In a groundbreaking move, NCAA president Charlie Baker on Tuesday proposed the creation of a new subdivision within Division I that would allow the highest-resourced schools the ability to compensate athletes through a trust fund and direct name, image and likeness (NIL) licensing agreements.

The proposal, which was sent out to all Division I members in a letter obtained by The Athletic, recommended the formation of new subdivision of Division I that would allow institutions to pay athletes through an “enhanced educational trust fund,” which would require an investment of at least $30,000 per year per athlete for at least half of the schools’ eligible athletes. Subdivision members would also need to remain compliant with Title IX, providing equal monetary opportunities to female and male athletes. There would be no strings attached to the trust fund payments; athletes would be free to use the money however they wanted.

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“It kick-starts a long-overdue conversation among the membership that focuses on the differences that exist between schools, conferences and divisions and how to create more permissive and flexible rules across the NCAA that put student-athletes first,” Baker wrote in the letter. “Colleges and universities need to be more flexible, and the NCAA needs to be more flexible, too.”

If the proposal were to pass, schools in the new subdivision could create their own rules separate from the rest of Division I, a level defined by more required investment in sports than Divisions II and III that nevertheless features vast financial disparities among its 350-plus institutions. The new subdivision’s members could equip themselves with not only the ability to move more quickly to address issues but also more leeway to make policy in areas such as scholarship limits and roster sizes in various sports. The schools at the top of the college athletics food chain often complain that they are held back by lower-resourced schools that cannot afford to enact changes that they wish to adopt.

In the letter to D-I members, Baker called his proposal a “forward-looking framework” that “gives the educational institutions with the most visibility, the most financial resources and the biggest brands an opportunity to choose to operate with a different set of rules that more accurately reflect their scale and their operating model.”

Baker also proposed that any Division I school could enter into an NIL deal directly with its athletes, which is not currently permissible. He would also remove the current cap on education-related compensation for athletes. The thrust of Baker’s message was that the NCAA needs to further remove restrictions around schools’ abilities to directly compensate athletes, creating a permissive structure in which those who can afford to do more are allowed to do more.

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Under the proposal, schools in both Division I subdivisions would continue to compete against one another for NCAA championships, except for in FBS football, which is run and governed by the College Football Playoff. It’s clear, though Baker doesn’t spell it out, that the highest-resourced schools he is referring to throughout the letter are those in the Power 4 leagues — the SEC, Big Ten, ACC and Big 12. Commissioners of the four conferences have been lobbying Congress together, seeking help on issues such as NIL that affect their constituents in a far different way than their peers at lower levels of Division I.

Opting into the new subdivision would be a school-by-school decision, but a conference could mandate that all of its members participate. Presumably, this would function largely as a subdivision within the FBS, similar to the oft-discussed power-conference split in which some or all of the power leagues move to operate entirely separately from the rest of the NCAA’s schools. Instead of a true breakaway, this structure would keep every NCAA school under the same roof.

Baker ended his letter by asking Division I members for feedback. Multiple college athletic administrators said Tuesday that they believed it to be an appropriate conversation-starter and an important effort to modernize college athletics. The NCAA expects that the Division I Board of Directors would need to weigh in on the proposal, as well as the Division I Council, but it is not yet clear who ultimately would need to vote to approve such a drastic legislative change. It may need to be the entire Division I membership.

The recommendations from Baker come amid mounting pressure to allow schools to directly compensate athletes, and as the NCAA is facing significant legal challenges to its model. Multiple lawsuits aimed at the economic structure of college athletics are working their way through the courts in a legal environment that appears more supportive of athletes’ rights than ever before. The National Labor Relations Board is proceeding with an unfair labor practice charge filed against USC, the Pac-12 and the NCAA in a push to categorize athletes as employees. Meanwhile, the NCAA and its power conference schools are facing what could be the costliest antitrust case in college sports history, as the defendants in the class-action suit House v. NCAA seek as much as $3 billion in retroactive NIL and broadcasting revenue payments.

Baker’s proposal is a significant step forward for the NCAA, which has spent the better part of the last 15 years in reactive mode. Baker’s predecessor, Mark Emmert, faced criticism toward the end of his tenure for a lack of forethought and leadership regarding NIL, which allowed state lawmakers to fill the void with their own laws and push the NCAA into an era in which athletes could receive compensation for their publicity rights. Emmert also failed in his efforts to get federal lawmakers to swoop in and pass national legislation to regulate the NIL environment.

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Baker’s proposal is an attempt to prove that the NCAA is capable of reforming some areas on its own, addressing what is within its power by acknowledging the vast differences between the haves and have-nots in Division I. Federal lawmakers have asked Baker and other college athletic leaders to show that they can adapt to the times while the politicians themselves mull jumping into the fray, either by pushing through federal legislation regarding NIL or by addressing whether or not athletes could be classified as employees. The NCAA has fought back against the concept of an employer-employee relationship at every opportunity in legal arenas.

Even if this proposal were to pass, the NCAA would continue to lobby on Capitol Hill and seek Congressional help in areas such as athlete employment status and NIL policies that are currently governed by state laws. And it will continue its fight in court, as the organization tries to preserve its longstanding and broad-based model in a battle against those who believe that athletes deserve a far greater cut of the multi-billion-dollar enterprise.

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