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January 24, 2010 - Athletic finances at the University of Minnesota

On January 24, the Minnesota Daily featured an investigative report into the athletic finances at the University of Minnesota (UM), raising many issues about how athletics departments find ways to raise and spend money to remain competitive.   The article considered the increasing pressures on athletics budgets from spiraling coaching salaries and the different ways that UM and other institutions raise revenues to pay for expanding athletics budgets.  Athletics is an important feature on college campuses, and colleges with less resources are willing to pay higher institutional subsidies in order to balance their athletic budgets and participate in the highest competitive levels. The Knight Commission's recent presidential survey is shared as data that supports the increasing concern by college presidents over the increasing costs of athletics, despite institutional support.

In 2009, UM reported $69.3 million in expenses and $67.7 million in revenue, including $1.6 million from the athletics endowment.  UM reported the majority of its revenue included its own broadcasting contract with Learfield Communications, distributions from the Big Ten (including from the Big Ten the Big Ten Network), corporate sponsorships, gifts, and from preferred seat tickets at its new football stadium, basketball, and hockey games. Yet, UM athletics department generated $25 million less revenue than fellow Big Ten schools, Pennsylvania State University and the University of Michigan and nearly $50 million less than Ohio State University.

“It’s fair to say that without the Big Ten Network money, we might look very, very different today,” said Associate Athletics Director Liz Eull. “Because I don’t know where we would have come up with another six-and-a-half million dollars to support the expenditures for the 25 teams that we currently have. I can’t tell you what would have happened. I mean, I don’t have a crystal ball, but I can’t even begin to tell you where we would have gone for, at that time, almost 10 percent of our budget.”

The “six-and-a-half-million dollars” Eull referred to is the lingering loss from the previous year, when Minnesota fired, bought out and replaced its football coach and its men’s basketball coach. To help recover the losses, the University loaned athletics $4 million in 2008.  UM athletics director Joel Maturi said that when he arrived at UM eight years ago, the University was giving more than $8 million annually to athletics.  Last year, the university subsidized the department with $3.4 million last year, which is counted as revenue by the athletics department.

Maturi has seen athletics expenses and revenue each increase by more than 50 percent during his tenure. This rise in spending has outpaced the growth of the University’s total expenditures, mirroring a national trend.  Maturi said that the largest changes in recent years are seen in coach compensation, pointing to the change at Kentucky since men’s basketball head coach Tubby Smith left that school to join the Gophers.  “Tubby was making $2.1 million, now three years later, [John] Calipari’s making $4 million,” Maturi said. Then, throwing up his arms in disbelief, Maturi asked, “What?

A 2009 NCAA report found that 25 programs reported positive net revenue in fiscal year 2008, up from 19 schools in 2006. It also found “expenses were increasing at only a slightly faster rate than revenues,” and that “losses continue to grow.” Among those that lost money in the Football Bowl Subdivision, which includes the largest programs, the average deficit reported was $9.9 million.  The report stated that “allocated revenues,” those funds which came directly from the school or state, had risen from 20 percent of total revenue in 2006 to 30 percent in 2008.

What the numbers show is a widening gap between the haves and have-nots, those institutions with access to additional sources of revenue ("the haves") and those without similar access ("the have-nots). J. Douglas Toma, associate professor at the Institute of Higher Education at the University of Georgia, a small group of elites has elevated itself above the rest.  “The leading programs have separated themselves even further from the pack,” Toma said. “And the places that are not there yet, that are behind that, feel increasing pressure to make potentially bad decisions to either attempt to keep pace, or, in theory, to move ahead. But that’s pretty unlikely.”

A recent survey of college presidents conducted by the Knight Commission found that presidents were concerned about the growth of spending, but had little confidence that the NCAA would be the mechanism to curb it.  “The NCAA is the logical place to make real change, but I have no faith they will,” one president told the Knight Commission.

Maturi said that when the desires of fans and regents come into conflict, he must choose what’s best for the school. “That’s simple, because I am part of the academic institution,” Maturi said. “We are. The University of Minnesota athletics department is part of this big University, and I have an obligation to do what we can to have a balanced budget.”