November 23, 2015
In September, Auburn University’s football stadium debuted one of the largest video boards in North America. At just shy of 11,000 square feet, the high-definition screen is roughly the size of a five-story building. During a test one night this summer, the glow was visible in the skies over the rural plains of eastern Alabama nearly 30 miles away.
When he announced the purchase, Auburn Athletic Director Jay Jacobs said the new board would help recruit star athletes and sell tickets. This convinced Auburn’s board of trustees to approve the $13.9 million expense even though the athletics department posted a deficit of more than $17 million the previous year, an analysis of financial records shows, one of the worst fiscal years in Auburn athletics history.
The same month, about 1,000 miles away in the crowded suburbs of northern New Jersey, another Rutgers University football season began with much less fanfare. There was no new video screen to celebrate, just a football team that has struggled to keep up with powerhouses like Auburn — on the field and financially — for more than 30 years.
Six years had passed since Rutgers’s last big athletics purchase — a $102 million expansion of the football stadium, which the former athletics director said would help finally make the program financially self-sufficient. That plan hasn’t worked yet. In 2014, Rutgers’s athletics deficit topped $36 million, an amount equivalent to losing $1, every second, for a year.
Big-time college sports departments are making more money than ever before, thanks to skyrocketing television contracts, endorsement and licensing deals, and big-spending donors. But many departments also are losing more money than ever, as athletic directors choose to outspend rising income to compete in an arms race that is costing many of the nation’s largest publicly funded universities and students millions of dollars. Rich departments such as Auburn have built lavish facilities, invented dozens of new administrative positions and bought new jets, while poorer departments such as Rutgers have taken millions in mandatory fees from students and siphoned money away from academic budgets to try to keep up.
To examine why so many big college athletic departments struggle to profit, The Washington Post reviewed thousands of pages of financial records from 48 public universities in the “Power Five,” the five wealthiest collegiate conferences. All 2004 figures are adjusted for inflation.
Among the findings:
●From 2004 to 2014, the combined income of the 48 departments nearly doubled, from $2.67 billion to $4.49 billion. The median department saw earnings jump from $52.9 million to $93.1 million.
●After a decade marked by surging income, 25 departments still ran a deficit in 2014. Twelve departments, including Auburn and Rutgers, actually lost more money in 2014 than in 2004.
● While some athletic programs have eliminated or reduced mandatory student fees earmarked for sports, other programs are charging more than ever. Students paid $114 million in required athletics fees in 2014, up from $95 million in 2004.
Athletic directors at money-losing departments defend their spending as essential to keeping pace with competition. Their programs benefit universities in ways that don’t show on athletics financial statements, they said, like media exposure that can cause increased applicants and help fundraising.
“This is a competitive race among some of the biggest universities in this country to compete and achieve at the highest level,” Rutgers Athletic Director Julie Hermann said.
To critics of big-time college athletics in America, however, the persistent inability of programs to profit despite continually rising income is evidence of systemic, wasteful spending.
“College sports is big business, and it’s a very poorly run big business,” said David Ridpath, a business professor at Ohio University and board member for the Drake Group, a nonprofit advocating for an overhaul of commercialized college sports.
“It’s frustrating to see universities, especially public ones, pleading poverty . . . and it is morally wrong for schools bringing in millions extra on athletics to continue to charge students and academics to support programs that, with a little bit of fiscal sense, could turn profits or at least break even.”
The frantic spending race is playing out differently across the country. Higher coaches salaries, while common, are just part of an array of expenses soaring at athletic departments that fail to profit.
At the University of California Berkeley, the mortgage on athletics buildings went from $0 to $23.4 million in a decade. At the University of Wisconsin, annual maintenance and spending on facilities went from $10.5 million to $38.2 million. At Florida State, pay for athletics staffers — not including coaches — went from $7.7 million to $15.7 million. At other schools, rising costs for travel, severance pay, recruiting and other items combine to keep athletics in the red.
Auburn and Rutgers provide two very different answers to the same question: “How do big-time college sports departments lose money?” To some critics, the spending decisions the people running these operations have made, and the way they’re financing them, illustrate fatal flaws in the financial arms race of big-time college sports.
“The current model does not work,” Ridpath said. “Some day it will implode.”
Not enough money
For the vast majority of the more than 4,000 colleges and universities in America, athletic departments should lose money. Their football and basketball teams don’t appear on national television, apparel companies don’t pay them millions for endorsement deals and they don’t have stadiums and arenas generating millions in ticket revenue.
But for athletic departments in the “Power Five” conferences — which includes 48 public universities that complied with records requests — a failure to profit is not inevitable, but the result of an athletic director’s decision to outspend income.
The sports programs in these five conferences — the Big Ten, Big 12, Pacific-12, Southeastern Conference and Atlantic Coast Conference — are the wealthiest in the country, and they are wealthy because of football.
Men’s basketball is also a money-maker, but arenas are smaller than football stadiums, limiting ticket income, and the sport’s largest television deal is managed more socialistically. The NCAA controls television rights for the wildly popular March tournament, and every year divies up nearly $800 million among hundreds of schools.
Football — where championship television rights belong to the conferences — separates Power Five schools from everyone else. ESPN is in the midst of a 12-year, $7.3 billion contract to televise the College Football Playoff that will primarily benefit the Power Five. Three of the conferences have launched their own television networks, creating additional revenue streams.
Within the Power Five, the popularity of a school’s football team separates the richest of the rich from everyone else. Powerhouse football teams fill stadiums with 100,000-plus paying customers, and command seven-figure donations from boosters to secure luxury suites.
Ohio State, Texas and Alabama are part of the 1 percent of college athletics, departments that annually bring in more than $140 million, enough to cover seven-figure salaries for head coaches and a near constant process of building and upgrading facilities without losing money.
Colleges generally treat athletic departments as stand-alone organizations, free to spend every dollar they earn. Colleges also rarely prevent athletic directors from outspending their earnings, often allowing them to charge mandatory student fees and take university money away from other departments to cover costs.
This financial setup leads to a seemingly inconsistent truth that surfaces in any argument over how colleges should spend the billions they earn from sports: No matter how much more money flows into the top tier of college athletics, few big-time athletics departments turn a profit.
To try to determine exactly how much money athletics programs cost or earn for schools, the NCAA has for years made every member school complete an annual financial report. This story is based, in part, on an analysis of the 2004 and 2014 NCAA financial reports from 48 public schools. (There are 53 public schools in the Power Five conferences, but five refused to provide their 2004 reports, which were exempt from public records laws in those states.)
Some athletic directors argue these reports present incomplete pictures of a program’s finances, and should not be used for comparing programs. In an interview, the NCAA’s director of research, Todd Petr, countered those claims.
“That’s exactly why we do this. . . . The goal of the report is to determine how much it costs an institution to support an athletics department,” Petr said. “Our data should encompass every variable they have, and then some.”
The number of profitable athletics departments, according to NCAA data, has remained remarkably stable for years: about 15 to 25 every year. NCAA officials have repeatedly cited this statistic to argue against expanded benefits for athletes.
In 2008, former NCAA president Myles Brand cited the low number of profitable programs in an op-ed arguing against paying players.
“That flies in the face of the popularly held perception that intercollegiate athletics — think of all those television contracts, all that bowl money, all the merchandizing — are awash in excess revenue. It just isn’t so,” Brand wrote.
In 2014, NCAA President Mark Emmert made the same argument from the stand in a federal lawsuit over whether schools should share licensing earnings with players.
“Any way you cut it, a very small portion of NCAA institutions are actually generating a profit,” said a narrated video the NCAA submitted as evidence in the O’Bannon vs. the NCAA lawsuit.
To critics, the number of athletics departments struggling to profit is not evidence of inexorably rising costs, but of bloated spending.
“There’s no shareholder demanding a dividend, there’s no one to take in profits, so they take in the money, and they spend it,” said Dan Rascher, a sports economist who has testified against the NCAA. “I just wonder if these school officials who claim they can’t afford anything, if they actually believe what they’re saying.”
There are athletic departments that profit without a perennially great football team, and without taking millions away from students. Indiana University routinely does it, despite being in the middle of the pack of the Power Five in earnings, with $84.7 million in 2014.
How do they do it?
“Hoosier tightwadness,” Indiana Athletics Director Fred Glass said. “We don’t spend more than we take in.”
Glass expressed puzzlement when asked why so many departments struggle to turn a profit.
“If I knew the answer to that, maybe I’d be head of the NCAA or something,” he said.
One of the first and most strident critics of the spending habits of top-tier athletics departments was the man who helped commercialize college football and basketball: Walter Byers, the NCAA’s first executive director, once the most powerful man in college sports.
A diminutive, gruff Missouri native fond of cowboy boots and Scotch, Byers, who died in May at age 93, ended his career an apostate. In 1984, he suggested forming an “open division” that would allow wealthy programs to pay players.
In his memoir, “Unsportsmanlike Conduct: Exploiting College Athletes,” Byers devoted an entire chapter to assailing athletics spending. As wealthy programs spent freely, Byers wrote, needier programs increasingly took money from government, academics and students to keep up. The chapter’s title: “Not Enough Money.”
“Do any major sports programs make money for their universities? Sure, but the trick is to overspend and feed the myth that even the industry’s plutocrats teeter on insolvency,” Byers wrote. “At the heart of the problem is an addiction to lavish spending.”
Scenese from Jordan Hare Stadium in Auburn. (Kevin C. Cox/Getty Images)
The cost of doing business
The cost of doing business
In downtown Auburn — not far from Toomer’s Corner, the intersection fans fill after big wins to watch students drape two oak trees in toilet paper — there is a road sign that explains the significance of college football in the city.
In a region devastated financially by the Civil War, a small, underfunded agricultural college started a football team in 1892. In the 123 years since that first game, Auburn football has won five national championships and evolved into an economic engine that generates millions of dollars every year for the university and merchants.
The day before the debut of that massive new video board, Auburn Athletics Chief Operating Officer David Benedict explained in an interview how his department lost more money in 2014 than it did in 2004, even though its income nearly doubled during that time.
To understand the culture of Auburn athletics, Benedict explained, one must start with the program’s motto: “All In.”
“When we do something, we’re going to do it at the highest level possible,” Benedict said.
In 2004, Auburn athletics nearly broke even on earnings of $57.5 million. (All 2004 figures are adjusted for inflation.)
By 2014, income had risen to $109.3 million, but spending soared to $126.5 million.
Benedict disagreed with an analysis based on the school’s annual financial report to the NCAA, which he said overestimated the department’s losses. Auburn athletics lost money in 2014, he acknowledged, but internal figures showed $8.2 million.
Auburn athletics is normally profitable, and Benedict expects the program will return to the black in 2015. In 2014, Auburn drew from its cash reserves to cover losses which Benedict attributed to a few unique situations.
While Auburn’s athletics spending has more than doubled in a decade, Benedict defended most of it as inherent to bankrolling a top-notch college program. Tuition, room and board nearly doubled (from $7.5 million to $12 million). Coaches’ pay more than doubled (from $9.3 million to $20.4 million). Facilities spending tripled (from $8.6 million to $27.8 million), thanks to a building boom including a new basketball arena and practice facility ($89.4 million), a new indoor football practice facility ($23.1 million) and a new soccer-track facility ($17.7 million).
Some purchases, Benedict acknowledged, were optional, like two new twin-engine jets: a six-seat 2008 Cessna Citation CJ2+ ($6.4 million) and a seven-seat 2009 Cessna Citation CJ3 ($7.8 million), each bearing a blue and orange “AU” insignia on its tail.
The jets are used primarily by coaches to criss-cross the country meeting with recruits, contributing to Auburn’s recruiting costs nearly doubling in a decade, from $1.6 million to $2.7 million.
“If you want to be in recruiting at this level, private planes are utilized,” said Benedict, who pointed out most of Auburn’s competitors also own jets.
That new video board, the largest in college sports, was also optional. Auburn has a history of trend-setting electronics displays. In 2007, it installed the first high-definition video board in the SEC, a $2.9 million purchase Athletic Director Jacobs decided was obsolete eight years later.
“For us to be financially healthy, we need our stadium to be full every Saturday,” Benedict said. “One of those ways we can do that is to make sure everybody has an unbelievable game-day experience.”
The most important part of a good game-day experience is a win, so football coach at Auburn, like at many big schools, is a well-compensated gig with very little job security. In 2012, the Tigers went 3-9, a season that resulted with the firing of coach Gene Chizik just two years removed from a national championship.
In 2013-14, Auburn paid Gus Malzahn $4.3 million to coach its football team. That same season, Auburn also paid Chizik and three assistants a combined $4.1 million to not coach its football team.
That year, Auburn also paid $400,000 to former baseball coach John Pawlowski (fired in May 2013), and $242,000 to former men’s basketball coach Tony Barbee (fired in May 2014) as part of $2.4 million the school will pay Barbee, in monthly installments, until 2017.
“That’s the cost of doing business in this league,” Jacobs said. “If you don’t graduate athletes and you don’t win championships, you’re not going to be around here very long.”
Auburn fans would argue Chizik’s severance was worth every penny, as his replacement Malzahn’s first season was a thrilling success, ending with two stunning last-second wins and a narrow loss in the national championship game.
That historic run should have helped the athletics department’s bottom line. By making the title game, Auburn earned an extra $2.6 million cut from the game’s revenue. After the 34-31 loss to Florida State, though, an Auburn official told a reporter the school actually lost $1 million on the game, due to the exorbitant cost to send people to Los Angeles. (The game was played in nearby Pasadena.)
It is expensive to send a football team, coaching staff, and a marching band to Los Angeles. It is much more expensive, however, when you also send dozens of staffers and their spouses. Auburn sent an estimated “team and staff” party of 370 to Los Angeles, all expenses covered, for eight days, helping contribute to a $2.7 million travel tab. Florida State sent 237 team and staff members, spending $1.9 million on travel.
“Whether it was the receptionist answering the phone every day, or a member of our board, they were all, in some way or another, important to us getting to a national championship game,” Jacobs said. “We wanted them all there, so we could thank them, and also create the expectation we’re going to get back there again, and we’re going to need them to work twice as hard.”
Auburn’s lavish spending on athletics employees is not limited to title game trips. In a decade, Auburn’s athletics payroll — not counting coaches — has ballooned from $9 million to $19.9 million.
Since 2004, records show, Auburn athletics has created more than 100 positions, including 15 jobs paying $100,000 or more in a region where median income is $35,055. Among the new positions are 18 full-time football support staff members (four make $100,000 or more), two senior associate athletic directors (earning $205,620 and $122,490, respectively) and a chief marketing officer ($185,400).
Jacobs defended the hiring spree, which also included a dietitian and a psychologist, as enabling more individual attention on athletes.
“You need more people just to provide the best possible student-athlete experience,” he said.
Jacobs’s pay has steadily risen since he started in 2005, from $407,300 to $648,700, and he’s been able to hire some help. In January 2014, Jacobs created a chief operating officer position, a No. 2 to take over the department’s day-to-day operations.
For that job, Jacobs chose Benedict, whom he lured away from Minnesota athletics with a salary of $310,000.
Benedict strongly disagreed with characterizing any Auburn spending as bloated.
“I don’t think it’s any different than any other competitive industry,” Benedict said. “As college athletics has generated more money, we’re going to invest more.”
It’s not accurate, Benedict said, to analyze college athletics in terms of profits or losses.
“There’s no for-profit company that would operate the way college athletics do,” he said. “We don’t make decisions based on the bottom line. If we did, things would operate very differently.”
The fan’s perspective at Auburn, with a new $13.9 million scoreboard, and Rutgers, which spent $102 million to expand its stadium six years ago. (Auburn photo by Scott Donaldson/Icon Sportswire via AP Images; Patrick McDermott/Getty Images)
Going big time
There are no jets for recruiting at Rutgers. The athletics department doesn’t even own buses. When Rutgers teams travel, they sometimes depart their fragmented campus in anonymous, rented coach buses.
Rutgers’s main campus in New Brunswick is actually five smaller campuses spread across both sides of the Raritan River. Rutgers athletics is headquartered in Piscataway, not far from the football stadium that bills itself as “the birthplace of college football.”
On Nov. 6, 1869, Rutgers and Princeton clashed in the first recorded college football game, a 6-4 Rutgers win. Over the next 100 years, as college football grew more popular, Rutgers officials decided the school fit better outside the top tier.
In the early 1980s — after prodding by Sonny Werblin, an alum and owner of the New York Jets — Rutgers launched an effort to join the top level of college sports. Gone were the annual games against Princeton; it was replaced with tilts against Alabama and Penn State.
On the field, there hasn’t been much glory. The 2006 season is the high-water mark: an 11-2 record highlighted by a win over then-No. 3 Louisville, a game the school refers to as “Pandemonium in Piscataway.”
Off the field, financial success has proven even more difficult. Rutgers athletics has perennially lost lots of money, according to “Going Bigtime: The Rutgers Experience,” by the late Richard P. McCormick, a former history professor.
In the 1980s, Rutgers athletics annually lost hundreds of thousands; in the 1990s, the department annually lost millions; and in the 2000s, annual losses topped $10 million.
“Rutgers was not yet ready for bigtime — after thirty years!” McCormick wrote.
In 2004, Rutgers athletics deficit was $22.7 million, and the department needed $6.4 million in student fees and $10.5 million from the school to pay its bills. Two years later, Rutgers cut six sports to try to save money.
By 2014, the financial picture only worsened. The athletics deficit hit $36.4 million. To pay its athletics bills, Rutgers to diverted $26 million in school funds and charged students $10.3 million in fees, or about $326 for each of the 31,630 full-time undergraduate students in New Brunswick.
Rutgers Athletics Chief Financial Officer Janine Purcaro also said the school’s financial report to the NCAA presents an inaccurate picture. In 2014, for example, it included a $6.5 million charge the school will pay out over several years to leave the smaller American Athletic Conference for the wealthier Big Ten.
The conference switch, Rutgers athletics officials say, is the key to the program’s eventual success. In 2014, each full member of the Big Ten received at least a $27 million cut of the league’s revenue. By 2021 – when Rutgers becomes a full conference member – that payout could top $40 million per school, thanks to rising television contracts.
In the early 2020s, Purcaro projects, Rutgers athletics will finally be almost self-sustainable. Until then, though, the department could lose another $1oo million.
“The next four or five years will be challenging to difficult, financially,” said Hermann, the school’s athletic director. “But this [conference change] will allow our athletics department to become financially sustainable in a way that we never could have.”
The annual losses infuriate economics professor Mark Killingsworth, who has watched as the school of Arts and Sciences has cut classes and replaced full-time professors with adjuncts.
In March, Killingsworth wrote a scathing report on athletics spending — approved by the university’s senate, which has both student and faculty members — that demanded a five-year plan for athletics to become self-sufficient. That’s simply not possible, Purcaro said.
The financial struggles of Rutgers athletics is a long-running controversy on campus, and Purcaro and Killingworth are familiar adversaries. There is exactly one thing the two agree on: the department’s biggest problem is income, not spending.
“It’s not like they are spending like drunken sailors. They are just not generating nearly enough revenue,” Killingsworth said.
An examination of Rutgers’s athletics spending shows tuition, coaches’ pay, and front-office pay have all steadily increased in a decade, but one item has taken a massive jump. Facilities costs leapt from $2 million to $11 million, caused by increased upkeep and $6.5 million in annual debt after an expansion of the football stadium in 2009.
Donations were supposed to cover a chunk of that project. State Senator Ray Lesniak, a Rutgers alum and longtime athletics booster, joked Rutgers would raise $30 million with “one spin through Jon Corzine’s Rolodex,” referring to the wealthy, well-connected New Jersey governor.
That spin wasn’t quite so lucrative. Corzine donated $1 million, and after Rutgers struggled to raise anything else, the school ultimately borrowed the entire $102 million.
An artist’s conception of America’s first intercollegiate football game between Rutgers and Princeton in 1869. Rutgers has been trying for more than 30 years to reach the top level of college sports. (File photo via Associated Press; Rich Schultz/Getty Images)
That experience demonstrated the biggest difference between Rutgers and Auburn — fans who will pay top-dollar to go to games and support the program.
In 2014, Auburn athletics made $69.2 million in ticket sales and donations, thanks in part to a tiered football season ticket strategy that requires donations ranging from $140 to $3,575 per seat. (The $3,575 seats sold out, and there’s a waiting list.)
Rutgers has tried a similar strategy – soliciting donations ranging from $3,000 to $20,000 for premium seating – but with much less success, making $18.6 million in 2014.
The financial struggles have not chastened Sen. Lesniak, who thinks Rutgers athletics isn’t spending enough. In February, Lesniak sent a letter to Rutgers President Robert Barchi calling for $30 million in upgrades to the basketball arena and a new practice facility.
“We’re in the Big Ten. We should act like it,” wrote Lesniak, who criticized Killingsworth’s report on athletics losses as based on “sixth-grade math.”
“I love it,” said Killingsworth of the criticism. “It only takes sixth-grade math to see that the program is a complete mess. It’s not rocket science . . . People are insisting Rutgers University build stuff, and then they don’t want to pay for it. They want academics to pay for it. They want the students to pay for it.”
Not every Rutgers professor thinks athletics is doomed to lose money forever.
History professor Richard L. McCormick is the son of the man who wrote the critical history of Rutgers athletics. The younger McCormick has an interesting perspective on the issue; from 2002 through 2012 he was Rutgers’s president. He endured criticism as Rutgers athletics cut sports, and as fundraising for the stadium expansion sputtered.
Like his father, McCormick doubted the wisdom of Rutgers jumping to big-time college sports. But the 2006 football season changed his mind.
“There is nothing the university could realistically do that would attract anywhere near the attention garnered by a successful football program. Academics and intellectual purists may lament this truth, but it is inescapable,” McCormick wrote in his memoir “Raised at Rutgers.”
McCormick expressed optimism the switch to the wealthier Big Ten will bring success. He predicted Rutgers will soon have a thriving athletics program, winning on the field, and raking in millions off it.
There was one looming possibility, though, that concerned McCormick.
“Maintaining that excellence will demand . . . discipline to resist the pressures that could put success at risk,” he wrote. “The most worrisome is competitive pressure toward unbridled spending.”