Gap growing ever wider between college sports' haves, have-nots
Powers Alabama, Florida, Michigan, Notre Dame and USC are among the haves
The chasm exists within the BCS, but is even more severe outside the big six
Areas of impact include salaries, scholarships, scheduling, facilities and more
To understand how the recession will affect college sports, scan the headlines. On Monday, Florida coach Urban Meyer agreed to a six-year contract that will pay him $4 million a year. Earlier this year, the Alabama state university system's trustees approved earlier a $80.6 million project that will expand Alabama's Bryant-Denny Stadium to accommodate more than 101,000 fans. Meanwhile, on the other end of the Football Bowl Subdivision food chain, Hawaii athletic director Jim Donovan last week took a voluntary seven percent pay cut to help offset a projected $2.6 million deficit for the 2008-09 fiscal year.
Florida and Alabama, which don't use public money to subsidize athletics, aren't spending foolishly. According to figures filed with the U.S. Department of Education, Florida's football program generated $66.1 million in revenue in the 2007-08 school year. Meanwhile, Alabama has a football season-ticket waiting list of more than 10,000, and football-only revenue topped $57 million for the 2007-08 school year. Meyer's $750,000-a-year raise and Alabama's stadium expansion should more than pay for themselves. The Gators, Crimson Tide and the rest of a handful of almost recession-proof athletic departments should continue to surge forward. Meanwhile, Hawaii and its ilk will struggle mightily.
"The gap is going to continue to get wider between the haves and have-nots," said Dan Fulks, a Transylvania University accounting professor who also studies athletic department spending for the NCAA. "That's kind of a microcosm of society. That's happening to you and me as well."
Facing a recession, college athletic departments generally encounter the same issues as corporations or private citizens. The healthiest ones, the profitable ones who spent money wisely while also accruing a nest egg, can use their increased buying power to take advantage of the down economy. Meanwhile, the ones who already lived month-to-month or year-to-year must take on more debt or slash costs to the bone.
Fulks, who just completed a study of 2008 financial data to update his 2006 study, said 25 of the 120 FBS athletic departments generated more money than they spent. That's up from 19 in 2006, and the median surplus for the departments turning a profit jumped more than $1 million to $3.9 million. Now for the bad news. The other 95 departments ran a median deficit of $9.87 million. For public schools, taxpayer dollars usually cover that deficit. Fulks expects the gulf between the profitable and unprofitable departments to grow more next year because of the recession.
Because Fulks' study guarantees anonymity, he didn't name the profitable schools, but some are easy to guess. Alabama, Florida, Michigan, Ohio State and Texas are examples of programs with huge fan bases and massive revenues. Those programs should be better positioned to withstand a dip in the economy. But being a public university in a power conference doesn't necessarily guarantee financial success.
Last month, The Eagle in College Station, Texas, obtained documents that showed Texas A&M's athletic department took out a $16 million line of credit from the university's general fund in 2005. Beginning this year, the department has 10 years to repay the loan interest-free. Meanwhile, Oregon State athletic director Bob De Carolis painted an unhappy picture in a June 2 letter to fans posted on the athletic department Web site. De Carolis wrote pledges had dropped $1 million from a year earlier to $10 million. Also, the program had suffered a net loss of 600 donors, and 12 percent of football season-ticket holders had not renewed. "When you combine the trends in giving and ticket renewals, the potential for a negative effect on the OSU Athletic Department and our offerings becomes a stark reality," De Carolis wrote. "Because gifts and football tickets make up 40 percent of our annual $47 million athletic department budget, they represent key sources of revenue for us."
Oregon State receives a share of revenue from the Pac-10's television contracts and from bowl money collected by conference members. But even with that, a financial chasm exists between the Beavers and USC, the conference's dominant football program. According to data submitted to the Department of Education, USC had a $76.4 million athletic department budget in 2007-08.
It's even worse outside the BCS. Hawaii's $2.6 million deficit for 2008-09 will be added to the $5.4 million deficit the department carried into the fiscal year. "We've made $1.3 million in cutbacks, we have open positions that aren't being filled," said Donovan told the Honolulu Star-Bulletin last month. "We're doing everything we can do to lower our expenses without doing any long-term damage to the athletic programs."
Salaries, scholarships most expensive
When most of their spending is tied up in scholarships and salaries, schools are hard pressed to find ways to minimize the recession's effects. Most programs are loath to cut sports, but some have had no other choice. In April, Cincinnati announced it would phase out financial aid for athletes in men's track and men's swimming. In May, Washington eliminated men's and women's swimming and Arizona State eliminated men's tennis, men's swimming and wrestling. Even Stanford, which just won its 15th consecutive National Association of Collegiate Athletic Directors Cup last week, will eliminate varsity fencing unless athletes can raise $250,000 to pay for the 2009-10 season and then raise enough money to endow the program. Stanford also has cut into its other major budget line: salaries. To help offset a projected $5 million shortfall over three years, Stanford eliminated 21 positions (13 percent of its staff) in February.
Fulks said the highest salaries -- for head football and men's basketball coaches -- won't fall because those rates are market-driven. Unfortunately for the unprofitable programs, the profitable schools usually set the prices and the salary scale trickles down. "If (Kentucky) is paying (basketball coach John) Calipari, then Tennessee has to pay (basketball coach Bruce) Pearl," Fulks said. "That's totally market-driven. The reality is that if you cut the salaries to a couple hundred thousand dollars, they'd still be lining up around the block to get the jobs. But if one school is paying, everybody has to."
While it might be true that Ohio State football coach Jim Tressel or North Carolina basketball coach Roy Williams would work for a low six-figure salary, the NCAA can't cap coaches' income. A reporter asked SEC commissioner Mike Slive about such a salary cap in May. Slive, a former attorney and judge, cracked a smile and said a cap would be great, if only Congress would repeal the Sherman Antitrust Act.
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