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Obama Administration Economic Woes Reduce Athletic Budgets: How Will BYU Fare?

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Obama Administration Economic Woes Reduce Athletic Budgets: How Will BYU Fare?
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The NCAA is going through a major transition now that it has finally agreed to a football playoff system of four teams. This is the tip of the iceberg, however, as most certainly in the years ahead we will see fairly quickly an eight team playoff. 

It will be simple, eight conferences, or six with two at-large teams, and perhaps independents will play a “qualifying” playoff game. For the Big 10 and Pac-12 that would be the Rose Bowl. For the SEC and Big 12 that will be their bowl game. Notre Dame as an independent, if qualified, will play in the Orange Bowl against the ACC. Other combinations will eventually create a qualifying club of four that will actually face off to play for the championship.

The question then arises as to which teams will be in the conferences that can afford to competitively field teams for that Division I, (D-I) playoff system.

D-I intercollegiate athletics are generally the major collegiate powers that have the money and population to support big time athletics. New Mexico State University with its regional student population will never be able to compete in that arena for the long term. They are already in debt $13 million, and their students have a tendency to reabsorb back into the local economy fraught with high unemployment and ethnic traditions that does not support a culture of collegiate athletics. Hence their problem with getting into the lowly Sun Belt Conference. 

The larger budgets and better athletic facilities attract the better athletes. The better athletes translate into more wins on the field, and that translates into higher poll rankings, which puts teams on television more, with the result of higher revenue. 

All colleges and universities are divided into one of three division, (I, II, III), so designated by the NCAA in 1973. For football D-I was further divided into a 1-a and 1-AA which was renamed in 2006 as the "Football Bowl Subdivision" (FBS) and "Football Championship Subdivision" (FCS).

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D-I contains 346 institutions, and the NCAA proclaimed a limit on schools wanting to move up to D-I until 2012. The current movement of schools like UMass, Charlotte, Old Dominion, UT-San Antonio and Texas State are just some of the schools that have announced their move from a lower division to the D-I.

All D-I schools must support at least seven sports for men and seven for women. The exception being six for men and eight for women allowing for two team sports for each gender. 

With NCAA limits on financial aid for all member schools the thought is that these limits will somehow level the playing field, sort of to speak, between the schools preventing the large and highly endowed schools from dominating athletics in the NCAA. Those limits have been so generous and skewed that all it has accomplished is the rich getting richer and the poor, like New Mexico State and Idaho, getting poorer.

The demise of the WAC is testament to the fact that the smaller and poorer schools cannot compete on the level playing field as it is today. That is the main reason BYU moved out of the WAC to the MWC, and it is the real reason BYU has moved from the MWC to independence. Yes, it comes back to money. But I digress.

Scholarships for the D-I FBS teams are set at 85. But there is a loophole. Schools can have as many as 25 additional “counters.” A counter is a person who is given “financial aid” to go to school. The rich schools can afford the 110 football athletes, but the poorer schools cannot. 

 

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Now the rub. D-I programs in total generated $8.7 billion in revenue in the 2009-2010. The men, meaning mostly football and basketball, provided 55 percent of the revenue. Women's teams brought in 15 percent, and 30 percent was miscellaneous income not associated with gender or a specific sport.

There is virtually no school that has football and men's basketball programs that do not support all of the other sports teams and athletes. All other programs are money losers and a burden to contributors and/or tax payers. If the total revenue were equally divided between all schools, the average take per school would be $25 million, and it would not even cover the cost of most D-I FBS football programs.

But be assured, the schools that are earning the majority of that money are not going to, and will not, split that money equally with the lesser schools.

To that end, those who manage the funds at BYU, or rather, in Salt Lake at Church headquarters, determined that BYU-Idaho would not fall into that trap of being a money pit and eliminated athletics from the school when it became a four year institution.

The next decision was only logical. If BYU in Provo was to have an athletic program, then it had to be first and foremost self supporting, so it had to run a surplus to contribute to the funding of the university. 

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Many wonder why BYU left the MWC and went independent. It was about the money. BYU in 2009 collected revenues close to $41 million with expenses of around $35 million. The reported profit, after rounding the numbers, left BYU with  $5.5 million.

 

Joshua Despain wrote about this in the Deseret News (2011-02-17). His article highlighted what then should have been the revelation that college sports was about money: If your football program doesn’t support the rest of the athletic department, then the taxpayers, or contributors, will. See the article at: "BYU sports budget rundown shows what sports profit, cost." 

Had the MWC followed through on their promises, then BYU would have done much better financially. But they didn’t, and those who run the numbers quickly realized that a successful independent football program could not only be self sustaining in independence but also be a revenue booster to the rest of the university.

BYU management moved quickly and decisively moving away from the MWC to independence seeing that playing at venues like Laramie was a drag on the budget and contributed nothing to revenues. Actually, BYU was subsidizing the University of Wyoming, and others, because of its successful football stadium and basketball program. BYU determined it was not right to subsidize state schools with either tithing funds or revenue from support of its programs.

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Because of this, BYU now stands capable of providing the revenue necessary to support its own athletic programs, have a surplus and contribute through BYUtv to BYU-Hawaii and its athletic program. Other programs are not so fortunate.

Roy Ockert, in an article posted on 31 July 2012 titled Penn State to join schools struggling to afford athletics, talked about how “CNN-Money analyzed Penn State’s financial reports and found that football took in revenue totaling $72.7 million last season, showing a profit of $53.2 million. That was second only to the University of Texas’ $71.2 million profit.”

 

His contention in that article is that Penn State will now join the poorer schools and have a reality check that will see it of necessity to roll back its entire athletic program. The leadership in Salt Lake evidently saw this trend in all of collegiate athletics years ago. It was essential for BYU to make changes to compete on a bigger more profitable stage than what the MWC could offer. 

If BYU saw these numbers crushing athletic programs, then surely administrators at other schools have seen this coming. The answer for them has been to go to boosters or the state legislature and ask for more money in the hope of making their football team the cash cow to support all of their athletics.

Texas opted for the Longhorn Network, and rather than share in those revenues, Texas Tech and others have rebelled. The Longhorn Network could have been the “Texas Athletics Network” that benefited all athletics in the state of Texas for every college, university and high school. Where was Governor Perry on that fight?

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In the current economic climate of tepid growth less than that of inflation, many of these colleges hopes and dreams will not be realized. In fact, with cities and states defaulting or going bankrupt, state budgets will have further pressure from taxpayers to fund athletics while defaulting on pension funds and civic services such as police, fire and primary education.

The future holds that school districts, and correspondingly universities, will be cutting back athletic budgets that are not self-sustaining. The taxpayer can no longer afford to support the estimated 500 plus athletes of a university while thousands lose out on an education because the athletic department is a drain on the budget. What is worse may be the fact that the $30-50 million being spent on an athletic budget may be the difference in pension fund deficits for a city, county or state. 

If a state has three to five universities in the same situation, the total impact could be in the neighborhood of $150 million being spent on athletics while retired seniors lose their pensions. The winner in that conflict will eventually be the honoring of pension commitments, combined with lower taxes as the economy worsens.

To that end, the 124 D-I schools may be losing members in the coming years. In the next article I will explore the 30 schools that may be stepping down from FBS to FCS in the near future.

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