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By: Travis Griggs
Staff Reporter
Issue date: 10/31/07
For the last five years, athletic spending has outpaced revenue growth at The University of Memphis, resulting in million-dollar deficits being passed on to students and The University general fund.
When President Shirley Raines arrived at The U of M, she said her goal was for the athletic department to be self-supporting within five years - but in the last five years, annual athletic department losses have increased from $3.6 to $9 million.
"It is true that creating a self-supporting athletic department was and is one of my goals," Raines said. "However, self-supporting has not been possible with rising scholarship costs, Title IX requirements to increase women's sports, the large array of sports for a major university and increased operating costs."
Athletic Director RC Johnson added travel expenses to the list of rising costs.
"Transportation costs get crazier and crazier, and those keep on going up," Johnson said.
But according to NCAA financial reports obtained by The Daily Helmsman, increased coaches salaries make up the largest portion of expense increases.
Coaches' salaries rose nearly $3 million in five years, while travel costs rose $1.8 million.
NCAA rules require that all intercollegiate athletic departments detail revenues and expenditures and submit annual financial reports, which are verified by an independent accountant.
Using these reports and University budgetary data, U of M athletic department expense and revenue trends from 2003 to 2007 were analyzed.
During that period, athletic expenses increased 31 percent from $22.1 to $28.9 million. The approved 2008 athletic budget is $31 million.
This growth outpaces The University budget, which, according to budget reports, grew 25 percent over the same period.
Coaches' salaries accounted for 43 percent of the increases, followed by team travel at 19 percent, other operating expenses at 11 percent, scholarships at 11 percent and employee benefits at 9 percent.
Title IX expenses are not directly categorized in NCAA reports, but based on approximations from Equity in Athletics data and The University budget, spending on women's athletics increased $1.8 million during the period, which would account for 26 percent of total increase.
University Justification
Administrators justified The University's support of the increased expenses, saying that even though athletics should be self-supporting, expenses at The U of M are not out of line with other schools, and the value athletics brings to The University is worth the price.
"I hear people say that athletics doesn't do anything to help academics or the reputation of The University, but that's not true," said David Zettergren, the assistant vice president of finance.
Johnson agreed.
"I think the athletic program can really help The University with enrollment, exposure and bringing in quality professors," Johnson said. "There are some great spin-off effects that really do enhance The University and give you some status."
Administrators also say that athletic scholarships give students who otherwise could not afford tuition a chance to attend college.
"Some of your folks who are good in athletics, they need to go to college, too. And they might not go if there weren't options for athletics," said Zettergren, who credits college athletics for giving one of his children the focus he needed to make it through school.
University administrators said athletes are generally better-than-average students and worth investing in.
"We get some very good students from athletics who are in our honors program," said Provost Ralph Faudree. "Athletics allow us to attract students that we might not get otherwise."
According to Charles Lee, vice president of finance, the graduation rate among the 360 athletes at The U of M is 64 percent higher than the overall University average.
Lee said the athletic department raises its own money for athletic scholarships.
"If The University wanted to get that same group of students," Lee said, "then I'd have to go find $6 million somewhere so that I can give them scholarships."
The amount of money spent on athletes at The U of M extends beyond scholarship costs.
According to Grady Bogue, author of a Tennessee Higher Education Commission study on higher education funding, universities invest much more money in athletes than students.
"You look at the total academic budget divided by students, you'll probably find that The University spends about $12,000 per student," Bogue said. "And if you look at the athletic budget divided by athletes, I wouldn't be surprised if that number was close to $80,000."
At The University of Memphis, these figures are approximately $13,500 per student and $86,000 per athlete.
Bringing in Money
According to NCAA data in 2005, only 22 schools had profitable athletic programs, and Johnson said estimates for this may be as low as 12 for 2007.
"If Michigan can't make it - I don't know that much about their budget, but I know how many people sit in that stadium - how are the rest of us going to do it?" Johnson said.
Johnson said the athletic department was working to build up their internal revenue sources to offset expense increases.
"We're trying as hard as we can to generate as much revenue as possible," Johnson said. "Basketball is doing great, but football is struggling."
In 2006, Tiger football lost $2 million, but basketball profited $219,923 - a low-profits year for the basketball team which has brought in as much as $2.8 million in profit in 2003.
Johnson said attendance at U of M football games - and the resulting low revenues - have been disappointing.
"Football is one place where we could make a lot more revenue," Johnson said. "Unless the Vols are in town, we don't sell out."
According to Lee, gifts to the athletic department are a key source of funding.
"Sure the student fee went up," Lee said, "but let me tell you who makes athletics go - it's the contributors."
But donations, despite being the second largest source of athletic department revenue, did not increase during the course of the study. They have remained at or below the 2003 level of $7.7 million
Advertising and licensing revenues only increased slightly from $2.1 to $2.5 million during the timeframe of the analysis, but according to Lee, The University has negotiated a new contract that will improve future advertising revenue.
Conference USA payouts reached a high point of $3.2 million in 2005, but despite falling since then, they still brought in $1.2 million more than in 2003.
"Really, what's missing is conference distributions," Zettergren said.
Lee agreed.
"We're in a conference that doesn't pay a whole lot of money," Lee said.
Lee said that they had examined the possibility of moving into a larger conference in order to increase revenues, but with BCS schools' athletic budgets as high as $100 million, the move would likely require further expense increases.
Questions from the Top
Responding to congressional concern about increased athletic spending, the NCAA formed a task force in 2005 to examine the state of intercollegiate athletics.
In their report, they said, "There is no crisis in intercollegiate athletics, but there is sufficient stress in the structure to warrant careful examination by each campus with regard to how it conducts its programs, at what cost, with what benefit and with an eye to the critical relationship between college sports and American higher education."
But according to some critics, the relationship between sports and education has already been stressed by rising costs.
In a 2002 report, the THEC said higher education was having trouble providing for the basic financial needs of the academic side of universities, "while at the same time ... allocating scarce resources to athletics that might have been devoted to the academic core."
Bogue said that college presidents are under "tremendous" political pressure to have competitive athletic programs and as a result are reluctant to limit spending on sports.
"College presidents," Bogue said, "are fond of saying, 'Woe is us, state appropriations are down, and we don't have enough money to support our programs and faculty.' But at the same time they're taking money from students and the general fund and giving it to athletic departments."
Friends with Benefits
University administrators at The U of M said athletic spending creates financial payoff to The University in other areas.
"There are a lot of people whose connection to The University overall is through athletics," Lee said, "and their giving to The University is broader than just to athletics. For a lot of those guys, the hook was athletics. A lot of the money we get, we would not have got if it wasn't for athletics."
Lee also said that The University benefits from the television exposure athletics bring.
"Last year," Lee said, "The University appeared on national or regional television 40 times for a total of 98 hours of publicity. That's a way to get The University's name and image out there without it costing a whole lot."
Lee said that in the future The U of M plans to further capitalize on the exposure by showing advertisements about the educational side of The University during televised games.
"We're pre-season number one (in basketball)," Lee said. "There are going to be so many opportunities this year to go talk about this University and our professors. We couldn't buy that."
Cornell economics professor Robert Frank conducted a study in 2004 to determine if there was a connection between athletic success and academic gains at universities.
His study focused on two central questions: "Do successful college athletic programs stimulate additional applications from prospective students and greater contributions by alumni and other donors? And if so, is it likely that additional investment in such programs is a cost-effective way of increasing those benefits?"
He concluded that the benefits of a successful athletic program, if it exists, are "almost surely very small.
"Alumni donations and applications for admission sometimes rise in the wake of conspicuously successful seasons at a small number of institutions," Frank said. "But such increases are likely to be both small and transitory."
The "Value Equation"
The University administration, which attempts to maintain a competitive athletic department with limited funds, must ultimately place a dollar amount on the value of athletics.
Gary Donhardt, director of institutional research, has studied the use of educational resources.
"As costs keep increasing in higher education," Donhardt said, "we have to keep in mind that the student is the client."
Even though Lee, who played football in college, is quick to defend athletic spending, he admits to some concern over increased expenses.
"I'll be the first to admit that the price of this thing is going up," Lee said. "I do get concerned about us pricing ourselves out of the market."
But Lee said expenses at The U of M are not bad compared to other schools.
"If you look at where The University of Memphis is compared to all the other Divison I schools, we are way way down in the pack," Lee said.
"The question is," Lee said, "what is the value of athletics to higher education? What does it do to help a student be a better person, be better in the discipline that they're going into? That's the analysis that needs to take place."
Changing the Game
According to Bogue, the difficulty isn't with university administrations, it's with the system.
"I'm a big fan of college athletics," Bogue said, "and I understand the role of athletics in college life ... but there have got be some limits here."
Bogue said that the economic and political forces driving the market for college athletics make changes unlikely.
"Right now, a president is vulnerable if they try to take their institution to a less competitive level," Bogue said.
But some critics think as state appropriations for athletics decrease and universities increasingly rely on student tuition for funding, the decision to fund athletics should be made by students.
"There is power in the student voice and vote," Bogue said. "Students can do things that faculty and politicians can't do."
Bogue doesn't expect any major changes in the state of intercollegiate athletics.
"This has been going on for a hundred years and shows no sign of slowing down. It's a culture phenomenon whose trajectory and destination I don't expect to see any big change in the immediate future," Bogue said.
"But," Bogue said, mentioning the fall of The Berlin Wall, "there have been some unexpected events in the past." |
