for legislation: Student athletes need to financially strike while the iron is hot and draw compensation for their performance in collegiate athletics. It is only fair because it is the athletes who are the draw in these hugely profitable activities.

According to the Author, “Athletes face severe repercussions if they receive compensation from sponsorship deals or use their own image for financial gain. Collegiate athletes are the only group of students who are barred in such a way. Collegiate athletes have lost eligibility to participate in their sport for things such as accepting groceries and assistance with rent, meanwhile the NCAA generates billions of dollars every year. The NCAA president Mark Emertt made over 3 million dollars on salary just last year meanwhile many athletes who put their bodies on the line struggle to make ends meet.” The California-Hawaii State Conference of the NAACP supports based on their belief that, “For many athletes, college is the only time they may profit from their participation in sports. The NCAA reveals less than 1% of women's college basketball players will make it to the WNBA, and less than 2% of men's college basketball, football, and soccer will ever play professionally.”

The bill’s cosponsor, The Alliance for Boys and Men of Color, writes in support to say, “Many collegiate athletes are participating without a guaranteed scholarship or no scholarship at all. Scholarships may be revoked for poor performance in their respective sport or failure to participate in ‘voluntary’ workouts. University studies have found that athletes are spending 32 to 44 hours a week on their respective sports. The time commitment athletes dedicate make it practically impossible for athletes to obtain outside employment to provide for themselves or families.” They add that, “Universities and the National Collegiate Athletic Association (NCAA) currently make huge amounts of money from TV deals and corporate sponsorships of their athletic teams, often profiting from young athletes who do not receive compensation for their hard work. This exploitation disproportionately affects students of color and students from low-income families. SB 206 will give young athletes the dignity of a fair wage.”

The American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO, adds in support, “In addition, (under SB 206) athletes cannot be prohibited from consulting with an agent. This is important for allowing college athletes to prepare for their future in professional athletics. While universities are intended to be centers of academia, some athletes are enrolled solely to participate in sports before they transition to the professional level. It is critical that they are provided with guidance along this route and are not misled by those who may be in compliance with NCAA standards, but do not have the athlete's best interests in mind. Sports agents act on behalf of the athletes they represent, and therefore, should not be shunned while college athletes are at the crucial preliminary stages of their careers.”

Finally, Teamsters write to share their belief that, “The ‘Fair Pay to Play Act’ is principally about fairness. We believe that athletes should have a financial avenue to provide for their families without facing loss of their athletic scholarship.”

1. Background:
   1. What is the NCAA? The NCAA is a voluntary, membership association of nearly 1,300 colleges and universities, athletics conferences and sports organizations that administer intercollegiate athletics. Although the NCAA promotes intercollegiate athletics and student-athletes, its core function is to create rules and ensure a level playing field in intercollegiate athletic competition. Representatives from member schools and conferences propose, debate, and vote on bylaws that govern the association. The NCAA enforces these rules, which govern, among other things, student-athlete financial aid, employment, and transfer eligibility.

“The Intercollegiate Athletic Association, the predecessor of the NCAA, was founded in 1906 to address the violence then plaguing college football. More broadly, the founders sought to set national standards for all collegiate sports. From the outset, the organization emphasized education and upholding amateurism. It adopted the NCAA name in 1910. The NCAA constitution states that the organization’s purpose is ―to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between intercollegiate athletics and professional sports. To achieve its goals, the NCAA issues and enforces rules that govern aspects such as recruiting, eligibility, academic standards, and the requirements for schools to be classified as Division I, II, or III.” (Lush, Reclaiming Student Athletes’ Rights to Their Names, Images and Likeness Post O’Bannon v NCAA, 2015 Southern California Interdisciplinary Law Journal Vol. 24:767.)

• 1. Amateurism is a core principle of the NCAA. “One of the NCAA’s main goals is to uphold the virtues of amateur sports. Such amateurism—or the practice of participating in a discipline without financial compensation—separates the NCAA from professional leagues where participants are paid to perform. In fact, an individual can lose amateur status if he or she is paid in any manner seemingly related to athletic ability and consequently lose NCAA eligibility.” (id)

As the United States Supreme Court noted in the NCAA vs Board of Regents decision, "What the NCAA and its member institutions market in this case is competition itself - contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed. A myriad of rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed, all must be agreed upon, and all restrain the manner in which institutions compete. Moreover, the NCAA seeks to market a particular brand of football - college football. The identification of this ‘product’ with an academic tradition differentiates [468 U.S. 85, 102] college football from and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor league baseball. In order to preserve the character and quality of the ‘product,’ athletes must not be paid, must be required to attend class, and the like. And the integrity of the ‘product’ cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice - not only the choices available to sports fans but also those available to athletes - and hence can be viewed as procompetitive.” (NCAA vs Board of Regents [1984] 468 U.S. 85, 103).

• 1. How is this bill incompatible with NCAA bylaws? As noted in the Senate Education Committee analysis, the NCAA maintains bylaws that regulate recruiting, scholarship levels, timing and methods of communication between institutions of higher education and student athletes. Note: Athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those that receive full athletic scholarships.
     1. Financial Aid. Currently, NCAA bylaws impose a number of restrictions on student athlete financial aid. Any student-athlete who receives financial aid other than that permitted by the Association shall not be eligible for intercollegiate athletics. Such payment is not allowed because it would be compensation based upon athletic skill, a preferential benefit not available to the general student population. As it stands, NCAA rules forbid a student-athlete from receiving preferential benefits or treatment because of the athlete’s reputation, skill or potential to be a professional athlete.

Specifically prohibited financial aid, benefits and arrangements include, but are not limited to, the following:

• • • 1. An employment arrangement for a prospective student-athlete's relatives;
      2. Gift of clothing or equipment;
      3. Co-signing of loans;
      4. Providing loans to a prospective student-athlete's relatives or friends;
      5. Cash or like items;
      6. Any tangible items, including merchandise;
      7. Free or reduced-cost services, rentals or purchases of any type;
      8. Free or reduced-cost housing;
      9. Use of an institution's athletics equipment (e.g., for a high school all-star game);
      10. Sponsorship of or arrangement for an awards banquet for high school, preparatory school or two-year-college athletes by an institution, representatives of its athletics interests or its alumni groups or booster clubs; and
      11. Expenses for academic services (e.g., tutoring, test preparation) to assist in the completion of initial-eligibility or transfer-eligibility requirements or improvement of the prospective student-athlete's academic profile in conjunction with a waiver request.
    1. Cost of Attendance. An institution shall not award financial aid to a student-athlete that exceeds the cost of attendance that normally is incurred by students enrolled in a comparable program at that institution. The “cost of attendance” is an amount calculated by an institutional financial aid office, using federal regulations, that includes the total cost of tuition and fees, room and board, books and supplies, transportation, and other expenses related to attendance at the institution. A student-athlete shall not be eligible to participate in intercollegiate athletics if he or she receives financial aid that exceeds the value of the cost of attendance as defined in this Bylaw.
    2. Agents. National Collegiate Athletic Association (NCAA) rules forbid student-athletes to agree, orally or in writing, to be represented by an agent or organization in the marketing of his or her athletic ability or reputation until after the completion of the last intercollegiate contest, including postseason games. The NCAA prohibition includes an agreement that is not effective until after the last game.

NCAA rules forbid a student-athlete or his/her representative from negotiating or signing a playing contract in any sport in which the athlete intends to compete, or to market the name or image of the athlete.

• 1. Consequences of non-compliance with National Collegiate Athletic Association (NCAA) bylaws. Violations of NCAA bylaws impact the eligibility of student-athletes, and the teams for which they play, for participation in NCAA competition. Violations may result in harsh penalties on the student, the team and the university. Penalties may include financial sanctions, repayment of monies received from NCAA championship competition, forfeiture of contests, and expulsion from the association.

1. SB 206 applies to community colleges: By state law, community colleges cannot offer athletic scholarships to their athletes. According to the Senate Education Committee analysis, this law is in place to make sure community colleges spend their financial resources on academic priorities while supporting more equitable competition across the system. Since community colleges are barred from offering athletic scholarships, this bill would allow community college student athletes to independently earn revenue on the basis of their name, image, and likeness in order to support themselves.
2. Relevant court and administrative decisions. This measure is the latest in a line of actions attempting to monetize student athletes’ talents as collegiate athletes.
   1. The first major effort came in 2009 when Ed O’Bannon sued the NCAA for authorizing and profiting from use of his likeness and statistics from his years as a college basketball star in a video game without compensation. The case, O'Bannon v. National Collegiate Athletic Association, was filed as an antitrust class action lawsuit against the NCAA, in which the plaintiffs’ challenged the NCAA’s use of the images of its former student athletes for commercial purposes. The suit argued that former student athletes are entitled to financial compensation for the NCAAs use of their image. The NCAA maintained that providing such compensation would be a violation of its rules and bylaws. In 2014, an original ruling was made in favor of O’Bannon, holding that the NCAA’s bylaws are a violation of antitrust law. However, in 2015, the Ninth Circuit Court of Appeals reversed the District Court’s ruling, holding that under a rule of reason standard, the NCAA had a permissible purpose in upholding amateurism. O'Bannon v. National Collegiate Athletic Association, 802 F. 3d 1049, (9th Cir. 2015)
   2. The next major effort came in 2014 when a group of Northwestern University football players attempted to declare themselves employees and unionize. It was a split decision of sorts, with the players being found at the district level to be employees, but the National Labor Relations Board (NLRB) denying recognition of their effort to unionize, siding with the University and NCAA, who in part had asserted, “recognition of the players as employees violates long standing precedent” of amateurism.
   3. The most recent case is that of Alston v. NCAA, wherein the plaintiffs challenged the legality of the NCAA and its’ member institutions practice of capping grants-in-aid at the cost-of-attendance based on federal antitrust laws. Once again, the NCAA contended that the rules were necessary because they served several procompetitive purposes permissible under federal antitrust laws. The court ruling in favor of the plaintiffs, holding that the NCAA can no longer “limit non cash education-related benefits and academic awards,” while allowing the NCAA to retain a substantial amount of discretion over student-athlete compensation that is unrelated to education. The ruling also provided that the NCAA allow conferences could create their own rules and policies for scholarship, and allow student athletes to receive a scholarship valued at greater than the total cost of attendance. The case settled with the NCAA agreeing to pay the estimated 40,000 member class of former students $208 million arrears. Because the NCAA had already changed their rules to allow institutions to offer full costs of attendance there were no future damages.
3. Opposition concerns: violation of NCAA rules carries severe consequences. The committee has heard from all segments of higher education who uniformly oppose this measure. Stanford University writes in opposition to this measure to say, “We share the author's interest in protecting and supporting the welfare of student-athletes. However, allowing student-athletes to receive compensation from their name, image, and likeness, would present serious challenges for higher education institutions and to the collegiate sports model. Stanford, like other universities with athletic programs across the US, has agreed to the bylaws of the National College Athletic Association (NCAA). This bill is in direct conflict with NCAA bylaws regarding the amateur status of student-athletes (Bylaw 12 .1.2 and 12.5 .2.1)…. In addition, SB 206 is inconsistent with recent court rulings, first in O'Bannon v. NCAA, and more recently in Alston v. NCAA that determined that all student-athlete benefits must be tied directly to education purposes only. In fact, although the court in Alston ruled against the NCAA, the judge held that payments not tethered to education, like name, image, and likeness payments, are not permitted because they are "professional-level cash payments, unrelated to education, that could blur the distinction between college sports and professional sports and thereby negatively affect consumer demand for Division I basketball and FBS football."

The University of Southern California (USC) also opposes this measure and instead urges reform at the national level, stating, “We believe that any reforms must be addressed at the national level through the NCAA. Any reforms approved at the state level would place the schools in that state at a competitive disadvantage with other national programs. According to USC, “There are two primary concerns with SB 206 relating to 1) conflicts with the National College Athletic Association (NCAA) bylaws 12.1.2 and NCAA bylaw 12.5.2.1 and 2) the impact on the teammates of any student athlete who takes advantage of this legislation, if enacted into state law…. SB 206 would encourage students to violate the NCAA bylaws, becoming athletically ineligible and putting athletic teams and athletic departments at risk. The NCAA has two bylaws that specifically prohibit participation in intercollegiate competition if they receive any outside compensation. In the past, when a single student has engaged any activity that violates the NCAA rules, the entire team and program are negatively impacted. In 2010, USC’s athletic program was investigated and punished for NCAA rules violations by our football, men’s basketball and women’s tennis teams. As part of the investigation, two former USC athletes were found to have violated NCAA rules by accepting compensation from sports agents. The Trojan athletic program received some of the harshest penalties ever handed down to a Division 1 program.”

The California State University additionally points out that, under SB 206 the “CSU would be required to continue to provide athletic scholarships to students who would be ineligible to compete under NCAA rules. This bill could result in our students and our campuses being unable to participate in intercollegiate athletics, compromising an important element of the educational experience for our students.”

Finally, Association of Independent California Colleges and Universities (AICCU) echoes the above concerns and adds in their opposition, “The NCAA has announced the creation of a working group that will review the NCAA's policies around name, image and likeness. The group includes conference commissioners, student athletes from Division 1, 2 and 3, and other administrators for student-athletics. The group will examine modifications to current policies, and prepare a final report that will be released in October. We believe that SB 206 should be held in committee, in order for this work to conclude and for policymakers to then assess what changes to state law are appropriate without putting athletic programs and student-athletes at risk.”

1. Request by NCAA and PAC-12 Conference to make SB 206 a two year bill in order to allow a NCAA NIL Task Force to complete its work on the issues raised in the bill. The President of the NCAA has reached out to this Committee to request delay in hearing SB 206, asking “On behalf of the nearly 1,300 NCAA member colleges, universities and conferences, I write to request respectfully that the Committee on Arts, Entertainment, Sports, Tourism and Internet Media and the Committee on Higher Education postpone further consideration of Senate Bill 206, the Fair Pay to Play Act, while we review our rules. We recognize all of the efforts that have been undertaken to develop this bill in the context of complex issues related to the current collegiate model that have been the subject of litigation and much national debate. Nonetheless, when contrasted with current NCAA rules, as drafted the bill threatens to alter materially the principles of intercollegiate athletics and create local differences that would make it impossible to host fair national championships. As a result, it likely would have a negative impact on the exact student-athletes it intends to assist. We believe this initiative necessitates conversations and agreements among member universities and colleges about how we can constructively engage. We humbly ask that the California legislature provide NCAA member schools the time and opportunity to thoroughly assess issues surrounding student-athlete name, image and likeness (NIL), including potential unintended consequences that might arise if SB 206 is passed as written.

“In May 2019, the NCAA Board of Governors and I announced the creation of a working group to study potential processes whereby a student-athlete's NIL could be monetized in a fashion that would be consistent with the NCAA's core values, mission and principles. This group of Presidents, conference commissioners, athletics directors and other administrators and student athletes includes Dr. Tim White, Chancellor of the California State University System. The Board made clear that concepts by which student-athletes are considered employees and paid for their athletics participation will not be considered. The working group is expected to provide an update on its work to the Board of Governors at their August meeting and deliver a report to the Board in October. Even though SB 206 has a deferred effective date of 2023, passage of the bill now will create confusion among prospective and current student-athletes and our membership. The impact of a prematurely passed bill would be difficult to untangle.”

1. Recent amendments delete findings and declarations and recognize need to implement NCAA Task Force recommendations in the future through follow-up legislation. The author has recently amended the findings and declarations out of the bill in recognition of their being reflective of student athlete experiences prior to recent changes in the law, rule changes made by the NCAA and court rulings, which have improved the situation of student athletes sufficiently as to call the findings into question.

In addition, the author has added intent language in recognition of the pending report of the NCAA task force on the issue of student’s name, image and likeness. This amendment comes in response to concern expressed by many parties, as detailed in comments 5 and 6 above, that passage of SB 206 by the Legislature while an ongoing internal process to address the same issues within the NCAA was premature and could create policy and implementation conflicts. In response, the bill now states the intention of the Legislature to revisit this issue to implement significant findings and recommendations of the NCAA working group while stressing the intent of the Legislature to continue to develop policies to ensure appropriate protections are in place to avoid exploitation of student-athletes and institutions of higher education.

1. Committee comment: SB 206 takes us into uncharted territory. Beyond Here there be Dragons - This was the warning that the ancient mapmakers would put on their maps to warn ships that they were about to enter into uncharted waters. While there might not be dragons, no one knows the impact of adoption of SB 206; not the Author, not the NCAA, not the Institutions of Higher Education (IHE) and not the students who will be impacted.

There are a couple of likely scenarios, the first of which is that the NCAA Task Force on NIL doubles down and denies student athletes any ability to monetize use of their name, likeness or image under the banner of amateurism. This has long been the NCAA position, recognized by the courts, including the US Supreme Court, and legal commentators as core to the mission of the NCAA. This rational of the “student” athlete has successfully been offered to push back on attempts to pay students for their participation in collegiate athletics, while allowing expansion of educationally related benefits.

Another potential NCAA position would be that SB 206 is an unconstitutional interference with interstate trade and violates the First Amendment’s Dormant Commerce Clause. In order to determine whether a law violates a so-called "dormant" aspect of the Commerce Clause, the court first asks whether it discriminates on its face against interstate commerce. In this context, "discrimination" simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. Given the potential differential treatment of California-based athletes being allowed to enter endorsement contracts, an argument may be made that this would place other states in a disadvantage in recruitment of athletes.

Another possible scenario is that the NCAA NIL Task Forces crafts some ability to monetize use of the student’s NIL. The NCAA has already shown itself able to adapt to changes and loosen its firm grip on issues addressed in SB 206. For instance, certain student athletes may already use agents yet retaining their amateur status. (See analysis of AB 1518 (Chu), Legislation of the current session, for a discussion of this issue).

In addition, student athletes who are Olympians are able to accept prize money from the United States Olympic Committee and maintain eligibility to compete in NCAA events. It should be noted that they may not enter endorsement deals under NCAA rules, a point SB 206 supporters often make. However, it would not take much of a policy change to allow endorsements. Much of the groundwork has been laid by the USOC in how to maintain amateurism and allow endorsement contracts. Known as The Olympic Model, athletes may not expressly endorse products, but for instance, may be paid to wear a certain brand and receive free branded gear. The brand in turn, may not reference the athlete’s team or status as an Olympian (or Spartan, Bulldog, Hornet or Golden Bear), but benefits from the association. This model has an added advantage of avoiding the Title IX problems and fairness issues of the IHEs paying athletes. Indeed, some movement in this direction has already been made when in 2014, after the O’Bannon decision, the NCAA changed its Student Athlete Statement rules and struck out the name and likeness language from the media waiver students sign, theoretically opening the door for some permitted use.

This measure contains a three year delay in implementation, which if it is passed by the legislature and signed is intended to give time for adoption of rules, regulations and conforming legislation. Any action on the monetization of student athlete participation in NCAA competitions will take much consideration, strict oversight and cooperation from all impacted actors; The Legislature, NCAA, professional leagues, Institutions of Higher Education, athlete agents, commercial entities, and the athletes themselves. As one supporter, ironically a former NCAA official, wrote, “Over the years, we’ve seen numerous colleges and universities go to great lengths to circumvent the unfair rules that the NCAA places on student athletes. In the 2010 film, “Pony Excess,” former NFL and Southern Methodist University (SMU) stars Eric Dickerson and Craig James talked openly about the ‘slush funds’ and large payments they regularly received while in college — and that they were not alone. SB 206 seeks to end these pay-to-play schemes by allowing collegiate athletes to make legitimate money from third-party sponsorship deals.” We must be vigilant in our oversight to assure that those who would abuse the system, such as was seen at SMU and North Carolina and even our own USC, don’t simply continue their under the table pay-to-play ways within this proposed NIL endorsement regime, least we prove the ancient cartographers right.

1. Double referral. Should the bill pass out of this committee it will be re-referred to the Assembly Committee on Higher Education.
2. Prior and related legislation.
   1. AB 1518 (Chu) of the current session, would authorize an athlete agent to offer or provide money or any other thing of benefit or value to a student athlete if it is authorized by, and is in compliance with, an official written policy of the student athlete’s school and the terms of the contract comply with the bylaws of the National Collegiate Athletic Association. AB 1518 is pending in the Senate Education Committee.
   2. AB 1573 (Holden), of the current session, would add to the Student Athlete Bill of Rights (SABR) provisions authorizing institutions of higher education to establish a degree completion fund, prepare notices containing pertinent data relating to the rights of students, as specified, and provisions prohibiting institutions of higher education from intentionally retaliating, as defined, against a student athlete as provided. AB 1573 passed out of this committee on a 7-0 vote and is currently pending in the Senate Education Committee.
   3. AB 2747 (Holden), of 2018, would have authorized college athletes to self-organize, as specified. Requires campuses to establish a process by which the complaints of student athletes may be reported and investigated, as specified. Prohibits a student athlete from being penalized for receiving gifts or income, as specified. Establishes and defines collegiate mandated reporters, as specified. (Status: Held in Senate Appropriations Committee.)
   4. AB 2220 (Bonta), of 2017, would have expanded the Student Athlete Bill of Rights (SABR) from four universities to all intercollegiate athletic programs that provide athletic scholarships, as defined, and would have removed the limitation in existing law for funding of SABR provisions to media rights revenues derived from the university athletic department. It would further have provided a private right of action, as specified, to college athletes who claim to have had any rights established under the SABR violated by an institution of higher education, including any of its personnel, as defined, and changed references from "student athlete" to "college athlete." (Status: Held in Senate Appropriations Committee.)
   5. AB 1435 (Gonzalez-Fletcher), of 2017, would have established the College Athlete Protection Act under the administration of the College Athlete Protection Commission, which would be established by the bill, for the protection of college or university athletes participating in intercollegiate athletic programs offered by institutions of higher education located in California. (Status: Held in the Senate Education Committee.)
   6. SB 1575 (Padilla), Chapter 625, Statutes of 2012 established the Student Athlete Bill of Rights, requiring public and private four-year universities that do not renew a student's athletic scholarship to provide an equivalent scholarship to that student, requiring an athletic program to be responsible for medical expenses of its student athletes resulting from their participation in the athletic program, and establishing a trust fund into which institutions of higher education that receive at least $10 million in annual revenue from media rights for intercollegiate athletics contribute funds.
   7. SB 193 (Murray), of 2003, would have enacted the Student Athletes' Bill of Rights, which in essence, would have removed NCAA authority over California student athletes. The bill also sought to entitle student athletes to workers' compensation benefits, and require higher education institutions to report on student athletes annually, as specified. SB 193 was held in Assembly Education Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Alliance for Boys and Men of Color
American Federation of State, County and Municipal Employees, AFL-CIO
California Hawaii State Conference of the NAACP
California Teamsters Public Affairs Council

1 individual

Oppose

Association Of Independent California Colleges & Universities (AICCU)
California State University, Office of the Chancellor
National Collegiate Athletic Association (NCAA)
Pac-12 Conference
Stanford University
University of Southern California

Analysis Prepared by: Dana Mitchell / A.,E.,S.,T., & I.M. / (916) 319-3450

 THIRD READING  

Bill No: SB 206

Author: Skinner (D) and Bradford (D), et al.

Amended: 5/17/19

Vote: 21

SENATE EDUCATION COMMITTEE: 7-0, 4/3/19

AYES: Leyva, Wilk, Chang, Durazo, Glazer, McGuire, Pan

SENATE APPROPRIATIONS COMMITTEE: 4-2, 5/16/19

AYES: Portantino, Bradford, Hill, Wieckowski

NOES: Bates, Jones

SUBJECT: Collegiate athletics: Fair Pay to Play Act

SOURCE: National College Players Association

OSKR

DIGEST:

This bill (1) allows student-athletes at colleges and universities to receive athletic endorsements, but prohibits colleges and universities from providing athletic endorsements to prospective student athletes; (2) allows student athletes to obtain professional representation; (3) prohibits the revocation of a student-athlete’s scholarship as a consequence of receiving endorsements, or as a consequence of obtaining legal representation as authorized under these provisions; (4) prohibits any group with authority over intercollegiate athletics from preventing a postsecondary educational institution from participating in intercollegiate athletics as a consequence of that institution allowing its student-athletes to receive athletic endorsements; and (5) takes effect in January 2023.

ANALYSIS:

Existing law:

1) Enacts the Student Athlete Bill of Rights, which requires intercollegiate athletics at four-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with the prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury. (Education Code § 67450)

2) Prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities. (EC § 67360)

3) Prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:

a) To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution.

b) To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program. These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the National Collegiate Athletic Association (NCAA). (EC § 67360)

4) Defines “student athlete” as an individual who attends an elementary, junior high, high school, or postsecondary educational institution, and who participates in any interscholastic athletic program in California, including an individual who receives scholarship funds for his or her athletic participation and an individual who does not receive scholarship funds for his or her athletic participation. (EC § 67360 et seq)

This bill:

1. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from receiving compensation for the use of their own name, image, or likeness.
2. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from obtaining professional representation in relation to their college athletics, provided that the professional representation is in compliance with federal law and is performed by persons licensed by the state.
3. Prohibits any group with authority over intercollegiate athletics from preventing a postsecondary educational institution from participating in intercollegiate athletics as a consequence of that institution allowing its student-athletes to earn athletic endorsements.
4. Prohibits the revocation of a student-athlete’s scholarship as a consequence of receiving endorsements, or as a consequence of obtaining professional representation as authorized under these provisions.
5. Defines “postsecondary educational institutions” as any campus at the University of California (UC), the California State University (CSU), the California Community Colleges, independent institutions of higher education, and private postsecondary educational institutions.
6. Requires the statute to become effective on January 1, 2023.

Comments

1. Need for the bill. According to the authors, “A report by Inside Higher Education revealed, over eighty percent of full scholarship athletes live at or below the federal poverty level. Under current restrictions, schools may only offer the total cost of attendance in a scholarship. For many student athletes, the total cost of attendance isn’t enough to provide for themselves or their families. Student athletes with families and children, as well as those that come from low socioeconomic backgrounds feel this burden the heaviest…Currently, students are restricted from hiring an advisor to make career altering decisions and assessing their value. With proper representation many athletes could have a realistic idea if professional sports is a possibility…SB 206 allows college athletes to hire an agent and make money off their own name, image, likeness or athletic reputation. Athletes will now have a financial avenue to provide for their families without facing loss of their athletic scholarship.”
2. NCAA. The NCAA is a non-profit organization which regulates college athletics programs for over one thousand North American academic institutions and conferences. It is estimated that nearly half a million college student athletes participate in NCAA sports each year. In its 2016–17 fiscal year, the NCAA took in approximately $1.06 billion in revenue. The NCAA competitions take place among colleges and universities that share the same Division, of which there are three. Division I and Division II schools offer athletic scholarships, while Division III schools may or may not. Generally, larger schools compete in Division I and smaller schools in II and III.
3. California schools in participating in intercollegiate athletics. NCAA Division I, II, and III collegiate athletics are active in the following major CA university systems:

A non-exhaustive list of notable private schools in the NCAA include CalTech, Stanford, University of Southern California and Pepperdine. The California Community College Athletic Association includes 108 schools. A comprehensive list of California college athletic programs can be found at [https://en.wikipedia.org/wiki/List_of_college_athletic_programs_in_California]

1. NCAA restrictions on financial aid. NCAA bylaws impose strict restrictions on the types of financial aid and benefits that student-athletes may receive. Student-athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those that receive full athletic scholarships. NCAA rules state that any student-athlete who receives financial aid or benefits other than that permitted by the NCAA shall not be eligible for intercollegiate athletics. Further, NCAA rules forbid a student-athlete from receiving preferential benefits or treatment because of the athlete’s reputation, skill or potential to be a professional athlete.

Examples of types of NCAA-prohibited financial aid and benefits include, but are not limited to, the following:

• 1. An employment arrangement for a prospective student-athlete's relatives;
  2. Gift of clothing or equipment;
  3. Co-signing of loans;
  4. Providing loans to a prospective student-athlete's relatives or friends;
  5. Cash or like items;
  6. Any tangible items, including merchandise;
  7. Free or reduced-cost services, rentals or purchases of any type;
  8. Free or reduced-cost housing;
  9. Use of an institution's athletics equipment;
  10. Sponsorship of or arrangement for an awards banquet for high school, preparatory school or two-year-college athletes by an institution, representatives of its athletics interests or its alumni groups or booster clubs; and
  11. Expenses for academic services (e.g., tutoring, test preparation) to assist in the completion of initial-eligibility or transfer-eligibility requirements or improvement of the prospective student-athlete's academic profile in conjunction with a waiver request.

1. NCAA limits athlete pay to cost of attendance. The NCAA Power 5 conferences provide their student-athletes with a tuition-free education by granting academic scholarships equal to no more than the full cost of attendance. The “cost of attendance” is an amount calculated by an institutional financial aid office using federal regulations, and includes the total cost of tuition and fees, room and board, books and supplies, transportation, and other expenses related to attendance at the institution. In addition, NCAA Power 5 student-athletes receive yearly stipends of $2,000 to $4,000 to cover cost-of-living expenses.
2. NCAA prohibits student-athletes from having agents. The NCAA rules forbid student-athletes to agree, orally or in writing, to be represented by an agent or organization in the marketing of his or her athletic ability or reputation until after the completion of the last intercollegiate contest, including postseason games. The NCAA prohibition includes an agreement that is not effective until after the last game. In addition, NCAA rules forbid a student-athlete or his/her representative from negotiating or signing a playing contract in any sport in which the athlete intends to compete, or to market the name or image of the athlete.
3. Consequences of non-compliance with NCAA bylaws. Violations of NCAA bylaws impact the eligibility of student-athletes, and the teams for which they play, for participation in NCAA competition. Violations may result in harsh penalties on the student, the team and the university. Penalties may include financial sanctions, repayment of monies received from NCAA championship competition, forfeiture of contests, and expulsion from the association.
4. Impact on college athletics at community colleges. By state law, community colleges cannot offer athletic scholarships to their athletes. This law is in place to make ensure that community colleges spend their financial resources on academic priorities while supporting more equitable competition across the system. Since community colleges are barred from offering athletic scholarships, these student-athletes are not compensated by the university for their participation. This bill would allow community college student-athletes to earn revenue on the basis of their name, image, and likeness (i.e., endorsements).
5. Relevant litigation, O’Bannon v. NCAA. O’Bannon v. NCAA is an antitrust class action lawsuit against the NCAA, in which the plaintiffs’ challenged the NCAA’s use of the images of its former student athletes for commercial purposes. The suit argued that former student athletes are entitled to financial compensation for the NCAAs use of their image. The NCAA maintained that providing such compensation would be a violation of its rules and bylaws. In 2014, an original ruling was made in favor of O’Bannon, holding that the NCAA’s bylaws are a violation of antitrust law. However, in 2015, the Ninth Circuit Court of Appeals reversed the District Court’s ruling.

In Alston v. NCAA, the plaintiffs challenged the legality of the NCAA and its’ member institutions practice of capping grants-in-aid at the cost-of-attendance based on federal antitrust laws. Contrarily, the defendants contended that the rules were necessary because they served several procompetitive purposes permissible under federal antitrust laws.

The ruling was found in favor of the plaintiffs. The court acknowledged the disparity between what student-athletes receive in comparison to what coaches, the NCAA, and other college sports administration officials receive. The judge ruled that the NCAA can no longer “limit compensation benefits related to education,” while allowing the NCAA to retain a substantial amount of discretion over student-athlete compensation that is unrelated to education. The ruling also mandated that the NCAA allow conferences to create their own rules and policies for scholarship, and allow student athletes to receive a scholarship valued at greater than the total cost of attendance. Although the NCAA did not provide a clear definition of amateurism during their defense, the court reasoned that the distinction between amateurism and professionalism in athletics lies in the fact that college athletes do not receive uncapped compensations in relation to playing sports.

1. Relevant litigation, NCAA v. Miller. In the early 1990s, Nevada passed a law forcing the NCAA to expand due process protections to schools, coaches, and student athletes. The Nevada law also prevented the NCAA from retaliating against Nevada schools that complied with the new law against NCAA’s own internal rules and regulations.

In NCAA v. Miller (1993), the NCAA successfully challenged the Nevada law based on the U.S. Constitution’s dormant commerce clause. The dormant commerce clause prevents any state from passing laws which “unduly burdens interstate commerce.” On the basis of violating this clause, the NCAA won the case in the Court of Appeals, and the Nevada law was struck down and deemed unconstitutional.

1. Legislative Counsel opinion on the Dormant Commerce Clause. This bill prohibits the NCAA barring from competition any universities that allow their student-athletes to earn endorsements in accordance with this bill. According to the opinion of Legislative Counsel, this provision may not violate the dormant commerce clause because the NCAA retains the right to discontinue its business activities in California rather than recognize this bill.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• Compliance staff: the CSU indicates that additional compliance staff would be needed for each of its 21 NCAA Division I and Division II athletic programs at a coast ranging from $3.2 million to $4.2 million. The UC has six NCAA Division 1 athletic programs and one NCAA Division II program and indicates it would need additional staff for each program at a cost ranging from $1.0 million to $1.4 million General Fund.
• NCAA penalties: The UC indicates that the total cost of fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.
• Revenue losses: The CSU system estimates system-wide revenue loses to be anywhere from $9 million to $15 million as a result of this measure. The UC indicates revenue losses for being out of compliance with the NCAA as well, but the actual figures are unknown and would vary based on campus and conference affiliation.

SUPPORT: (Verified 5/16/19)

National College Players Association (co-source)

OSKR (co-source)

American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County, and Municipal Employees

Association of African Americans in Fire Service

International Union, United Automobile, Aerospace Agricultural Implement Workers of America

United Steelworkers

University of California Student Association

OPPOSITION: (Verified 5/16/19)

Association of Independent California College and Universities

California State University

Stanford University

University of California

University of Southern California

Prepared by: Chanel Matney / ED. /

5/20/19 14:54:15

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 206 (Skinner) - Collegiate athletics: Fair Pay to Play Act

Bill Summary:

This bill would allow college student athletes to earn compensation for the use of their own name, image, or likeness and also obtain professional representation such as a sports agent, in relation to their college athletics.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2019

Fiscal Impact:

• Compliance staff: the CSU indicates that additional compliance staff would be needed for each of its 21 National Collegiate Athletic Association (NCAA) Division I and Division II athletic programs at a cost ranging from $3.2 million to $4.2 million. The UC has six NCAA Division I athletic programs and one NCAA Division II athletic program and indicates it would need additional staff for each program at a cost ranging from $1.0 million to $1.4 million General Fund.
• NCAA penalties: the UC indicates that the total cost of the fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.
• Revenue losses: the CSU estimates systemwide revenue losses to be anywhere from $9 million to $15 million as a result of this measure. The UC indicates revenue losses for being out of compliance with the NCAA as well but the actual figures are unknown and would vary based on campus and conference affiliation.

Committee Amendments:

Delay the bill’s implementation until January 1, 2023 and add coauthors.

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 206 (Skinner) - Collegiate athletics: Fair Pay to Play Act

Bill Summary:

This bill would allow college student athletes to earn compensation for the use of their own name, image, or likeness and also obtain professional representation such as a sports agent, in relation to their college athletics

Fiscal Impact:

• Compliance staff: the CSU indicates that additional compliance staff would be needed for each of its 21 National Collegiate Athletic Association (NCAA) Division I and Division II athletic programs at a cost ranging from $3.2 million to $4.2 million. The UC has six NCAA Division I athletic programs and one NCAA Division II athletic program and indicates it would need additional staff for each program at a cost ranging from $1.0 million to $1.4 million General Fund.
• NCAA penalties: the UC indicates that the total cost of the fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.
• Revenue losses: the CSU estimates systemwide revenue losses to be anywhere from $9 million to $15 million as a result of this measure. The UC indicates revenue losses for being out of compliance with the NCAA as well but the actual figures are unknown and would vary based on campus and conference affiliation.

Background:

The Student Athlete Bill of Rights requires intercollegiate athletics at 4-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury.

Existing law prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities. Further, existing law prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:

1. To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution.
2. To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program.

These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the NCAA.

Proposed Law:

This bill prohibits a postsecondary educational institution, athletic association, conference, or other group or organization with authority over intercollegiate athletics, including the NCAA, from preventing a student athlete from receiving compensation for the use of their own name, image, or likeness and provides that earning such compensation shall not affect the student’s scholarship eligibility. This bill also provides that an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including the NCAA, shall not prevent a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image, or likeness.

This bill provides that a postsecondary educational institution or other entity with authority over intercollegiate athletics shall not provide a prospective student athlete with compensation in relation to the athlete’s name, image, or likeness.

This bill prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from obtaining professional representation in relation to contracts or legal matters, including representation provided by athlete agents or legal representation provided by attorneys. The bill provides that professional representation obtained by student athletes shall be from persons licensed by the state, as specified, and that athlete agents shall comply with federal law, as specified.

This bill specifies that a scholarship from the postsecondary educational institution that provides the student with the cost of attendance at that institution is not compensation, as specified, and a scholarship shall not be revoked as a result of earning compensation or obtaining legal representation.

Related Legislation:

AB 735 (Ridley Thomas, Chapter 220, Statutes of 2016) eliminated the January 1, 2021 sunset on the Student Athlete Bill of Rights.

SB 1525 (Padilla, Chapter 625, Statutes of 2012) enacted the Student Athlete Bill of rights and required institutions of higher education receiving income of more than $10 million annually through income rights to provide student athletes with a life and financial workshop that provides an overview of financial aid, debt management, and a budget for full-and partial-scholarship athletes.

Staff Comments:

The UC has six NCAA Division I athletic programs and one NCAA Division II athletic program. For each program, the UC indicates it would need one additional staffer for compliance related activities. Assuming a salary range of $150,000 to $200,000 for each position, the total cost to hire seven would range from $1.0 million to $1.4 million General Fund. The CSU also indicates that an additional compliance staff would be needed for each of its 21 Division I and Division II athletic programs at a similar cost of $150,000 to $200,000 per staff. In total, CSU estimates a range of $3.2 million to $4.2 million.

Additionally, both segments indicate there may be penalties imposed by the NCAA for willful violations of its rules with fines ranging from $25,000 to $250,000. The UC indicates that the total cost of the fines could range from $175,000 to up to $1.8 million, while the CSU estimates total fines from $525,000 to up to $5.3 million.

The CSU also estimates revenue losses for being out of compliance with the NCAA that could range from $10,000 for one of its Division II campuses to up to $3.3 million for a Division I school. Systemwide revenue losses are anticipated to be anywhere from $9 million to $15 million. The UC indicates revenue losses for being out of compliance with the NCAA as well. However, the actual figures are unknown and would vary based on campus and conference affiliation.

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SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: SB 206 Hearing Date: April 3, 2019

Subject: Collegiate athletics: Fair Pay to Play Act.

SUMMARY

This bill allows college student athletes to earn compensation for the use of their own name, image, or likeness. This bill allows college student athletes to obtain legal representation, such as that provided by a sports agent, in relation to their college athletics. This bill allows colleges and universities to provide student athletes with stipends or other compensation, in addition to and separate from scholarships that cover the total cost of attendance.

BACKGROUND

Existing law:

1. Enacts the Student Athlete Bill of Rights, which requires intercollegiate athletics at 4-year institutions of higher education that receive, on average, $10 million or more in annual revenue derived from media rights, to comply with the prescribed requirements related to student athletes’ rights. These requirements include provisions concerning when intercollegiate athletic programs are required to renew scholarships, cover health insurance costs, and cover medical treatment expenses for student athletes who have experienced a sports-related injury. (Education Code § 67450)
2. Prohibits any person from giving, offering, promising or attempting to give money or other item of value to a student athlete or member of the athlete's immediate family to induce, encourage or reward a student athlete's application, enrollment or attendance at a public or private institution of higher education to participate in intercollegiate sporting activities. (EC § 67360)
3. Prohibits any person from giving, offering, promising, or attempting to give any money or other things of value to any particular student athlete or member of the immediate family of the student athlete for either of the following purposes:
4. To induce, encourage, or reward the student athlete’s application, enrollment, or attendance, at a public or private institution of postsecondary education in order to have the athlete participate in intercollegiate sporting events, contests, exhibitions, or programs at that institution.
5. To induce, encourage, or reward the student athlete’s participation in an intercollegiate sporting event, contest, exhibition, or program.

These provisions do not apply to student athletes who receive any money or other thing of value from a higher education institution offered in accordance with the official written policy of that institution, which is in compliance with the bylaws of the National Collegiate Athletic Association (NCAA). (EC § 67360)

1. Defines “student athlete” as an individual who attends an elementary, junior high, high school, or postsecondary educational institution, and who participates in any interscholastic athletic program in California, including an individual who receives scholarship funds for his or her athletic participation and an individual who does not receive scholarship funds for his or her athletic participation. (EC § 67360 et seq)

ANALYSIS

This bill:

1. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from receiving compensation for the use of their own name, image, or likeness.
2. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from receiving a stipend or other compensation in relation to their athletic performance.
3. Prohibits any entity with authority over intercollegiate athletics from preventing a student athlete from obtaining legal representation in relation to their college athletics.

STAFF COMMENTS

1. Need for the bill. According to the author, “A report by Inside Higher Education revealed, over eighty percent of full scholarship athletes live at or below the federal poverty level. Under current restrictions, schools may only offer the total cost of attendance in a scholarship. For many student athletes, the total cost of attendance isn’t enough to provide for themselves or their families. Student athletes with families and children, as well as those that come from low socioeconomic backgrounds feel this burden the heaviest.”

“For many athletes, college is the only time that they may earn from their sports. The NCAA reveals less than 1 percent of women’s college basketball players will make it to the WNBA and less than 2 percent of men’s college basketball, football, and soccer will ever play professionally. Currently, students are restricted from hiring an advisor to make career altering decisions and assessing their value. With proper representation many athletes could have a realistic idea if professional sports is a possibility.”

“In addition, many collegiate athletes are participating without a guaranteed scholarship. Scholarships may be revoked for poor performance in their respective sport or failure to participate in “voluntary” workouts. University studies have found that athletes are spending from 32 to 44 hours a week for their respective sports. This time commitment makes it practically impossible for athletes to provide for themselves or families.”

“Restrictive rules paired with time commitment and poverty have a negative impact on academic performance. Studies show more than half of California’s National Collegiate Athletic Association (NCAA) Division 1 and Division 2 colleges have one or more teams with graduation rates below 60 percent. Approximately 40 percent of NCAA Division 1 and Division 2 athletes say they do not have enough time to keep up with academics during the season, and many say athletics prevent them from taking classes.

“SB 206 allows college athletes to hire an agent and make money off their own name, image, likeness or athletic reputation. Athletes will now have a financial avenue to provide for their families without facing loss of their athletic scholarship.”

The author may wish to consider if the statistics and findings enumerated in the intent language of the bill reflects the most accurate, relevant, and updated data related to student-athlete academic performance and financial standings.

1. How is this bill incompatible with NCAA bylaws? The NCAA adopted bylaws that regulate recruiting, scholarship levels, timing and methods of communication between institutions of higher education and student athletes.

Athletes receiving a partial athletic scholarship or no athletic scholarship are subject to the same pay prohibitions as those that receive full athletic scholarships.

Financial Aid

Currently, NCAA bylaws impose a number of restrictions on student athlete financial aid. Any student-athlete who receives financial aid other than that permitted by the Association shall not be eligible for intercollegiate athletics.

Such payment is not allowed because it would be compensation based upon athletic skill, a preferential benefit not available to the general student population. As it stands, NCAA rules forbid a student-athlete from receiving preferential benefits or treatment because of the athlete’s reputation, skill or potential to be a professional athlete.

Specifically prohibited financial aid, benefits and arrangements include, but are not limited to, the following:

• 1. An employment arrangement for a prospective student-athlete's relatives;
  2. Gift of clothing or equipment;
  3. Co-signing of loans;
  4. Providing loans to a prospective student-athlete's relatives or friends;
  5. Cash or like items;
  6. Any tangible items, including merchandise;
  7. Free or reduced-cost services, rentals or purchases of any type;
  8. Free or reduced-cost housing;
  9. Use of an institution's athletics equipment (e.g., for a high school all-star game);
  10. Sponsorship of or arrangement for an awards banquet for high school, preparatory school or two-year-college athletes by an institution, representatives of its athletics interests or its alumni groups or booster clubs; and
  11. Expenses for academic services (e.g., tutoring, test preparation) to assist in the completion of initial-eligibility or transfer-eligibility requirements or improvement of the prospective student-athlete's academic profile in conjunction with a waiver request.

Cost of Attendance

An institution shall not award financial aid to a student-athlete that exceeds the cost of attendance that normally is incurred by students enrolled in a comparable program at that institution. The “cost of attendance” is an amount calculated by an institutional financial aid office, using federal regulations, that includes the total cost of tuition and fees, room and board, books and supplies, transportation, and other expenses related to attendance at the institution. A student-athlete shall not be eligible to participate in intercollegiate athletics if he or she receives financial aid that exceeds the value of the cost of attendance as defined in this Bylaw.

Agents

National Collegiate Athletic Association (NCAA) rules forbid student-athletes to agree, orally or in writing, to be represented by an agent or organization in the marketing of his or her athletic ability or reputation until after the completion of the last intercollegiate contest, including postseason games. The NCAA prohibition includes an agreement that is not effective until after the last game.

NCAA rules forbid a student-athlete or his/her representative from negotiating or signing a playing contract in any sport in which the athlete intends to compete, or to market the name or image of the athlete.

1. Consequences of non-compliance with National Collegiate Athletic Association (NCAA) bylaws. Violations of NCAA bylaws impact the eligibility of student-athletes, and the teams for which they play, for participation in NCAA competition. Violations may result in harsh penalties on the student, the team and the university. Penalties may include financial sanctions, repayment of monies received from NCAA championship competition, forfeiture of contests, and expulsion from the association.
2. Applies to community colleges By state law, community colleges cannot offer athletic scholarships to their athletes. This law is in place to make sure community colleges spend their financial resources on academic priorities while supporting more equitable competition across the system. Since community colleges are barred from offering athletic scholarships, this bill would allow community college student athletes to independently earn revenue on the basis of their name, image, and likeness in order to support themselves.
3. Relevant litigation. O’Bannon v. NCAA is an antitrust class action lawsuit against the NCAA, in which the plaintiffs’ challenged the NCAA’s use of the images of its former student athletes for commercial purposes. The suit argued that former student athletes are entitled to financial compensation for the NCAAs use of their image. The NCAA maintained that providing such compensation would be a violation of its rules and bylaws. In 2014, an original ruling was made in favor of O’Bannon, holding that the NCAA’s bylaws are a violation of antitrust law. However, in 2015, the Ninth Circuit Court of Appeals reversed the District Court’s ruling.

In Alston v. NCAA, the plaintiffs challenged the legality of the NCAA and its’ member institutions practice of capping grants-in-aid at the cost-of-attendance based on federal antitrust laws. Contrarily, the defendants contended that the rules were necessary because they served several procompetitive purposes permissible under federal antitrust laws.

The ruling was found in favor of the plaintiffs. The court acknowledged the disparity between what student-athletes receive in comparison to what coaches, the NCAA, and other college sports administration officials receive. The judge ruled that the NCAA can no longer “limit compensation benefits related to education,” while allowing the NCAA to retain a substantial amount of discretion over student-athlete compensation that is unrelated to education. The ruling also mandated that the NCAA allow conferences to create their own rules and policies for scholarship, and allow student athletes to receive a scholarship valued at greater than the total cost of attendance. Although the NCAA did not provide a clear definition of amateurism during their defense, the court reasoned that the distinction between amateurism and professionalism in athletics lies in the fact that college athletes do not receive uncapped compensations in relation to playing sports.

1. Amendments. Staff recommends amendments to do the following:
2. Require that stipends and compensation provided by institutions of higher education to student athletes in excess of the total cost of attendance are based on demonstrated needs or expenses for academic services. Demonstrated needs include, but are not limited to food, childcare, and academic development. Expenses for academic services include, but are not limited to, test preparation and tutoring.
3. Prohibit individuals or entities coordinating with or acting on behalf of, intercollegiate athletics or any entity with authority over intercollegiate athletics, from providing prospective student athletes with direct or indirect gifts or compensation in relation to their name, image, and likeness, or athletic reputation.
4. Require that the legal representation of student athletes, including but not limited to sports agents, is licensed by the state. This relationship must be in compliance with the Sports Agent Responsibility and Trust Act.

Related and prior legislation.

HR 1804 (Walker, 2019) The Student Athlete Equity Act is a bipartisan federal bill to amend the definition of a qualified amateur sports organization in the tax code to remove the restriction on student-athletes using or being compensated for use of their name, image and likeness – forcing the National Collegiate Athletic Association to change its current model. This bill is awaiting referral to a committee.

SB 1525 (Padilla, Chapter 625, 2012) enacts a Student Athlete Bill of rights, and places specified requirements on collegiate athletic programs commending with the 2013-14 academic year and ending on January 1, 2021. This bill applies its requirements only to institutions of higher education receiving income of more than $10 million annually through income rights and requires the institution to rely exclusively on this revenue to cover the costs of these requirements. This bill requires these institutions to provide the student athlete with a life and financial workshop that provides an overview of financial aid, debt management, and a budget for full-and partial-scholarship athletes. Finally, the bill requires each program to adopt and implement guidelines that prevent, assess, and treat sports-related concussions and dehydration.

AB 735 (Ridley Thomas, 2016) eliminated the January 1, 2021 sunset on the Student Athlete Bill of Rights.

SUPPORT

The Association of African Americans in Fire Service

The American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County, and Municipal Employees

The International Union, United Automobile, Aerospace Agricultural Implement Workers of America (UAW)

National College Players Association (Sponsor)

OSKR (Sponsor)

United Steelworkers

University of California Student Association

OPPOSITION

California State University

Stanford University

University of California

University of Southern California

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