Only a few schools ever send money back into the general university fund. The department of athletics at Ohio State, for example, pays the university a fee of more than $4 million annually in overhead charges to support basic campus infrastructure. The University of Kentucky’s athletic department contributes $1 million a year to the president’s office for nonathletic need-based scholarships, says Rob Mullens, deputy director of athletics.
To be sure, some cost escalation is uncontrollable. Athletic departments, which generally pay back scholarship money at the list price, are subject to the same runaway tuition costs that all students are seeing. Mullens says that the cost to cover athletic scholarships at Kentucky has increased 12.5 to 15 percent in each of the last four years.
When athletic departments lose money, they often raise student fees to cover the deficit or dip into the university’s general fund. For example, when the University of California at San Diego went $300,000 into the red this past academic year, its student-affairs department covered the shortfall, and the school put an increase to student fees on the table. Students will vote in a referendum to raise the fee this fall. Similarly, Colorado State University, which expects an annual deficit in its athletic department of $1 million in coming years, is looking to raise what students pay into the sports program from $53 a semester to $68 a semester, bringing in an additional $720,000 each year. And on the infrequent occasions when Ohio State runs in the red, the university covers the shortfall, but charges the athletic department between 5 and 6 percent interest on what it considers to be a loan. “We’re expected to be in the black every year,” says Henderson.
Facing a shortfall after a scandal-plagued couple of years and an expensive contract buyout for former football coach Gary Barnett, the University of Colorado obtained an $8 million loan in June from the general university reserve fund at a rate that CFOs would kill for — 2 percent.
Stretching the Dollar
Plenty of universities, however, say they have no choice but to watch the cost side closely. Minnesota, which in 2002 was projecting a deficit of $31 million in its athletic program by the 2007–08 academic year, recently conducted a top-to-bottom review of its sports budget and cut costs anywhere it could. “We looked at every nickel,” says Eull. The program now operates close to break-even, with less dependence on general university funds.
Charges that athletic directors spend foolishly ring false to Suzette Fronk, assistant athletic director for business affairs at the University of Toledo in Ohio. She says the athletic department is under tremendous pressure to rein in spending after years of running a deficit. “We don’t just have to balance our yearly budget, we’re also working against a [loss] carry-forward.”
While the athletic department finished the last academic year with a surplus of $800,000, it was not a typical year for the Rockets. Generally they have lost money, and when they do, they start the next year in the hole. After last year, the department still has a deficit of $3.17 million to make up.