Win or lose, the North Carolina Tar Heels will already be in rare company when they open the college football season against Texas Christian University in Dublin. They will be among a small but growing group of athletic programs receiving taxpayer support from their home states.

As universities compete to pay athletes millions of dollars, some states are now propping up strained sports budgets in ways not seen before. The money is not going directly to star athletes. Instead, states are funding facilities and administrative costs that schools would normally pay themselves, freeing university dollars for other uses.

At the University of North Carolina at Chapel Hill, the athletics program is receiving $3 million for the first time from state sports betting taxes. Wisconsin lawmakers approved $15 million for athletic costs at the University of Wisconsin. Connecticut and Louisiana are also using tax dollars to support college athletics, and more states have considered doing the same.

Sports business analysts say the trend is emerging quickly.

“Once one state provides that kind of assistance, schools in competing states can argue that they are being placed at a competitive disadvantage, which could create additional pressure on legislatures to respond,” said Daniel McIntosh, faculty director of the sports business program at Arizona State University.

Legal cases have accelerated spending on college athletes

NCAA rules long prohibited college athletes from being paid by schools and boosters. But after pressure from lawsuits and states — a push that accelerated after California passed a first-in-the-nation law in 2019 allowing athletes to profit from their fame, prompting other states to follow — the NCAA in 2021 cleared the way for athletes to receive money from private entities for use of their name, image and likeness (NIL). A legal settlement last year, the House v. NCAA antitrust case that received final approval from a federal judge in June, then allowed higher education institutions to directly pay athletes about $20.5 million annually under a revenue-sharing model, on top of scholarships and other NIL deals.

That cap rose to $21.3 million for this school year, when the 10-year agreement took effect, and is scheduled to increase again next year.

Many mid-level programs cannot afford that amount. Still, nearly all NCAA Division I athletic programs are trying to raise more money to pay athletes in order to stay competitive with their peers. At the same time, schools are taking on higher costs for facilities, coaches’ salaries and travel, especially as conference realignment has erased old geographic rivalries.

Over the past four years, athletic operating expenses at public Division I institutions increased by nearly a third, significantly outpacing revenue and widening deficits, according to an Associated Press analysis using the Knight-Newhouse College Athletics Database, which compiles the financial reports that Division I schools file with the NCAA.

Athletic departments have long relied on subsidies such as student fees and transfers from campus budgets to balance their books. The new state measures go further, with legislatures directing public appropriations toward the specific costs of staying competitive in the pay-for-play era.

Federal legislation could drive costs even higher

The Protect College Sports Act, pending in the U.S. Senate with bipartisan sponsorship from Sens. Ted Cruz of Texas and Cory Booker of New Jersey, has been promoted as a way to place guardrails on college sports spending. But it could also permit even greater spending by schools.

The latest version would allow institutions to pay up to an additional $27.5 million annually to keep players on their rosters, pushing the overall athlete payment cap close to $50 million. That higher ceiling could reduce demand for third-party NIL deals.

Congress has debated federal NIL legislation for years without reaching a deal, leaving the rules largely shaped by courts and statehouses in the meantime.

However, the legislation does not include any provision limiting increases in state or institutional funding for athletics, said Amy Privette Perko, CEO of the Knight Commission on Intercollegiate Athletics.

“Without some restraint on the underlying spending competition, additional public funding could simply finance the next stage of the arms race,” McIntosh said.

States are routing money to schools in creative ways

When North Carolina launched online sports wagering in 2024, it set aside part of the tax revenue for athletic departments at 13 public universities. The two largest institutions — the University of North Carolina at Chapel Hill and North Carolina State University — were excluded.

That changed in July under a new state budget that raises the sports betting tax. The two schools are now projected to receive $3 million each this year and $5.8 million next year.

Louisiana also raised its sports wagering tax and earmarked about $2.2 million for each of its 11 public universities in conferences with Division I football programs.

In Connecticut, lawmakers authorized the University of Connecticut to issue vouchers for state tax credits equal to half of the amount of donations, sponsorships and licensing endorsements. According to a university report, the program generated $1.7 million in its first four months.

New Jersey’s new budget allocates $5 million for “events attraction and marketing” at Rutgers’ flagship campus. A university spokesperson declined to say whether the money will be used for athletics.

Florida’s universities governing board last year authorized schools to transfer up to $22.5 million to athletics, though it did not provide new state money. Florida State University did so almost immediately, and other schools have since followed.

Wisconsin lawmaker says poor sports programs hurt the state

The Wisconsin budget includes $14.6 million for athletic facility debt payments at the University of Wisconsin-Madison and $200,000 each for the Milwaukee and Green Bay campuses.

“None of that state funds technically would go toward student athletes,” said Republican state Rep. Alex Dallman, who sponsored the legislation.

But by covering facility debt, the state allows the university to direct its own funds “for other things, such as NIL, or just trying to compete,” said Dallman, who typically attends a couple of Wisconsin football games each year.

“Having a bad football team, having uncompetitive college sports in general, would not be beneficial to our state, both culturally or economically,” Dallman said. “So we decided as a state we’d help out.”

This story was originally featured on Fortune.com