How Transforming Into a DSO Could Impact Florida State's Athletic Department

Florida State's athletic department intends to become a direct support organization, which would effectively make it a quasi-private entity. Several factors provide insight into how it may play out.

The days of big-time college sports being “amateur” are long gone. The NCAA generates more than $1 billion a year in revenue. Athletic conferences and member schools negotiate multi-year, billion-dollar TV deals as well as lucrative merchandise, apparel and live streaming contracts. Some college coaches earn millions of dollars a year and take home more in pay than their universities’ highest-ranking officers. Meanwhile, the legal efforts of college athletes to be compensated for their labor and for the commercial use of their names, images and likenesses continue without resolution. Yet the “professional” elements of their collegiate experience are undeniable: college athletes at major programs play and train in stadiums, arenas and other facilities that rival those of the major leagues.

By many measures, then, college sports are professional sports.

Still, should athletic departments of public universities be privatized from the rest of their schools? Is that a step too far from the romanticized ideal that collegiate athletics and academics ought to be inseparable?

In some ways this is already occurring in Florida. As detailed by Iliana Limón Romero in the Orlando Sentinel, Florida State University’s athletic department intends to become a so-called “direct support organization” (DSO) under Florida law.

By doing so, FSU would better coordinate its athletic department activities with Seminole Boosters Inc., which is also a DSO. The boosters’ entity raises money from the private sector and then uses those proceeds to fund intercollegiate athletics, specifically athletic scholarships. The Seminoles athletic department—which will be renamed the Florida State University Athletics Association—would join the University of Florida Gators and the University of Central Florida Knights athletic departments as DSO athletic departments. Final approval for FSU’s initiative is expected by the fall.

Understanding a DSO and DSO athletic department and how they blend elements of public administration and private enterprise

FSU’s move to transform its athletic department into a DSO is fully legal under Florida law. The impact of the move, which effectively makes the Seminoles athletic department a quasi-private entity, remains to be seen. However, there are several factors that lend insight into how it might play out.

First, it’s worth considering what exactly is a DSO. It is a not-for-profit, tax-exempt corporation in Florida. A DSO has been certified by a university’s board of trustees and approved by the Florida Secretary of State. It must also comply with a bevy of federal and state tax laws in order to qualify for exemption.

As a corporation, a DSO takes on a number of “business-like” functions. They include receiving, investing and administering assets—such as real property and intellectual property—as well as spending money. A DSO must operate for the benefit of a state university and for the best interests of the state. These requirements are expressed in Chapter 1004.28 of Florida Statutes and specifically the education code.

Although they operate for the betterment of their universities, DSOs are partly autonomous from those universities and to some degree function as separate entities. They are not like the university’s English Department or its School of Law or any another academic department school governed by detailed academic procedures and university policies—DSOs are their own corporations, with their own rules. DSO employees work for them, not the associated university. DSOs can thus rely on different systems for payroll and benefits that are used for university employees.

DSOs’ mission statements heed to industry issues and practical applications. They are less engaged in the types of theoretical studies and scholarly pursuits often found at universities and are more about real-world engagements. Further, DSOs can take advantage of public/private partnerships and similar entrepreneurial collaborations that are sometimes difficult to pursue in a public university setting.

Most DSOs have nothing to do with athletics. The Cattle Enhancement Board Inc., for example, is a University of Florida-associated entity that promotes research relevant to cattle rangers, including on disease prevention, genetic research and forage development. For its part, the Florida Atlantic University Research Corporation focuses on the licensing of intellectual property, including patents, copyrights and trademarks. Specifically, it coordinates with industry participants to develop royalty-producing licenses that are linked to FAU-led research. These types of organizations can leverage their expertise when pursuing grants. They can also engage in innovation that offers students unique opportunities for practice-oriented learning.

Other DSOs are designed for athletic administration. The Florida International University Athletics Finance Corporation and the UCF Stadium Corporation, for example, are DSOs. They support their universities by taking the lead on matters related to their schools’ football stadiums. The two corporations issued debt as part of financing stadiums and then helped to manage and operate those stadiums. A DSO issuing debt for a facility is not unique to athletics—other DSOs have been created to issue debt for housing facilities or parking facilities.

As mentioned above, the UF Athletic Department is a DSO. The Gators’ website makes clear that while it operates apart from the university, it is designed to advance UF’s interests. The website also expresses that the athletic department is a “self-supporting entity” that “receives no direct state funds.” Along those lines, the department’s expenses “are funded through event ticket sales, booster contributions and Southeastern Conference revenues.” Like other athletic departments, UF’s employs compliance officers to ensure that students, coaches and trainers adhere to various NCAA and university rules. To that end, it takes on student interns for learning opportunities in compliance and related fields.

Although DSOs operate more like a business than other types of university entities, they are not quite private businesses. They are tax-exempt entities that do not operate for profit. Further, their university Board of Trustees issues directives that must be followed—there is no CEO whose decision-making authority trumps that of others.

DSOs are also subject to various forms of government oversight and mandatory disclosures that are unique to their public university affiliation. To that end, DSOs are independently audited each year and their annual audit report must be submitted to the Florida Auditor General and the state university system’s Board of Governors. DSOs must also submit its tax filings to the university’s president.

DSOs thus enjoy some degree of independence, but they are ultimately beholden to their universities.

DSO athletic departments can take advantage of sovereign immunity

DSOs are also beneficiaries of Chapter 768.28 of the Florida Statutes. It is the state law for sovereign immunity. As a general concept, sovereign immunity protects public entities, including state schools, from having to defend against lawsuits. There are a variety of exceptions and limitations to sovereign immunity, but overall it diminishes a public university’s exposure to litigation. This normally means lower legal fees and lower insurance rates for universities. It also means a lessened risk for pretrial discovery, which in the public university context involves the taking of sworn testimony from university officials and sharing of emails, texts and other evidence from those officials with the party that is suing.

The reason why DSOs are eligible for sovereign immunity is because, as articulated by Florida Supreme Court Justice Ricky Polston in Plancher v. UCF Athletics Association, Inc.—a 2008 case involving the death of UCF football player Ereck Plancher, who collapsed and died during a conditioning drill—although DSOs are to some degree separate from the university, the university nonetheless exercises control over the DSO and its directors, as well as over the DSO’s activities, budget and finances. Stated more bluntly, while a DSO athletic department may be more separate from its university than are other athletic departments and their universities, the DSO athletic department is still bound by the university.

DSO athletic departments enjoy the power to deny public records requests

While DSO athletic departments remain accountable—and ultimately subservient—to their universities, they enjoy a substantial benefit denied to athletic departments at other public universities: they are largely exempt from having to comply with public records requests. This point was highlighted in a recent article by Laura Theisen on Deadspin. Generally, Florida’s “Open Government Sunset Review Act” requires that public entities, including state universities, to comply with records requests.

Florida’s open records law is similar to those found in other states. It mandates that public universities respond to requests from journalists and members of the public about assorted controversies and various topics. The basic idea is that public universities are to varying degrees funded by taxpayers and are extensions of state government. Athletic departments at public universities must thus share information that they would otherwise prefer to keep under wraps—including details about a coach’s contract and emails sent between athletic administrators about a scandal—that athletic departments at private universities are under no legal obligation to divulge. 

As detailed in Chapter 1004.28, a DSO is not entirely immune from public record requests. It is potentially obligated to share a number of records with the public. They include the annual auditor’s report, any records related to the expenditure of state funds, and any financial records related to the expenditure of private funds for travel. In other words, a DSO athletic department does not enjoy the same freedom as a private university athletic department with respect to concealing records.

Still, the state’s law makes clear that other types of records “shall be confidential and exempt” from public records requests. This feature could be very helpful to a school rife with controversies in its athletic program. FSU, of course, has had its share of high-profile athletic controversies over the years, including sexual assault allegations brought against Jameis Winston.

As Theisen observed, laws in two other states—Georgia and Pennsylvania—also enable their public universities to not be as forthcoming in records requests, so Florida’s DSO law is not unique. Further, as discussed above, the Florida law has a number of appealing features for public/private collaborations that can benefit students and better connect public universities to the private sector. In addition, while a DSO athletic department is not obligated to comply with public records requests, it can choose to respond to them as a matter of practice. The UF Athletic Department, for example, has generally fulfilled records requests.

But if Florida’s DSO law is used to shield athletic departments when they face controversy, perhaps Florida lawmakers should explore whether modifications to it are worthwhile. After all, since DSO athletic departments are still governed by their public universities, there is a sensible argument that their activities should be as transparent as other parts of those universities.

Michael McCann is SI’s Legal Analyst. He is also an attorney and Associate Dean of the University of New Hampshire Franklin Pierce School of Law (a public university law school).