In college football, you have to spend money ... and hope to make money

Published January 6, 2010 5:20 pm
BCS » Universities exhaust cash in pursuit of a big bowl payout - but can crash if they come up empty
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Just over a year ago, the Utah Utes celebrated one of the finest moments in their sports history: a Sugar Bowl victory over legendary Alabama that capped a perfect football season and triggered much rejoicing.

Not just on the field, either.

The triumph allowed the Utes to balance their athletic budget -- something that would not have come close to happening without the estimated $2.3 million profit they made from their second trip into the lucrative Bowl Championship Series in five seasons.

But while that surely counts as a victory, on the eve of the annual BCS title game, it also illustrates a growing problem for many universities: Spending in pursuit of sporting success can result in serious financial jeopardy if they cannot reach a brass ring, such as a BCS game, to deliver multi-million-dollar salvation.

"The real crisis facing college athletics" is not the need for a major football playoff system, two co-chairmen of the Knight Commission on Intercollegiate Athletics wrote in The Washington Post recently, but rather "the sustainability of its business model, which is on a path toward meltdown" because of soaring costs amid a troubled economic environment.

President R. Gerald Turner, of Southern Methodist University, and chancellor William E. Kirwan, of the University of Maryland, noted that NCAA statistics showed that nearly 80 percent of the 120 athletic programs that sponsor major-college football reported operating deficits in the 2007-08 school year.

What's more, revenue from football does not even cover the operating costs of the football program at 44 percent of those schools, according to an NCAA report.

"These are hardly profit centers at most institutions," the men wrote.

It's not nearly that bad for the Utes. They do make a modest profit from football that helps fund other sports at the university.

But they also expect to see falling revenues and a $1.2 million shortfall in their athletic department budget for the 2009-10 fiscal year, according to budget documents and the annual report from their athletic advisory council, in addition to what would have been a $1.5 million shortfall in 2008-09 had it not been for the Sugar Bowl payout.

The Utes had planned to use their profit from the game to cover more modest shortfalls over several years, but instead expect to need all of it to cover just last year and the current year. Unless they find a way to close that budget gap before next summer, the report warned, the Utes might have to make "some very difficult decisions."

"It's a challenge," athletic director Chris Hill acknowledged. "We're not alone. It's a national challenge, big time."

The Utes will get some help from a revenue-sharing plan that assures they will receive a share of the money earned by Texas Christian and Boise State for reaching the big-money Fiesta Bowl this season, and they are hardly at the extreme end of the shortfall spectrum.

The NCAA reported that the average annual budget deficit for the major football schools that lose money is nearly $10 million a year, and some universities have endured budget cuts exponentially larger than the relative pennies the Utes are short of.

But like many schools, the Utes are chasing the football powers.

Documents show they have increased spending on football salaries, travel and recruiting about 46 percent over the past four years, offsetting cuts and budget reallocations in other areas.

In fact, accounting for several budget categories such as game operations that associate athletic director Pete Oliszczak said have been moved mostly off the football ledger to other areas, the estimated football budget of $7.8 million for 2009-10 is about 30 percent higher than it was when the Utes won the Fiesta Bowl in the 2004-05 season.

"We're watching our expenses as best we can," Hill said, "but there are certain things we have to invest in, or else the incomes don't come in."

In other words?

It's all part of trying to keep up in the high-stakes world of major college football. Without paying the steepening price, it's hard to keep the best coaches and attract the best recruits and win the most games and sell the most tickets.

Even then, though, it's clear that teams such as the Utes still have to occasionally achieve the extraordinary simply to break even, especially at a time when every other sport at the university has seen budget increases, too, in part because of rising costs for everything from team meals to airline baggage fees.

Which is why boosting income has become a priority.

That would be easier if the Utes were part of one of the six most powerful leagues that enjoy automatic berths into the lucrative BCS, so they could count on an extra few million dollars every year. But that's not the case.

Instead, they're pursuing other options.

Having already reached record levels, the Utes probably can't expect to sell many more football season tickets, Hill said, so price increases might be on the horizon to help boost revenue. So, too, might be increases in the amount of student fees and university funding that help subsidize the athletic department, areas in which Hill said the Utes rank at the bottom of the Mountain West Conference.

"Nobody likes to raise prices," Hill said, "but we feel we're going to be in that position because otherwise we don't help our program."

The Utes have a few sources of income that are contractually assured of going up in the near future, including television and marketing deals. And Hill hopes that the slumping rate of donations will pick up again if the economy rebounds.

But one year after their greatest triumph, one thing remains clear. "The business model is very difficult," Hill said.

Utes got only a slice of Sugar Bowl payout

Fans might remember reports that pegged the payout to the Utes for reaching last season's Sugar Bowl at $19.2 million.

It sounded great, but that's hardly what wound up in the bank account. That number dwindled to about $3.5 million after extracting the money that went to fellow members of the Mountain West Conference and the other four leagues that do not have automatic berths into the Bowl Championship Series, as part of a revenue-sharing agreement. That agreement also assures the Utes will get a slice of the money that TCU and Boise State earned for reaching the Fiesta Bowl this season. The Utes then paid $1.2 million in expenses for the trip to New Orleans, leaving about $2.3 million in profit that they're using to cover athletic department budget shortfalls.

Football, men's basketball are cash cows

Football and men's basketball generate by far the most revenue for the Utah Utes. The $5.2 million generated by football ticket and suite sales this year were expected to help cover the football budget and pay for other sports at the university that generate almost no revenue. In fact, according to university budget estimates, the football and men's basketball teams will generate about $7.3 million this year. Every other sport? Only $392,000 combined.

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