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| 8/18/2009 9:09:00 AM | Email this article • Print this article | Despite cutbacks, collegiate athletics boom (for a few)
Recession triggers age-old debate about spending on sports
News Analysis
Despite the worst economic downturn since the Great Depression, college athletics, especially college football, remain a very big business in the United States, and the program at the University of Wisconsin-Madison is one of the biggest revenue generators among some very affluent programs.
Just this past season, during which the athletics department squeaked by with a tiny surplus for the 2008-09 year, the Badgers' program raked in a phenomenal $89 million. With such earnings power, the administration and coaches are munching on the pie of prosperity.
Barry Alvarez, for example, the iconic former coach, is now the nation's third highest-paid athletic director, making $781,250 a year, while football coach Bret Bielema enjoys a compensation package worth between $1.1 and $1.2 million a year.
The high salaries don't stop at the top of the sports food chain, either.
Men's basketball coach Bo Ryan pulls in slightly more than $1 million in annual total compensation. Men's hockey coach Mike Eaves slaps down $261,442 a year.
The women's track coach, James Stintzi, runs off with nearly $96,000 a year and the coach of the women's and men's swimming teams, Eric Hansen, strokes about $101,000 a year. Men's crew? Coach Christopher Clark hauls in $74,479 a year. Volleyball? William Peter Waite is served up $144,272 a year.
Strength and conditioning coach? That's John Dettmann, pressing almost $123,000 a year. His assistant, Ben Herbert, lifts more than $105,000 a year.
The good times don't end in Madison, either.
Florida football coach Urban Meyer recently inked a six-year $24-million deal just as the University of Florida was facing a $42 million shortfall and announced cuts of nine faculty members and 49 staff positions.
Of course, before that, in 2007 Alabama enticed Nick Saban away from the Miami Dolphins with an eight-year, $32-million deal.
So far as conferences go, according to Tom Oates of the Wisconsin State Journal, the SEC's 12 football coaches average $2.446 million a year; in the Big 12, it's $1.926 million per coach, followed by the Big Ten at $1.794 million a year.
Meyer is not even at the top of the list. Consider that USC's Pete Carroll makes $4.4 million a year; Notre Dame's Charlie Weis, $4.2 million.
If salaries are leaping out sight, so are the TV network contracts that help to pay for them.
The SEC recently signed 15-year deals with ESPN and CBS worth an estimated $3 billion, while the Big Ten has its own network.
The TV contracts, the spiraling salaries, the quest to build the most expensive, state-of-the-art sports' facilities - the question is, is it all too much, especially in a bad economy?
Spending justified
To athletics boosters and many fans, the spending is well worth it.
For instance, they say, the paychecks of Alvarez and Bielema and the others do not come from taxpayers. In fact, the athletic department is self-supporting, spends no tax dollars, and for years it has consistently ended up in the black, if only by the slimmest of margins.
This year, fiscal year 2008-09, was no exception. Because of the recession, the athletic department took some hits, particularly in interest income and concessions, but still finished ahead by about $100,000.
The athletic program was in a position to do this, supporters say, because they say Alvarez budgets responsibly.
The 2009-10 budget, for example, has been reduced by $325,000, with spending cuts in 10 sports programs and in most support units, while capital spending plans were scaled back. The athletics department followed other universities in eliminating printed media guides, saving $200,000.
All that enabled the department to reach its 2009-10 bottom line without a ticket increase for the second straight year.
What's more, UW coaches and staff are taking eight unpaid furlough days in each of the next two years, just like all other state employees, and the athletics department will pay the state $3 million from its general compensation fund over the next two years to help balance the state's budget.
That total includes the furloughs and comprises a 1 percent operating expense fee and the 2 percent pay raise state employees were slated to receive.
Finally, earlier this year, Alvarez told his athletic board he was considering other options to reduce spending, such as cutting back on the number of games played by certain teams, and reducing the coaching staff, as well as having teams bus to nearby road games instead of flying.
But how does UW compare?
In addition to the absolute bottom line, the UW athletic department compares favorably to most of its Football Bowl Series counterparts - 119 schools strong - and has a strong fan base to help sustain it.
Indeed, last year the NCAA released a report on athletic expenditures and revenues from 2004 to 2006 and, compared to overall trends, the UW athletic department scored high in a variety of categories.
For example, it is one of just 19 profitable programs in the country. While expenditures are growing more rapidly than revenues in most athletic departments, that has not been the case for the UW.
Most institutions chip in "allocated revenues," the NCAA report revealed - that is, taxes or fees - to help pay for athletics. Direct allocated funds accounted for an average of 26 percent of total athletic revenues in 2006.
That was not the case in Madison, where all the operating revenues were self-generated through ticket sales, conference revenues, concessions, licensing, parking, concerts, gift funds and multi-media rights.
Then, too, if some salaries seem high, supporters say, those numbers have to be put in context. For example, while Alvarez may be among the highest paid for his position, football coach Bielema ranks just 41st in the nation. In addition, the school's individual sports outperform other schools in the revenues provided from such base sources as ticket sales.
In 2006, for example, according to the NCAA report, the median FBS football program generated about $10.6 million in revenues. That year Wisconsin generated $15 million in football ticket sales alone, never mind post-season play, conference and television revenues and such things as concessions and parking.
The men's basketball program also topped the national median by a lop-sided margin, earning more than $6 million in ticket sales alone compared to the national median of $4 million in total revenues earned by men's basketball programs.
Ticket sales remain strong, despite the recession, school officials say.
In May, the university announced a renewal rate of 94 percent for 2009 season ticket holders, down only slightly from the previous two seasons' rate of 98 percent and 99 percent, respectively, and well within the budget forecast.
The dark side
If all those glowing assessments seem to good to be true, critics say that's because they are.
For one thing, they say, there is a growing gap between the 'haves' and 'have-nots' among universities.
The University of Wisconsin happens to be one of the haves, one of those 19 programs to take in more than it spends.
However, take those 19 schools out of the equation, according to the NCAA report released last year, and the median negative net revenue for the other institutions within the FBS was approximately $8.9 million. That's $8.9 million taxes and fees must cover - at 100 of the 119 FBS schools in the country.
All totaled, the difference between the largest generated revenue of approximately $105 million (at Ohio State) and the median generated revenue of approximately $26 million exposes a glaring discrepancy among FBS universities, the NCAA report states.
Those figures are being exacerbated, critics say, by ever larger spending by the profitable institutions. To be sure, while the UW athletic department's budget is about $88.8 million this year - some $325 thousand lower than last year - the overall budget has increased from $80 million in 2006-7. That's an 11 percent increase in just three years.
By spending ever more, except in this one recessionary year, critics say schools such as Wisconsin raise the competitive stakes, the total cost of college athletics, and, ultimately, the price tag to taxpayers even more.
They compare the escalating spending to an arms race in salaries and facilities, an arms race that increases the gap between the haves and have-nots by ever-higher margins. That is to say, median net negative revenue figures are growing, not shrinking.
The median gap between the financially successful programs and others - $13,214,000 in 2006 - continues to broaden and has almost doubled since 2004, the NCAA report states.
How does the spending by larger schools cause this?
For one thing, to stay competitive, smaller schools are tempted to cash in on the popularity - and potential lucrativeness - of profitable sports such as football and men's basketball.
"With ticket sales accounting for more than $7.4 million annually in revenue at a typical school, schools work hard to augment this figure," wrote Matthew Denhart, Robert Villwock and Richard Vedder in a 2009 report of athletics and academics tradeoffs for the Center for College Affordability and Productivity. "The incentive is to build larger stadiums, host more home games and spend money in attempts to produce winning teams that fans will pay money to come watch. . . . Additionally, increasing the number of home games usually also means increasing the number of away matches. This imposes new travel costs, which can be substantial."
Smaller schools also add sports that traditionally lose money in an attempt to improve graduation rates, which are traditionally higher in those sports. Graduation rates are important because, as Denhart, Villwock and Vedder reported, poor academic performance can bring restrictions in scholarships, recruiting and practice time.
In their report, Denhart, Villwock and Vedder looked at the implications of this practice for Tulane University, which has announced the addition of men's swimming and tennis and women's soccer and swimming.
"The operating expenses alone will account for a rise of 11.4 percent in the athletic budget," they wrote. "Tulane is almost certainly not one of the 19 NCAA schools that earn revenue in excess of expenses, . . . . An athletic program that is already losing money will add 11.4 percent to its budget; almost certainly, a privately run business would not do that. Since these sports traditionally do not cover expenses, this increased spending will require further subsidization from outside the athletics department. An increase of 11.4 percent is especially high when considering the low number of student athletes that will benefit from the additional costs of adding these programs."
Hurting gift giving
Even within a university itself, critics say, the current system drains money from academics, no matter what the bottom line says.
For example, at UW-Madison, alumni and other gifts comprise 23.9 percent of the athletic department's revenue. But would this gift giving go to academics if athletics did not exist? Are sports a drain on academic gift giving? New research suggests it is, Denhart, Villwock and Vedder state.
"Increasingly athletic giving is taking a greater share of total donations to a university," they wrote. "While athletic success appears to significantly impact giving to a school's athletic department, it does not show a positive relationship to academic giving. It is possible that athletics may be imposing a crowding-out effect to a certain degree on donations that may have gone to traditional academic missions of the university were athletics not to exist."
As proof of that, critics point to an analysis published in the April 2007 issue of the Journal of Sport Management.
According to that analysis, 26 percent of all dollars donated to Division I-A colleges and universities now go to athletics. In 1998, the comparable figure was 14.7 percent.
That's troubling, critics say, not just economically but ethically at a time when rising tuition, higher dorm costs and other fees are threatening the ability of many to attend college.
Just this past week, Ron Morris, a sports columnist for The State newspaper in Columbia, S.C. put it this way:
"The sagging national economy is forcing colleges to change their ways to make ends meet," he wrote. "Tuition at nearly every school is skyrocketing. Budgets are being slashed. Teaching positions are being eliminated. Fund-raising is falling flat. In the end, the message sent by paying football coaches exorbitant salaries is sad and self-defeating. The spike in salaries during difficult financial times conveys the message that athletics are bigger than the university."
There are those who believe the ever higher levels of spending at such universities as UW-Madison will lead not only to an ethical backlash but to an implosion that will economically affect even today's profitable programs.
William Kirwan, chancellor of the University System of Maryland and co-chairman of the Knight Commission on Intercollegiate Athletics compared excessive spending in college athletics to that in the housing market before the bubble burst and triggered the recession.
"There was an assumption that housing prices would always go up and up," Kirwan told ESPN's Mark Schlabach. "You could buy a house and everybody assumed its value would increase. Intercollegiate athletics has lived in this fantasy world and assumed corporate sponsorships and TV contracts would always go up. Now we're finding out that's not the case. I think we've dug ourselves a huge hole."
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