Spending in NCAA Division I athletics increases as competition forces inflation
Funding for collegiate athletic programs has been increasing for decades.
Today, six-figure coaching contracts, a demand by fans and boosters for state-of-the-art facilities and increased scholarship commitments clash with declining state funding for higher education.
Because it is rare for all but the largest universities to balance athletics budgets on revenue alone, schools like Central Michigan University have had to compensate by using subsidies from the general fund — money created by academic programs and tuition dollars.
“We are challenged in how we are doing our business; where we fit in right now because of this mad rush going forward,” said Director of Athletics Dave Heeke. “We want to be successful and stay in the game. We need to do that responsibly. We know we can’t do what other schools, with tremendous resources, can do.”
A 2013 report by the American Institutes for Research, which included CMU and other Mid-American Conference schools, found the athletics departments of most Division I universities spend three to six times more per student-athlete as smaller institutions spend per student.
According to the report, MAC schools spent $13,069 per student in 2010, while spending $52,537 per athlete that same year.
While perhaps not as drastic at the mid-major level, MAC teams also face pressure to stay competitive with their peers. CMU does not benefit from the massive revenue generated by teams in conferences like the Big Ten or SEC create.
“Big universities can generate all of their revenue separate from the general fund,” said Vice President of Finance and Administrative Services Barrie Wilkes. “The challenge is restraining costs. I think there are a lot of challenges with college athletics financially. It’s not a CMU issue, it’s a national issue.”
To help try to secure new revenue, the university partnered with IMG College in 2012, a marketing, broadcasting and brand development company that helps negotiate sponsorships for schools.
The revenue is split, with 45 percent going directly to CMU athletics and 55 percent going to IMG. IMG revenue totaled $508,000 in 2014-15, up from $450,000 in 2013-14.
Athletics currently employs one full-time marketing employee, and two IMG employees.
Subsidies and competition
CMU’s Athletics Department receives $18.5 million in subsidies from the university’s general fund. Revenue from the academic colleges, which is primarily tuition dollars, accounts for 72 percent of the Athletics Department budget.
In 2005-06, subsidies accounted for close to three-quarters of the total athletics budget. Proportionally that is still true today. Measured in actual dollars, the amount of subsidies has increased from $12.25 million to $18.5 million.
“Generally, institutions like ours have been around that 65 to 70 percent (budget subsidy),” Heeke said. “The large portion of that is salary, benefits and scholarship costs. Everything else is self-generated to run those programs.”
Subsidized “auxiliary centers” like the Athletics Department are paid for through the general fund. The university allocates $34.9 million in subsidies to these centers, including the Athletics Department, Computing Support, Public Broadcasting, Telecom, the College of Medicine and University Recreation.
The Athletics Department receives 52 percent of funds designated to all of the auxiliary centers.
“More often than not, colleges and universities are subsidizing athletics, not the other way around,” the AIR report reads. “Student fees or institutional subsidies (coming from tuition, state appropriations, endowments, or other revenue generating activities on campus) often support even the largest NCAA Division I college sports programs.”
Revenue generated by athletics programs only covers 28 percent of the department’s budget. The department’s revenue for 2014-15 is projected to be $7.1 million, with major contributions coming from the MAC, $1.3 million, and football revenue, $2.1 million. Men’s basketball is the second-most successful sport, bringing in $375,000 in revenue.
Projected expenses for 2014-15 total $25.5 million.
“We are very challenged on the revenue side,” Wilkes said. “U-M charges $75 for the cheap (tickets to football) games, we can’t sell them at $22. Part of that is our demographic, we don’t have a lot (of alumni) living close, and some of that is a different economic demographic (of Mount Pleasant).”
U-M announced student ticket prices for the 2015-16 school year Monday — $185 for football, $210 for men’s basketball and $160 for hockey. Student tickets at CMU are free.
Heeke stressed CMU is comparable to other MAC schools in terms of budget subsidies.
Return on investment
Some administrators believe spending money on Division I athletics has allowed CMU to grow.
“It puts you into a group of peer institutions you want to align yourself with,” Heeke said. “Like it or not, athletics plays a prominent role in helping position your university.”
It would be wrong to undervalue the connection points athletics makes at CMU, Heeke said. The university’s athletic programs allow CMU to connect with alumni across the world, inspiring donors to invest in the department, and university, at a time when universities are receiving fewer dollars, he added.
Gov. Rick Snyder’s 15-percent cut to higher education funding in 2011 significantly impacted the cost of college on students and their families. State funding today accounts for 17 percent of the CMU operating budget.
Under Snyder’s 2015-16 budget, public universities would see an additional $28 million for general operations, including a 3 percent restoration of funds to CMU since Snyder’s first budget cut.
At the Feb. 19 Board of Trustees meeting, University President George Ross reaffirmed his belief in athletic spending.
“There are about two dozen programs in the country that show a black bottom line,” Ross said. “I believe intercollegiate athletics is important to our campus. I wish the metric around what it takes to make it happen was different, but that is not the reality.”
Ross said collegiate athletics gives CMU tuition dollars from credit hours generated by athletes, band members and students attracted to a Division I university with strong sports programs. He said it would be hard to quantify the total number of students who come to CMU for these reasons.
The 462 student-athletes at CMU would create $5.3 million a year in tuition based on a 15-credit semester, although $5.7 million was allocated to the athletics department for scholarships this year.
“There are academic programs that lose money,” Ross said. “At the end of the day the university’s budget balances and we produce 6,500 graduates a year. I’m pretty pleased with that.”