How Maryland went broke: Inside the athletic department's decline
Dire financial straits fueled Maryland's recent move from the ACC to the Big Ten
Major crisis stemmed from lavish spending on facilities, less wins and donations
Inside the department, many place a lot of the blame on former AD Debbie Yow
Maryland president Wallace Loh is a former law professor who doesn't mince words, and so those who know him weren't surprised by his candor last week at a press conference announcing Maryland's jump from the ACC to the Big Ten.
In explaining why the Terrapins were leaving a conference they'd been affiliated with for 59 years, Loh said: "Number one, by being members of the Big Ten Conference, we will be able to ensure the financial sustainability of Maryland athletics for decades to come." Maryland was going for the money, Loh essentially said. Early estimates indicate Maryland could earn $100 million more in the Big Ten by 2020.
It's no secret that Maryland is in dire financial shape, but the school's change in circumstance has been sudden. Years of untenable financial practices, lukewarm fundraising and disappointing performances in football and men's basketball have hampered the athletic department. Tack on lackluster graduation rates, an exhausted donor base and persistent turbulence within the department, and Maryland now possesses one of the most dysfunctional athletic departments in the country.
When Maryland's move to the Big Ten was announced, commissioner Jim Delany praised the school's athletic programs and its position in a large media market, but neither Delany nor Loh spoke about how Maryland got to this point. How did a school with excellent facilities, a storied basketball tradition and multiple national championships across several different sports suddenly go broke? How did it get to the point where the school felt forced to disavow the ACC, a critical part of its identity? Moreover, should Maryland fans feel secure that those operating the department today won't repeat the mistakes of the past?
When Debbie Yow was named Maryland's athletic director in 1994, she inherited more than $50 million in debt and an operating budget that had not been balanced in 10 years. Her five predecessors lasted an average of three years. Addressing a flailing athletic department as one of only two female athletic directors in major college sports was no small task.
Maryland's athletic department, like most public university departments, is a self-sufficient auxiliary unit; no state funds can be allocated toward athletics. Scholarships are paid through donations and revenues, increasing the need for successful teams and generous donors in order for the athletic department to survive.
Initially, the Maryland athletic department under Yow succeeded on both fronts. By March 2002, the men's basketball team won the national championship, the football team earned a BCS berth, women's lacrosse had won seven consecutive national titles, men's soccer earned its seventh consecutive playoff berth and field hockey played for the 2001 national championship. Yow was achieving her vision of a widely thriving department.
Donors flocked to the department's primary fundraising arm, the Terrapin Club, helping the school build up its coffers. As the money flowed in, Yow expanded the athletic department, funneling money into non-revenue-generating sports, and she commenced a decade-long facelift to several athletic facilities. Starting in 2002 and continuing into 2010, Maryland opened the $125 million Comcast Center and the $3 million Terrapin Softball Complex, built a new facility for field hockey and lacrosse, renovated its soccer and baseball facilities and made multiple upgrades to its football offices. To cap it off, Maryland completed a $50.8 million expansion to Tyser Tower at Byrd Stadium in 2009. Byrd Stadium was one of the only ACC football stadiums without luxury seating, so Yow financed a plan that added 64 luxury suites and 440 mezzanine suites.
Just as Yow was lavishly refurbishing the facilities, the top sports began flailing, culminating in the football team's first 10-loss season in 2009. After winning a national championship in 2002, men's basketball also declined, failing to win more than one NCAA tournament game since 2003.
Coaches admired Yow's ambition, but not her management skills, and her shortcomings were highlighted as the top two revenue-producing sports began to struggle.
"Debbie was a polarizing figure and it had a ton of an impact on the department," said former Maryland water polo coach Carl Salyer. "I think the atmosphere within the department was that people were always on edge. The one time I was in her office was after I got hired to meet her. If you were in her office, you were in a world of hurt and everybody knew that."
At major Maryland athletic events, Yow was often seen walking briskly with her head down instead of greeting fans and schmoozing alums. She engaged in public battles with football coach Ralph Friedgen and, more notably, with men's basketball coach Gary Williams. Williams was already a nationally respected coach when Yow arrived in 1994, and it remains unclear if they ever got along in their 16 years working together. Infamously surly himself, Williams publicly implicated Yow and associate AD Kathy Worthington in a 2009 dispute over two recruits who signed elsewhere after Williams courted them.
"There were a lot of donors that turned away because they didn't like her," said Brian Burlace, a former Maryland All-America lacrosse player and prominent donor. "They didn't like the way she treated Gary Williams. I think without question she really severed a lot of relationships with donors."
But those donors may have romanticized Williams too fondly. Several powerful donors loved Williams because he won the 2002 national championship, but others soured on him because of his frequently subpar graduation rates as well as his notoriously weak recruiting efforts. Yow's growing frustration with Williams coincided with the team's weakening performance. Their relationship was always frosty, but Williams' team had fallen from the ACC elite while Brenda Frese (who was hired by Yow) led the women's basketball team to the 2006 national championship and the 2008-2009 ACC title.
"Gary Williams didn't get along with the department," said Martin Green, a prominent donor who is on the Terrapin Club's executive committee. "A lot of people loved Gary because he won a national championship, but that was 10 years ago. That doesn't pay the bills."
While men's basketball still had enough tradition to generate some annual excitement, the football team began to spiral into a tailspin. After Friedgen led the Terps to at least 10 wins in his first three seasons, Maryland plunged into mediocrity. From 2004 until 2008, the team went 33-28 with no significant bowl appearances. Then came 2009.
In his ninth year at the helm, Friedgen endured a disastrous season. Starting with an embarrassing 52-13 loss at California and ending with seven consecutive defeats, Maryland finished 2-10, its first 10-loss season in school history. With $4 million remaining on Friedgen's contract, Yow began calling donors in an attempt to scrape together enough money to fire Friedgen so she could promote her anointed "coach-in-waiting," offensive coordinator James Franklin (who would eventually leave for Vanderbilt in 2010).
The money, however, was already being spent on renovating facilities, improvements that were not paying dividends. When Yow had cut the ribbon on the Tyser Tower renovations that September, only 41 of 64 luxury suites and 357 of 539 mezzanine seats were sold. The numbers haven't significantly improved since then. In 2011, The Washington Post reported that Maryland had already used most of the $25 million from the naming rights agreement with Comcast Cable Communications Inc. The Post noted those funds will run out in 2016.
Campus officials had previously stated that the renovations would produce enough funds to pay off the project's annual debt requirement. But with football and basketball ticket sales declining and donations shrinking, there was not enough money to pay the debt requirement and certainly not enough to buy out Friedgen.
Yow's goal was to improve and expand her athletic department, but her critics say she greatly overreached.
"It seems to be common knowledge within the department that Debbie spent all of the money," said Salyer, the women's water polo coach who saw his program cut along with seven others in July. "The thought is that she knew that she was going to be out of there and she spent the money."
Yow declined to comment on Salyer's claim, but said in an email: "During the 16 years I served as Maryland's Director of Athletics, we paid down an inherited debt of $51 million to $5.5 million, paid expenses during the 16-year period using athletically-generated income secured through aggressive/creative sponsorships, enhanced fundraising initiatives and improved ticket sales, won 20 national championships, and completed several facility projects."
But when Yow left in June 2010 to become athletic director at NC State, she also left the Maryland athletic department with three significant problems: a losing football team, an underachieving basketball team and a mountain of debt.
When Kevin Anderson became Maryland's athletic director in September 2010, donors were impressed with his rich baritone voice and palpable aura of confidence. The former athletic director at Army appeared to be the leader who would energize the donor base and guide Maryland to prominence. Under his watch, Anderson claimed that Maryland athletics were going to go "from good to great."
Just four months after he was hired, Anderson controversially fired Friedgen. Most wanted Friedgen out after the disastrous 2009 season, but Friedgen led the football team to a 9-4 record in 2010 and was honored as the ACC Coach of the Year. Friedgen tried to parlay his success into a new contract; Anderson had other plans.
Anderson fired Friedgen with one year left on the coach's contract, and Friedgen received a $2 million buyout. Anderson subsequently hired Randy Edsall from the University of Connecticut and signed him to a six-year, $12 million contract.
Four months after the firing, Anderson needed a $1.2 million loan from other non-state auxiliary funds because the department could not balance its budget. One key shortfall came because a major gift did not materialize. Once Anderson saw the new data, he realized the department was running a deficit.
"That was the red light that went off," said Anderson.
Documents reveal that the red light may have already been on. The Maryland Athletic Council, the primary advisory body on university intercollegiate athletics, acknowledged an ominous budget outlook as early as August 2010 under interim AD Randy Eaton (Eaton declined to speak to SI.com). The Athletic Council stated that money from the new ACC television contract, due to earn the school $3.9 million more than the old one, would ease any financial burden.
In July 2011, Loh set up a commission to take a hard look at the athletic department. A year later, seven sports (men's and women's swimming, women's water polo, men's cross-country, men's indoor track and field, men's tennis and aerobics and tumbling) were cut.
That move drew the ire of many, especially after it was revealed in January that the school was financing a $7.2 million reconstruction of Loh's presidential mansion. Controversy also surrounded which teams were targeted for elimination, as those choices ran contrary to the commission's stated criteria of academic excellence. Of the seven sports Maryland cut, six had far better Academic Progress Rates scores than the baseball team, which survived despite having the lowest APR of any team in the ACC.
The Analysis of the Fiscal Year 2013 Maryland Executive Budget revealed gruesome details about the state of the athletic department. It noted that while the department balanced its budget in Fiscal Years 2009 and 2010, "the report failed to mention that this was achieved by drawing down its reserve funds" and that the problem "started in fiscal 2006 when declines in several revenue sources coincided with increasing expenses related to scholarships, personnel, and overhead charges. As a result, the deficit escalated 166 percent, or $4.9 million, in fiscal 2011, totaling $7.8 million."
Deputy athletic director Nathan Pine, who worked at Cal when it cut five sports (all of which have been reinstated) in 2010, admitted the situation at Maryland is dire. "A challenge that we are faced with is that right now that even given our protections and the sports cuts, we are looking at three more years of running a deficit," Pine said. "It is not a short term solution."
One of the several faulty cogs in the Maryland fundraising operation was its basketball ticket pricing. A famously hot (and expensive) ticket since the men's team won a national championship, Maryland basketball traditionally had a lucrative waiting list for prospective season ticket holders, but the Terrapin Club's exorbitant prices gradually froze out young alumni. Entering this season, there was not even a waiting list for season tickets.
In 2008, a season ticket holder had to have given roughly $10,000 since he or she joined the Terrapin Club to maintain his or her season ticket. In 2012, there was no minimum threshold to purchase or maintain a season ticket. Despite impassioned newsletters to get young alumni to join, there was never a noticeable uptick even before the economic recession. After approaching 10,000 members in 2008, the Terrapin Club is now hovering around 8,000.
"The majority of those that (the department) has lost are giving $125-$150 per year as opposed to the type of donor that's giving $20,000-$30,000 per year," said Green. "They've lost the lower echelon. It happens that basketball program is really in the doldrums ever since we won the national championship in 2002 and opened the Comcast Center. We weren't recruiting a lot of top talent and we fell behind in the ACC. You won't fill Comcast without having a successful program."
The Washington Post reported that without the move to the Big Ten, the Maryland department faced an annual deficit projected to reach $5 million this year that could have reached $17 million by 2017. For a department that reportedly grossed only $2,829 in 2010-2011, the decision to make the move was an easy one, even with a $50 million exit fee to the ACC that Loh plans on negotiating.
Loh even declared the department would work to return the seven sports that were cut four months ago.
"What (Anderson) and I had to do, as a result, the most painful thing we've ever had to do, which was to look student-athletes in the eye and tell them that no, we could no longer support your team, the sport you loved and which you came to Maryland to play," Loh said. "We vowed, this will never happen again. Not so long as we're here."
When Maryland joins the Big Ten in 2014, it is due to make $12 million more than it would have in the ACC. With an expanded cable market for the Big Ten Network following its eventual contract renegotiation in 2017, Maryland is looking at a $43 million boon in 2017 alone.
Like a compulsive spender whose debts are absolved, Maryland has a clean slate and a new revenue stream to reinvigorate its athletic department.
Maryland fans can only hope the money is better managed this time.
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