Many top college athletic programs are swimming in red ink

THE BALTIMORE SUN

CHICAGO -- Intercollegiate athletics is taking in more money than ever before.

And the system is going broke.

At least 70 percent of the big-time athletic programs are expected to operate in the red this year. Remarkably, Michigan will be one of them.

No school can match the Wolverines on football Saturdays, when they put the population of a medium-sized city (106,000 people) in Michigan Stadium. The basketball team won the national championship and a big-time payday in 1989. Then there's television on which Michigan appears early, late and often.

Michigan should have its immense stadium filled to the brim with cash.

But for fiscal 1991, Michigan is projecting an operating deficit of $2.8 million. Even when outside fund-raising and $1.4 million in interest income from Michigan's reserve fund is factored in, the overall deficit still is an eye-opening $750,000.

"If it can happen at Michigan, it can happen [anywhere]," said Nebraska business manager Gary Fouraker, whose program is trying to whittle down a debt that reached as high as $1.8 million last year.

"I don't think anyone should be surprised," said Michigan interim athletic director Jack Weidenbach. "We're in the same boat as everyone else."

And the boat is taking on water. Or more specifically, red ink.

NCAA Executive Director Dick Schultz estimates at least 70 percent of the 106 big-time football programs (Division I-A) will operate in the red this year. In reality, he knows the situation is much worse.

"Very few Division I-A schools don't have a financial crisis, or at least haven't had one in recent years," Schultz said. "You can count on one hand and one finger the number of I-A athletic directors who can look you in the eye and say they have no legitimate financial problems."

It's a nightmarish paradox. The NCAA is about to start the first year of an unprecedented seven-year, $1 billion television contract for its basketball tournament. College football attendance was the second highest ever in 1990, with 36,560,247 people attending games at 673 schools. This year's bowl revenues exceeded $63 million.

Yet despite the perception college athletics is swimming in a green river of cash, boom time is going bust. According to the last NCAA financial study released in 1990, funding for all NCAA intercollegiate athletics was nearly $300 million in the hole in 1989, and that deficit ($1.8 billion in expenses to $1.51 billion in revenues), says the study's author Mitchell Raiborn, probably is low.

Football and basketball revenue account for an average of 72 percent of the take and contribute considerable profits at most schools. But those funds usually aren't enough to cover all of the bills.

The problem is twofold. Universities want to sponsor a broad-based athletic program with as many as 28 men's and women's sports, ranging from golf to lacrosse to track, with the majority of those rarely bringing in significant revenue. When the costs of scholarships, coaching and travel expenses for those sports are factored in, millions of dollars in expenses are added to the budget. For example, Illinois has budgeted almost $200,000 for men's and women's gymnastics this year.

But compounding the situation is an "arms-race" mentality that has permeated big-time football and basketball. With virtually every program trying to seek the competitive edge that will allow them to win and win again, the idea of spending more on such items as recruiting and facilities has taken on new meaning.

When the combination meets, an athletic department budget swells like a balloon being filled with water. In some programs, the balloon has burst.

Here's an idea of problem's scope:

* Factoring in debt servicing on new facilities and renovation projects, Division I-A schools (those with big-time football programs) spent an average $10,371,000 in 1989, according to the NCAA study. They took in an average of $9,765,000 in revenues, accounting for an average shortfall of $606,000 per school.

* In the Big Ten, four schools are carrying deficits -- Illinois, Wisconsin, Purdue and Minnesota. Four others -- Michigan, Iowa, Ohio State and Indiana -- showed operating deficits for 1989-'90, but have money in their reserve funds. Michigan State was the only school that showed a profit ($2.8 million) and had money in a reserve fund.

Michigan does have $17 million in reserves, but some of those funds are earmarked for a 10-year, $10 million renovation of Michigan Stadium. If the deficits continue and the interest reserve money is reduced, the Wolverines could face some serious problems.

Northwestern, the Big Ten's only private school, refused to disclose its financial figures; it also didn't divulge them for an internal conference survey. Athletic director Bruce Corrie admits his program's budget is supported by "a generous contribution from the university."

Corrie also is moving a Northwestern "home game" against Ohio State to Cleveland this year. Reason: 80,000 people in Cleveland Stadium vs. 30,000 in Dyche Stadium.

* The financial problems hardly are limited to those schools that are struggling on the field. Ohio State, which fills its 89,000-seat stadium and takes in more than $23 million in revenues, has had deficits ranging from $700,000 to $1.5 million over the last three years, leaving only $1.7 million in its reserve fund.

Nebraska football games have been sold out for years, and yet it has trouble escaping the red zone. Duke has reached the NCAA basketball tournament's Final Four four of the last five years, but that hasn't prevented the school from running up a $3 million deficit.

Even Notre Dame, with all of its football and basketball revenues, isn't immune. Irish athletic director Dick Rosenthal, who oversees a $13 million budget, says his school has been in the black, but if new revenue sources aren't developed, "we'll cross the line [to the red] in four years."

Exact figures are difficult to determine because there isn't a uniform accounting procedure for athletic departments. Some schools also receive money from the university's general fund or student fees, while others don't; Michigan doesn't.

"Bring in a real auditor to some of these programs and there would be an ocean of red ink," said Murray Sperber, a member of the Indiana faculty and author of "College Sports Inc."

The question of whether the athletic programs should be self-supporting still is being debated. Schultz endorses a plan in which the universities would make up any athletic department shortfalls, with profits, if any, going to the school's general fund. He believes such a set-up would take away "the win-at-all-costs philosophy."

Relief in some form obviously is needed. The depth of the problem was seen at the recent NCAA convention. Cost-cutting proposals were passed, including a controversial reduction in scholarship levels and the size of coaching staffs. However, the cuts (an average of $500,000 per program) barely make a dent at most schools, Schultz admits.

The repercussions of these deficits could be far-reaching in intercollegiate athletics, former Michigan athletic director Don Canham predicts. He can see the day when university presidents are left with no choice but to make wholesale cuts of sports.

"I think unless something is done immediately, intercollegiate sports will collapse under its own weight," said Canham, who still is active as a consultant to athletic departments. "Finally, a president is going to say to his athletic director, 'You're $5 million in the hole. Either balance the budget, or start cutting some sports.' Once one president does it, they all will."

Inflation has done its share to contribute to the problem, especially in the cost of tuition and room and board for scholarships.

Rosenthal says Notre Dame's cost (now more than $17,000) is rising by an average of 9 percent each year. With more than $4 million of his budget going to scholarships (the biggest expense), such an increase is dramatic.

"You've got to find additional money just to maintain what you did last year," Rosenthal said.

However, inflation isn't the main culprit. While the cost of living increased 15 percent from 1985 to 1989, athletic spending rose an average of 42 percent, according to Raiborn's study.

The problem goes deeper.

"There's a lot of conspicuous consumption to keep up with competitive parity," Big Ten commissioner Jim Delany said.

New facilities have popped up all over college campuses. Illinois built a new baseball stadium. Michigan is paying more than $1 million a year to offset the debt and maintenance (at $1,000 per day) for a swimming facility built by and named for Canham.

There's also a spending bloat in administration, with a growing cadre of assistants and assistants to assistants. When Canham was asked to consult at Maryland, whose deficit could reach $3.5 million this year, he judged the department overstaffed by 17 employees.

Nowhere is the spend trend more obvious than the proliferation of indoor football practice facilities, so players don't have to get cold and wet. Indiana now is the lone Big Ten team which doesn't have access to one; Northwestern also doesn't have a true facility, but it does use a 30-yard piece of turf inside Welsh-Ryan Arena.

Guess what? Hoosier coach Bill Mallory is pushing for an indoor facility.

"I'm teaching English classes with 150 students," Indiana's Sperber said. "Schools are in a crisis. State governments are cutting back funding for higher education. Meanwhile, they're talking about an indoor facility for football. It's Alice in Wonderland."

The prevailing theory goes if you don't have an indoor facility, you can't attract the quality players and coaches, which means you can't win.

The price tag is immense, and it is weighing down these athletic programs like a 1,000-pound anchor. Purdue's indoor facility cost $9.3 million, Ohio State's $10.5 million, Wisconsin's $9.5 million.

The idea was to have these facilities paid for by private donations, but in some cases, it didn't work out that way. For example, the total pledges for Ohio State's facility weren't met, meaning the athletic department now is paying almost $500,000 per year to handle the debt.

At Purdue, their facility tapped out the reserves in the department's John Purdue Fund. In addition to losing $600,000 annually from the fund's interest, business manager Glenn Tompkins says the department is operating "without a safety net."

Was it worth it?

"From a business point of view you wonder," Tompkins said. "It's hard to justify except that everyone is doing it."

Spend is the buzz word in big-time athletic programs. "The more money that comes in, the more money that is spent," Raiborn said.

And the money that doesn't come in also seems to get spent.

Schultz, though, hopes the situation is changing, and more presidents will become aware of the problem. He believes presidents are going to start demanding balanced budgets or else.

Schultz is encouraging schools to tackle the financial problem "courageously." That means the toughest cuts still are yet to come.

TTC "Everyone is going to have to pull their belts up a notch or two and realize that there are going to be some tough times ahead," Schultz said.

For most schools, though, the tough times are already here. Wisconsin's financial officer, Alan Fish, doesn't have to be told. The Badgers are facing nearly a $2 million deficit. And the sad story is, Wisconsin isn't alone.

"The crisis isn't looming," Fish said. "It's something we're in the middle of, whether you realize it or not. It's in everyone's face."

Even Michigan's.

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